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Can Fin Homes Ltd.

BSE: 511196 Sector: Financials
NSE: CANFINHOME ISIN Code: INE477A01020
BSE 00:00 | 07 Apr 273.95 11.75
(4.48%)
OPEN

268.70

HIGH

278.00

LOW

258.50

NSE 00:00 | 07 Apr 274.65 11.45
(4.35%)
OPEN

269.25

HIGH

278.80

LOW

258.05

OPEN 268.70
PREVIOUS CLOSE 262.20
VOLUME 91207
52-Week high 519.00
52-Week low 253.55
P/E 10.36
Mkt Cap.(Rs cr) 3,648
Buy Price 260.10
Buy Qty 25.00
Sell Price 276.90
Sell Qty 5.00
OPEN 268.70
CLOSE 262.20
VOLUME 91207
52-Week high 519.00
52-Week low 253.55
P/E 10.36
Mkt Cap.(Rs cr) 3,648
Buy Price 260.10
Buy Qty 25.00
Sell Price 276.90
Sell Qty 5.00

Can Fin Homes Ltd. (CANFINHOME) - Auditors Report

Company auditors report

To

The Members

Can Fin Homes Limited

Report on the Audit of Ind AS Financial Statements

Opinion

We have audited the accompanying Ind AS financial statements of Can Fin Homes Limited("the Company") which comprise the Balance Sheet as at March 31st 2019 theStatement of Profit and Loss (including Other Comprehensive Income) the

Statement of Changes in Equity and the Statement of Cash

Flows for the year ended on that date including summary of the significant accountinginformation in which are included the Returns for the year ended on that date audited bythe branch auditors of the

Company's 155 branches located at various locations across India (hereinafter referredto as "the financial statements").

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies

Act 2013 ("the Act") in the manner so required and give a true and fair viewin conformity with the Indian Accounting Standards prescribed under section 133 of the Actread with the Companies (Indian Accounting Standards) Rules 2015 as amended ("IndAS") and other accounting principles generally accepted in India of the state ofaffairs of the Company as at

March 31st 2019 the profit changes in equity and its cash flows for the year ended onthat date.

Basis for Opinion:

We conducted our audit of the financial statements in accordance with the Standards onAuditing (SAs) specified under section 143(10) of the Act. Our responsibilities underthose Standards are further described in the Auditor's

Responsibilities for the Audit of the Financial Statements section of our report. Weare independent of the Company in accordance with the Code of Ethics issued by theInstitute of Chartered Accountants of India (ICAI) together with the ethical requirementsthat are relevant to our audit of the andotherexplanatory financial statements under theprovisions of the Act and the Rules made thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our audit opinion on the financial statements.

Key Audit Matters:

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financialstatements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters. Weandtotalcomprehensiveincome have determined the matters described below to be the keyaudit matters to be communicated in our report.

Key Audit Matter Auditor's response
1. Expected credit loss allowances: We evaluated management's process and tested key controls around the determination of expected credit loss allowances including controls relating to:
Ind-AS accounting framework was implemented on April 1st 2018. Accordingly Ind-AS 109 is a new and complex standard that requires the Company
to recognise Expected Credit Loss (ECL) on financial instruments. This is a significant departure from the earlier rule based provisioning. Expected credit loss allowances relating to loans and advances are determined on a portfolio basis with the use of impairment models. These models are based on historical loss experience and use a number of key assumptions including probability of default loss given default (including propensity for possession and forced sale discounts for mortgages) and valuation of recoveries. Our work therefore focused on the appropriateness of modelling methodologies adopted and the significant judgementsrequired. Refer to Note 2(h) to the financial statements accounting policy on accounting for the impairment of financial assets and Note 40(i) to the financial statements for credit risk disclosures and for Credit impairment charges and other provisions. The identification of events leading to a significant risk and credit impairment events; and The review challenge and approval of the expected credit loss allowances including the impairment model outputs and key management judgements applied. We found that these key controls were designed implemented and operated effectively and therefore determined that we could place reliance on these key controls for the purposes of our audit. We understood and assessed the appropriateness of the impairment models developed and used by the management at the entity level. This included assessing and challenging the appropriateness of key modelling judgements (e.g. the transfer criteria used to determine significant increase in credit risk). We tested the formulae applied within the calculation files the completeness and accuracy of key data inputs sourced from underlying systems that are applied in the calculation. We also tested the reconciliation of loans and advances between underlying source systems and the expected credit loss models
2. Amortisation of Processing Fee:
In accordance with Ind-AS 109 interest income on loans is recognised in the statement of profit or loss using the effective interest method. The calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate transaction costs and all other premiums or discounts accordingly processing fees collected is an integral part of the effective interest rate calculation. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or when appropriate a shorter period to the net carrying amount of the financial or financial now is being recognized over the life of the loan. Refer to Note 2(k)(ii) to the financial the accounting policy on recognition of revenue from Processing Fee. We evaluated management's process and tested key controls around the determination of amortization of processing fees including controls relating to: Identification of agent sourced loans Estimating the transaction cost relating to sourcing of loans We found these key controls were designed implemented and operated effectively and therefore determined that we could place reliance on these key controls for the purposes of our audit. We have verified the workings which contain the processing fees collected against each loan sanctioned during the current year as well as previous year. We tested the formulae applied within the calculation files. We tested the completeness and accuracy of key data inputs sourced from underlying systems that are applied in the calculation. We matched the processing fees in the workings with the underlying source systems including General Ledger. We have also tested whether loans which have been pre-closed the related balance processing fees received have been recognized fully as income.

