To the members of Karnavati Finance Limited

Report on the financial statements and quarterly financial results

We have audited the accompanying financial statements of KarnavatiFinance Limited (the "Company") which comprise the Balance sheet as at March31 2021 and the Statement of Profit and Loss for the period then ended the Cash flowStatement for the year ended March 31 2021 and a summary of significant accountingpolicies and other explanatory information.

Management's responsibility for the financial statements

The Company's Board of Directors is responsible for the mattersstated in Section 134(5) of the Companies Act 2013 ("the Act") with respect tothe preparation of these standalone financial statements that give a true and fair view ofthe financial position financial performance and cash flows of the Company in accordancewith the accounting principles generally accepted in India including the IndianAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting frauds and otherirregularities; 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 the financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

That Board of Directors are responsible for overseeing theCompany's financial reporting process.

Auditors' responsibility

Our objectives are to obtain reasonable assurance about whether theStatement 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 the Statement.

As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of thestatement 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 collusion.Forgery intentional omissions misrepresentations or the override of internal control.

• Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances butnot for the purpose of expressing an opinion on the effectiveness of the company'sinternal control.

• Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by the Board ofDirectors

• Conclude on the appropriateness of the Board of Directors' useof the going concern basis of accounting and based on the audit evidence obtainedwhether a material uncertainty exists related to events or conditions that may castsignificant doubt on the Company's ability to continue as a going concern. If we concludethat a material uncertainty exists we are required to draw attention in our auditor'sreport to the related disclosures in the financial results or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.

• Evaluate the overall presentation structure and content of theStatement including the disclosures and whether the financial results represent theunderlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.

Our responsibility is to express an opinion on these financialstatements based on our audit. We have taken into account the provisions of the Act theAccounting and Auditing Standards and matters which are required to be included in theAudit Report under the provisions of the Act and the Rules made there under. We conductedour audit in accordance with the Standards on Auditing specified under Section 143(10) ofthe Act. Those Standards require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance about whether the financial statementsare free from material misstatement.

Opinion

In our opinion and to the best of our information and according to theexplanations given to us the aforesaid financial statements give a true and fair view ofin conformity with the:

(a) In the case of Balance sheet of the State of Affairs of theCompany as at March 31 2021; and

(b) In the case of Statement of profit and loss of the Profit for theYear ended on March 31 2021; and

(c) Its cash flow statement for the year ended March 31 2021.

(d) Statement of changes in the equity for the year ended March 312021.

Basis for Opinion

We conducted our audit in accordance with Standards on Auditing (SAs)specified under section 143(10) of the Companies Act 2013. Our responsibilities underthose Standards are further described in the Auditor's Responsibilities for the Auditof the Financial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and we have fulfilledour other ethical responsibilities in accordance with these requirements and theICAI's Code of Ethics.

Key Audit Matters

Key audit matters are those matters that in our professional judgementwere of most significance in our audit of the financial statements of the current period.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters.

Emphasis of Matters

We draw attention to note 31 to the Ind AS financial statements whichdescribes the uncertainty caused by Novel Coronavirus (COVID-19) pandemic with respect tothe Company's estimates of impairment of loans to customers and that such estimatesmay be affected by the severity and duration of the pandemic. Our opinion is not modifiedin respect of this matter.

We would like to draw emphasis on the matter of Contingent Liability(Refer Note 24 to financial statements) on Inter Corporate Loan which arises through thepass through transaction on NIM basis entered by the Company consequent to asset underpass through arrangement becoming NPA on account of dispute in transaction. Loss likely toarise is to the extent of interest liability on account of negative outcome of litigation.Our opinion is not modified in respect of this matter.

Information Other than the Financials Statements and Auditor'sReport thereon (Other Information)

The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in the CorporateOverview Board's Report Management Discussion and Analysis Report and Report onCorporate Governance in the Annual Report of the Company for the financial year 2020-21but does not include the financial statements and our auditor's report thereon. Thereports containing the other information as above are expected to be made available to usafter the date of this auditor's report.

Our opinion on the financial statements does not cover the otherinformation and we will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements ourresponsibility is to read the other information identified above when it becomes availableand in doing so consider whether the other information is materially inconsistent withthe financial statements or our knowledge obtained in the audit or otherwise appears tobe materially misstated.

When we read the reports containing the other information if weconclude that there is a material misstatement therein we are required to communicate thematter to those charged with governance.

