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AAVAS Financiers Ltd.

BSE: 541988 Sector: Financials
NSE: AAVAS ISIN Code: INE216P01012
BSE 15:18 | 27 Jun 1960.00 -37.75
(-1.89%)
OPEN

2010.00

HIGH

2014.35

LOW

1956.85

NSE 15:04 | 27 Jun 1976.40 -21.60
(-1.08%)
OPEN

2008.50

HIGH

2022.00

LOW

1963.35

OPEN 2010.00
PREVIOUS CLOSE 1997.75
VOLUME 6709
52-Week high 3336.95
52-Week low 1838.70
P/E 43.37
Mkt Cap.(Rs cr) 15,476
Buy Price 1958.00
Buy Qty 4.00
Sell Price 1960.50
Sell Qty 2.00
OPEN 2010.00
CLOSE 1997.75
VOLUME 6709
52-Week high 3336.95
52-Week low 1838.70
P/E 43.37
Mkt Cap.(Rs cr) 15,476
Buy Price 1958.00
Buy Qty 4.00
Sell Price 1960.50
Sell Qty 2.00

AAVAS Financiers Ltd. (AAVAS) - Auditors Report

Company auditors report

To

The Members of

Aavas Financiers Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the accompanying standalone financial statements of Aavas FinanciersLimited ("the Company") which comprise the Balance sheet as at March 31 2021the Statement of Profit and Loss including the statement of Other Comprehensive Incomethe Cash Flow Statement and the Statement of Changes in Equity for the year then endedand notes to the standalone financial statements including a summary of significantaccounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 as amended ("the Act") in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India of the state of affairs of the Company as at March 31 2021 its profitincluding other comprehensive income its cash flows and the changes in equity for the yearended on that date.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the ‘Auditor'sResponsibilities for the Audit of the Standalone Financial Statements' section of ourreport. 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 ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the standalone financial statements.

Emphasis of Matter – Impact of COVID-19

We draw attention to Note 45 to the standalone financial statement which describes theextent to which the COVID-19 pandemic will impact the Company's operations and itsfinancial metrics including the expected credit loss on financial assets which aredependent on uncertain future developments. Our opinion is not modified in respect of thismatter.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements for the financial yearended March 31 2021. These matters were addressed in the context of our audit of thestandalone financial statements as a whole and in forming our opinion thereon and we donot provide a separate opinion on these matters. For each matter below our description ofhow our audit addressed the matter is provided in that context.

We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the standalone financial statements section ofour report including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the standalone financial statements. The results of our audit proceduresincluding the procedures performed to address the matters below provide the basis for ouraudit opinion on the accompanying standalone financial statements.

Key audit matters How our audit addressed the key audit matter
a) Grouping of the loan portfolio under risk-based categories determined using Company's risk-management framework. Loans grouped under a particular category are assumed to represent a homogenous pool thereby expected to demonstrate similar credit characteristics; Assessed the assumptions used by the Company for grouping and staging of loan portfolio into various categories and default buckets and their appropriateness for determining the probability-weighted default (PD) and loss-given default (LGD) rates.
b) Staging of loans (i.e. classification in ‘significant increase in credit risk' ("SICR") and ‘default' categories); Tested controls for staging of loans based on their past-due status. Also tested samples of stage 1 and Stage 2 loans to assess whether any loss indicators were present requiring them to be classified under higher stage.
c) Estimation of expected loss from historical observations.
d) Estimation of losses in respect of those groups of loans which had no/ minimal defaults in the past. Tested samples of the input data used for determining the PD and LGD rates and agreed the data with the underlying books of accounts and records.
e) Management overlay for macro-economic factors and estimation of their impact on the credit quality. Assessed the management overlays applied by the Company to factor the impact of COVID-19 on the ECL as approved by their Board of Directors.
The Company has developed models that derive key assumptions used within the provision calculation such as probability of default (PD) and loss given default (LGD). The output of these models is then applied to the provision calculation with other information including and the exposure at default (EAD). Tested the arithmetical accuracy of computation of ECL provision performed by the Company.
The impact of COVID-19 on the ECL is highly uncertain however the Company has factored the higher risk in its computation of the ECL provision and has applied management overlays which are approved by the Board of Directors. Assessed that the assumptions used by the management for estimation of allowance for expected credit losses as at March 31 2021 are presented and disclosed in the financial statements.
Considering the significance of such provision to the overall financial statements and the degree of management's judgment any error or misstatement in such estimate may give rise to a material misstatement of the financial statements or omission of any disclosure required by the standards. Therefore it is considered as a key audit matter. Assessed the Company's policy with respect to moratorium pursuant to the RBI circular and tested the implementation of such policy on a sample basis.
Information Technology (IT) systems and controls Our audit procedures have a focus on IT systems and controls due to the pervasive nature and complexity of the IT environment the large volume of transactions processed in numerous locations daily and the reliance on automated and IT dependent manual controls. Assessed the additional considerations applied by the management for staging of loans as SICR/ default in view of Company's policy on moratorium.
Due to the pervasive nature and complexity of the IT environment we have ascertained IT systems and controls as a key audit matter. Read and assessed the specific disclosures made in the financial statements with regards to managements evaluation of the uncertainties arising from COVID-19 its impact on ECL and other disclosures as prescribed by RBI relating to moratorium granted.
In assessing the reliability of electronic data processing we included specialized IT auditors as part of the audit team.
Tested the design and operating effectiveness of the IT general controls (logical access changes management and aspects of IT operational controls). This included testing that requests for access to systems were reviewed and authorised.
Tested the Company's periodic review of access rights. We inspected requests of changes to systems for appropriate approval and authorisation.
Considered the control environment relating to various interfaces configuration and other application layer controls identified as key to our audit.