Information Other than the Financial Statements and Auditor's Report Thereon

The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis and Annual report on CSR Activities and but ourdoes not includethe financial auditor's report thereon which we obtained prior to the date of thisauditor's report and the Report of Directors including Annexures to Directors ReportCorporate Governance and Information to Shareholders which is expected to be madeavailable to us after that date. Our opinion on the financial statements does not coverthe other information and we do not express any form of assurance conclusion thereon. Inconnection with our audit of the financial statements our responsibility is to read theother information and in doing so consider whether the other information is materiallyinconsistent with the financial statements or our knowledge obtained during the course ofour audit or otherwise appears to be materially misstated.

If based on the work we have performed on the other information that we obtained priorto the date of this auditor's report we conclude that there is a material misstatement ofthis other information we are required to report that fact. We have nothing to report inthis regard.

When we read the reports which are expected to be made available to us after the dateof this auditor's report if we conclude that there is a material misstatement therein weare required to communicate the matter to those charged with governance. In case ofuncorrected material misstatement we are required to communicate to other stakeholders asappropriate as well as to take action applicable under the applicable laws andregulations if any.

Management's Responsibility for the 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 Ind AS financial statementsthat give a true and fair view of the financial position financial performance totalcomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards specified under section 133 of the Act. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error. In preparing thefinancial statements management is responsible for assessing the Company's ability tocontinue as a going concern disclosing as applicable matters related to going concernand using the going concern basis of accounting unless management either intends toliquidate the Company or to cease operations or has no realistic alternative but to doso. The Board of Directors are also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these 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 financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.

Obtain an understanding of internal financial controls relevant to the audit in orderto design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness 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'sgoing concern. If we conclude that a material uncertainty exists we are required to drawattention in our auditor's report to the related disclosures in the financial statementsor if such disclosures are inadequate to modify our opinion. Our conclusions are basedon the audit evidence obtained up to the date of our auditor's report. However futureevents or conditions may cause the Company to cease to continue as a going concern.

Evaluate the overall presentation structure and content of the financial statementsincluding the disclosures and the underlying whether the financial transactions andevents in a manner that achieves fair presentation We communicate with those charged withgovernance regarding among other matters the planned scope and timing of the audit andsignificant any significant deficiencies in during our audit. We also provide thosecharged with governance with a statement that we have complied with relevant ethicalrequirements regarding independence and to communicate with them all relationships andother matters that may reasonably be thought to bear on our independence and whereapplicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.

Other Matter

We did not audit the financial statements of 155 branches included in the financialstatements of the Company whose financial statements reflect total assets ofH1266950.47Lakhs as at 31st March 2019 and total revenues of H114713.79 Lakhs for the year ended onthat date as considered in the financial statements. The financial statements of thesebranches have been audited by the branch auditors whose reports have been furnished to usand our opinion in so far as it relates to the amounts and disclosures included in respectof these branches in based solely on the report of such branch auditors. Our opinion isnot modifiedinrespect of this matter.