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 Companies Act 2013 we give in the Annexure 1 statement onthe 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 obtained all the information and explanations which to thebest of our knowledge and belief were necessary for the purpose of our audit;

b) In our opinion proper books of account as required by law have beenkept by the Company so far as appears from our examination of the books of account;

c) The Balance Sheet and Statement of Profit and Loss and Cash Flowstatement dealt with by this report are in agreement with the books of account;

d) In our opinion the balance sheet and statement of profit and lossand Cash Flow Statement dealt with by this report comply with the Indian AccountingStandards referred to in section 133 of the Act read with rules issued thereunder;

e) On the basis of written representations received from the directorsas at 31^st March 2021 and taken on record by the Board of Directors we reportthat none of the directors is disqualified as at 31^st March 2021 from beingappointed as a director in terms of subsection (2) of section 164 of the Companies Act2013.

f) With respect to the adequacy of the internal financial controls overfinancial reporting of the Company and operating effectiveness of such controls refer toour separate Report in "Annexure 2" to this report.

g) With respect to the other matters to be included in theAuditor's Report in accordance with Section 197(16) of the Act in our opinion and tothe best of our information and according to the explanations given to us: theremuneration paid/ provided by the Company to its directors during the year is inaccordance with the provisions of section 197 of the Act.

h) With respect to the matters to be included in the Auditor'Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 inour opinion and to the best of our information and according to the explanations given tous:

i. The Company has disclosed impact of pending litigations on itsfinancial position in its financial statements

ii. The Company has not entered into any long-term contracts includingderivative contracts requiring provision under applicable laws or accounting standardsfor material foreseeable losses.

iii. There are no amounts which required to be transferred to theInvestor Education and Protection Fund by the Company

Annexure 1 to the Independent Auditor's Report of even date onfinancial statements of Karnavati Finance Limited

i. (a)The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets.

(b) The fixed assets of the company have been physically verified bythe management during the year and no material discrepancies between the book records andthe physical inventory have been noticed. In our opinion the frequency of verification isreasonable.

(c) The title deed of immovable property is held in the name of thecompany.

ii. The Company has inventory of foreign currency and it is measured asper the RBI Exchange rate as on 31^st March 2021.

iii. According to the information and explanations given to us thecompany has not granted any loans secured or unsecured to companies firms limitedLiability Partnerships or other parties covered in the register maintained under section189 of the Companies Act 2013.

iv. According to the information and explanations given to us thecompany has not granted any loans investments guarantees and security covered under theprovisions of section 185 and 186 of the Companies Act 2013 and hence this clause is notapplicable to the company.

v. According to the information and explanations given to us theCompany has not accepted any deposits from the public to which the directives issued bythe Reserve Bank of India and the provisions of Section 73 to Section 76 or any otherrelevant provisions of the Act and the rules framed there under apply

vi. To the best of our knowledge and according to the information andexplanations given to us the Central Government of India has not prescribed themaintenance of cost records under sub-section (1) of Section 148 of the Act for anyservices rendered by the company.

vii. (a) According to the information and explanations given to us theCompany has been regular in depositing undisputed statutory dues.

(b) According to the information and explanations given to us thereare no dues outstanding of income tax sales tax customs duty service tax excise dutycess and goods and service tax on account of any dispute.

viii. The Company has not defaulted in repayment of loans or borrowingto a financial institutions or banks.

ix. Managerial Remuneration had been paid by the company during theyear in accordance with the requisite approvals mandated by the provisions of section 197read with schedule V to Companies Act.

x. According to the information and explanations given to us and therecords of the Company examined by us all the transactions with the related parties arein compliance with sections 177 and 188 of Companies Act 2013 and the details have beendisclosed in financial statements as required by the applicable accounting standards.

xi. The company has not entered into any non cash transactions withDirectors or persons connected with them.

xii. In our opinion the company is Non Banking Finance Companyregistered under section 45-IA of the Reserve Bank of India Act 1934 vide certificate ofregistration no. 13.00064 dated February 24 1998.

Annexure 2 to The Independent Auditor's Report Of Even Date On TheFinancial Statements Of Karnavati Finance Limited

Report on the Internal Financial Controls under Clause (i) of SubSection 3 of section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financialreporting of Kamavati Finance Limited ("the company") as of 31^stMarch 2021 in conjunction with our Audit of the standalone financial statements of thecompany for the period ended on that date.

Management's Responsibility for Internal Financial Controls

The company's Management is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India (ICAI).These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to company's policiessafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company'sinternal financial controls over financial reporting based on our audit. We conducted ouraudit in accordance with the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting (the Guidance Note ) and the standards on Auditing issued by ICAI anddeemed to 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 the 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 audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on assessed risk. Theprocedures selected depend on the auditor's judgment including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internalfinancial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting isa process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external Purposes in accordancewith generally accepted accounting principles. A company's internal financial controlover financial 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 authorizations of management and directors of the companyand (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could havea material effect on the financial statements.

Inherent Limitations of internal Financial Controls over FinancialReporting

Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrols over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at 31^st March2021 based on the internal financial 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 Institute of Chartered Accountants of India.