Other Information

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual report but does not includethe standalone financial statements and our auditor's report thereon.

Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether such other informationis materially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.

Responsibilities of Management for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income cash flows and changes in equity of the Company in accordancewith the accounting principles generally accepted in India including the IndianAccounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and the designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the standalone financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.

Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.

Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe 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'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.

Evaluate the overall presentation structure and content of the standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsfor the financial year ended March 31 2021 and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the "Annexure 1" a statement on the matters specified inparagraphs 3 and 4 of the Order.

2. As required by Section 143(3) of the Act we report that: (a) We have sought andobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purposes of our audit; (b) In our opinion proper books ofaccount as required by law have been kept by the Company so far as it appears from ourexamination of those books; (c) The Balance Sheet the Statement of Profit and Lossincluding the Statement of Other Comprehensive Income the Cash Flow Statement andStatement of Changes in Equity dealt with by this Report are in agreement with the booksof account;

(d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Companies (IndianAccounting Standards) Rules 2015 as amended; (e) On the basis of the writtenrepresentations received from the directors as on March 31 2021 taken on record by theBoard of Directors none of the directors is disqualified as on March 31 2021 from beingappointed as a director in terms of Section 164 (2) of the Act; (f) With respect to theadequacy of the internal financial controls over the financial reporting of the Companywith reference to standalone financial statements and the operating effectiveness of suchcontrols refer to our separate Report in "Annexure 2" to this report; (g) Inour opinion the managerial remuneration for the year ended March 31 2021 has been paid /provided by the Company to its directors in accordance with the provisions of section 197read with Schedule V to the Act; (Rs) With respect to the other matters to be included inthe 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 tothe explanations given to us: i. The Company does not have any pending litigations whichwould impact its financial position; ii. The Company did not have any long-term contractsincluding derivative contracts for which there were any material foreseeable losses; iii.There were no amounts which were required to be transferred to the Investor Education andProtection Fund by the Company.

For S.R. Batliboi & Associates LLP

 

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004

per Sarvesh Warty

 

Partner

Membership Number: 121411

UDIN: 21121411AAAADF4046

Place of Signature: Mumbai

Date: April 29 2021

Annexure 1 to The Independent Auditors' Report

Annexure 1 referred to in paragraph 1 under the heading "Report on other legal andregulatory requirements" of our report of even date

Re: Aavas Financiers Limited

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) All fixed assets were physically verified by the management in the previous year inaccordance with a planned programme of verifying them once in two years which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. No material discrepancies were noticed on such verification.

(c) According to the information and explanations given by the management the titledeeds of immovable properties included in property plant and equipment are held in thename of the company.

(ii) The Company's business does not involve inventories and accordingly therequirements under clause 3 (ii) of the Order are not applicable to the Company and hencenot commented upon.

(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013. Accordingly the provisions of clause 3(iii) (a) (b) and (c) of theOrder are not applicable to the Company and hence not commented upon.

(iv) In our opinion and according to the information and explanations given to usthere are no loans investments guarantees and securities given in respect of whichprovisions of section 185 and 186 of the Act are applicable and hence not commented upon.

(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).Accordingly the provisions of clause 3(v) of the Order are not applicable.