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 of the Act we give in the Annexure(Annexure A) a statement on the audit findings including matters specified in Paragraphs3 and 4 of the Order to control that we identify the extent applicable.

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 appears from ourexamination of those books and proper returns adequate for the purposes of our audit havebeen received from branches not visited by us. c) The report on the accounts of 155 branchoffices audited under section 143 by a person other than the company's principal auditorhas been forwarded to us as required by sub-section (8) of section 143 and have beenproperly dealt with in preparing our report in the manner considered necessary by us. d)The Balance Sheet the Statement of Profit and Loss including Other Comprehensive Incomethe

Statement of Changes in Equity and the Statement of

Cash Flow dealt with by this Report are in agreement with the relevant books ofaccount; e) In our opinion the aforesaid financial statements comply with the Ind ASspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014; f) On the basis of written representations received from the directors as on31 March 2019 and taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2019 from being appointed as a director in terms of Section164(2) of the Act. g) With respect to the adequacy of the internal financial control overfinancial reporting of the company and the operating effectiveness of such control referto our separate report in "Annexure B" h) With respect to the other matters tobe included in the Auditor's Report in accordance with the requirements of section 197(16)of the Act as amended:

In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the year iswithin the limit laid down under the provisions of section 197 of the Act. i) With respectto the other matters to be included in the Auditor's report in accordance with rule 11 ofthe Companies (Audit and Auditors) Rules 2014 in our opinion and to the best of ourinformation and according to the explanations given to us: i. The Company has disclosedpending litigations as contingent liabilities in Note 35 to the financial statements theimpact if any on the final settlement of the litigations is not ascertainable at thisstage. ii. The Company has not entered into any long-term contracts including derivativecontracts which require provision for foreseeable losses as per law or applicableaccounting standards and iii. There has been no delay in transferring amounts required tobe transferred to the Investor

Education and Protection Fund by the Company. Refer Note 15.2 to the FinancialStatements.

For VARMA & VARMA

Chartered Accountants

FRN 004532S

R Kesavadas

Place: Bangalore Partner Date : April 30 2019 M.No.23862

Annexure - A to the Auditors' Report

Annexure referred to in paragraph 1 under the heading "Report on Other Legal andRegulatory Requirements" of our Independent Auditors Report of even date on theFinancial Statement of M/s Can Fin Homes Limited for the year ended 31st March 2019.

i. In respect of Fixed Assets: a. The company is maintaining proper records showingfull particulars including quantitative details and situation of fixed assets. In ouropinion the records require further improvement with respect to situation of fixedassets. b. We are informed that the fixed located at the 175 branches including theCentralised Processing Centre and the Head Office physically verified by the personsin-charge as at the year-end except in the case of eight branches as reported by thebranch statutory auditors and no major discrepancies were noticed. In our opinion thefrequency of verification company is adequate. c. The title deeds of the immovableproperty of the company are held in its name. ii. The Company is a service companyprimarily rendering housing finance services. Accordingly it does not hold any inventoryof goods. Thus Para 3(ii) of the Order is not applicable. iii. As informed the Companyhas not granted any loans secured or unsecured to companies firms or other partiescovered in the register maintained under section 189 of the Companies Act. iv. Accordingto the information and explanations given to us and based on the audit proceduresconducted by us the Company has not given Loans guarantees investments or securitieswhich fall under the purview of Sections 185 & 186 of the Companies Act 2013. v. TheCompany has not accepted any deposits within the meaning of Sections 73 to 76 of the Actand the Companies (Acceptance of Deposits) Rules 2014 (as amended). Accordingly theprovisions of clause 3(v) of the Order are not applicable. assets of the company vi. Asper the information and explanation given to us the Central Government has not prescribedthe maintenance havebeen of cost records under sub-section (1) of section 148 of theCompanies Act 2013 for any of the services rendered by the Company. vii.of fixed assetsof the In respect of statutory dues: a. According to the information and explanation givento us and as per our verification of the company the Company has been generally regularin depositing undisputed statutory dues including provident fund employees‘ stateinsurance income-tax goods and services tax cess and any other statutory dues with theappropriate authorities and no material statutory dues have been outstanding for more thansix months from the due date as at the year end. b. According to the information andexplanation given to us and as per our verification of the Company the following are thedisputed amounts of tax/ duty along with the details of amounts that have been depositedwith appropriate authorities as at

31st March 2019

Statute Nature of dues Amount (In Lakhs) Amount paid (in Lakhs) Period to which the amount relates Forum to which amount is pending
Income Tax Act 1961 Income Tax 3.55 3.55* AY 2003-2004 Commissioner of Income
Tax -Appeals
Income Tax Act 1961 Income Tax 15.61 Nil AY 2004-2005 Deputy Commissioner
Income Tax
Income Tax Act 1961 Income Tax 568.55 568.55* AY 2006-2007 High Court of Karnataka
Income Tax Act 1961 Income Tax 446.27 446.27* AY 2007-2008 High Court of Karnataka
Income Tax Act 1961 Dividend Distribution 16.44 Nil AY 2011-2012 Commissioner of Income
Tax-u/s 115-O Tax -Appeals
*Includes amount paid under protest and amounts adjusted against refunds due to the company.

viii. According to information and explanation given to us and as per our verificationof the Company has not defaulted in repayment of its dues to bank/financialinstitution/government/debenture holders during the year. ix. The Company has not raisedmoneys by way of Initial Public offer or further public offer. The term loans raised havebeen applied for the purposes for which they were raised. The Company has also raisedworking capital loans with no repayment schedule and being working capital loans thereporting requirements of utilization is not commented upon. x. According to theinformation and explanations given to us and as per our verification of the records of thecompany no fraud either on or by the company has been noticed or reported by its officersor employees during the year except in the following case.

Nature of Fraud Amount involved
(in Lakhs)
Fraudulently obtained loan by borrowers in collusion with the employee of the Company Loan sanctioned: 755.50 Loan outstanding at the year-end: 755.64*

*The entire amount has been fully provided for in the books of account.

xi. According to the information and explanations given to us the managerialremuneration has been paid or provided in accordance with the requisite approvals mandatedby the provisions of section 197 read with Schedule V to the Companies Act 2013. xii. Inour opinion and according to the information and explanations given to us the Company isnot a Nidhi company. Accordingly paragraph 3(xii) of the Order is not applicable.

xiii. According to the information and explanations given to records ofthecompanytheus and based on our examination of the records of the Company transactions with therelated parties are in compliance with sections 177 and 188 of the Act where applicableand details of such transactions have been disclosed in the financial statements asrequired by the applicable accounting standards. xiv. According to the information andexplanations given to us and based on our examination of the records of the Company theCompany has not made any preferential allotment or private placement of shares or fully orpartly convertible debentures during the year. Accordingly paragraph 3(xiv) of the Orderis not applicable. xv. According to the information and explanations given to us and basedon our examination of the records of the

Company the Company has not entered into non-cash transactions with directors orpersons connected with him. Accordingly paragraph 3(xv) of the Order is not applicable.xvi. The Company is not required to be registered under section 45-IA of the Reserve Bankof India Act 1934.

For VARMA & VARMA

Chartered Accountants

FRN 004532S

R Kesavadas

Place: Bangalore Partner Date : April 30 2019 M.No.23862

Annexure - B to the Auditors' Report

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 financialcontrols over financial reporting of M/s Can FinHomes Limited ("the Company") as of 31st March 2019 in conjunction with ouraudit of the financial statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancialcontrols 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 (‘ICAI'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects. Our auditinvolves performing procedures to obtain audit evidence about the adequacy of the internalfinancial controls system over financial reporting and their operating effectiveness. Ouraudit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error. We believe thatthe audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion on the Company's internal financial controls system over financialreporting.

Meaning of Internal Financial Controls Over Financial Reporting conduct of itsbusiness A company's internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31st March 2019 based on theinternal control over financial established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.

Other Matters

Our aforesaid report under Section 143(3)(i) of the Act on the adequacy and operatingeffectiveness of the internal financial controls over financial reporting insofar as itrelates to 155 branches is based on the corresponding auditors' reports of the auditors ofsuch branches.

For VARMA & VARMA

Chartered Accountants

FRN 004532S reporting criteria

R Kesavadas

Place: Bangalore Partner Date : April 30 2019 M.No.23862