(vi) To the best of our knowledge and as explained the Central Government has notspecified the maintenance of cost records under section 148(1) of the Act for theservices of the Company.

(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax value added tax goods and service tax cess and other statutorydues have generally been regularly deposited with the appropriate authorities though therehas been a slight delay in a few cases. The provisions relating to duty of excise andsales-tax are not applicable to the Company.

(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax service taxsales-tax duty of custom duty of excise value added tax goods and service tax cessand other statutory dues were outstanding at the year end for a period of more than sixmonths from the date they became payable.

(c) According to the information and explanations given to us there are no dues ofincome tax sales-tax service tax customs duty excise duty value added tax and cesswhich have not been deposited on account of any dispute.

(viii) In our opinion and according to the information and explanations given by themanagement the Company has not defaulted in repayment of loans or borrowing to afinancial institution bank or government or dues to debenture holders.

(ix) In our opinion and according to the information and explanations given by themanagement the Company has utilized the monies raised by way of initial public offer anddebt instruments in the nature of Non-convertible debentures for the purposes for whichthey were raised.

Further monies raised by the Company by way of term loans were applied for the purposefor which those were raised though idle/surplus funds which were not required forimmediate utilization were gainfully invested in liquid investments payable on demand. Themaximum amount of idle/surplus funds invested during the year was H 20761 lakhs of whichH Nil was outstanding at the end of the year.

(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the Company or no material fraud onthe Company by the officers and employees of the Company has been noticed or reportedduring the year.

(xi) According to the information and explanations given by the management themanagerial remuneration has been paid and provided in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the Act.

(xii) In our opinion the Company is not a nidhi company. Therefore the provisions ofclause 3(xii) of the Order are not applicable to the Company and hence not commented upon.

(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with section 177 and 188 of theAct where applicable and the details have been disclosed in the notes to the financialstatements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and hence reporting requirements under clause 3(xiv) are not applicable tothe company and not commented upon.

(xv) According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions with directors or persons connected withthe directors as referred to in section 192 of the Act.

(xvi) According to the information and explanations given to us the provisions ofsection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company.

For S.R. Batliboi & Associates LLP

 

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004

per Sarvesh Warty

 

Partner

Membership Number: 121411

UDIN: 21121411AAAADF4046

Place of Signature: Mumbai

Date: April 29 2021

Annexure 2 to The Independent Auditors' Report

Annexure 2 referred in paragraph 2(f) under the heading "Report on other legal andregulatory requirements of our report of even date

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of AavasFinanciers Limited ("the Company") as of March 31 2021 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.

Management's Responsibility for Internal Financial Controls

The Company's Management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to the Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting with reference to these standalone financial statementsbased on our audit. We conducted our audit in accordance with the Guidance Note on Auditof Internal Financial Controls Over Financial Reporting (the "Guidance Note")and the Standards on Auditing as specified under section 143(10) of the Companies Act2013 to the extent applicable to an audit of internal financial controls and both issuedby the Institute of Chartered Accountants of India. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls over financialreporting with reference to these standalone financial statements was established andmaintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls over financial reporting with reference to thesestandalone financial statements and their operating effectiveness. Our audit of internalfinancial controls over financial reporting included obtaining an understanding ofinternal financial controls over financial reporting with reference to these standalonefinancial statements assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the internal financial controls over financialreporting with reference to these standalone financial statements.

Meaning of Internal Financial Controls Over Financial Reporting With Reference to theseFinancial Statements

A company's internal financial control over financial reporting with reference to thesestandalone financial statements is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accountingprinciples. A company's internal financial control over financial reporting with referenceto these standalone financial statements includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting WithReference to these Standalone Financial Statements

Because of the inherent limitations of internal financial controls over financialreporting with reference to these standalone financial statements including thepossibility of collusion or improper management override of controls materialmisstatements due to error or fraud may occur and not be detected. Also projections ofany evaluation of the internal financial controls over financial reporting with referenceto these standalone financial statements to future periods are subject to the risk thatthe internal financial control over financial reporting with reference to these standalonefinancial statements may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects adequate internal financialcontrols over financial reporting with reference to these standalone financial statementsand such internal financial controls over financial reporting with reference to thesestandalone financial statements were operating effectively as at March 31 2021 based onthe internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.

For S.R. Batliboi & Associates LLP

 

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004

per Sarvesh Warty

 

Partner

Membership Number: 121411

UDIN: 21121411AAAADF4046

Place of Signature: Mumbai

Date: April 29 2021

.