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Karnavati Finance Ltd.

BSE: 538928 Sector: Financials
NSE: N.A. ISIN Code: INE554R01012
BSE 16:00 | 28 Oct 19.10 0
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NSE 05:30 | 01 Jan Karnavati Finance Ltd
OPEN 19.10
PREVIOUS CLOSE 19.10
VOLUME 2
52-Week high 21.90
52-Week low 10.90
P/E
Mkt Cap.(Rs cr) 19
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 19.10
CLOSE 19.10
VOLUME 2
52-Week high 21.90
52-Week low 10.90
P/E
Mkt Cap.(Rs cr) 19
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Karnavati Finance Ltd. (KARNAVATIFINANC) - Auditors Report

Company auditors report

To the members of Karnavati Finance Limited Report on the financial statements

We have audited the accompanying financial statements of Karnavati Finance Limited (the"Company") which comprise the Balance sheet as at March 31 2020 and theStatement of Profit and Loss for the period then ended the Cash flow Statement for theyear ended March 31 2020 and a summary of significant accounting policies and otherexplanatory information.

Management's responsibility for the financial statements

The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.

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

Auditors' responsibility

Our objectives are to obtain reasonable assurance about whether the Statement as awhole are free from material misstatement whether due to fraud or error and to issue anauditor's report that includes our opinion. Reasonable assurance is a high level ofassurance but is not a guarantee that an audit conducted in accordance with SAs willalways detect a material misstatement when it exists. Misstatements can arise from fraudor error and are considered material if individually or in the aggregate they couldreasonably be expected to influence the economic decisions of users taken on the basis ofthe Statement.

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

• Identify and assess the risks of material misstatement of the statement whetherdue to fraud or error design and perform audit procedures responsive to those risks andobtain audit evidence that is sufficient and appropriate to provide a basis for ouropinion. The risk of not detecting a material misstatement resulting from fraud is higherthan for one resulting from error as fraud may involve collusion. Forgery intentionalomissions misrepresentations or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances but not for the purposeof expressing an opinion on the effectiveness of the company's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by the Board of Directors

• Conclude on the appropriateness of the Board of Directors' use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the financial results or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern.

• Evaluate the overall presentation structure and content of the Statementincluding the disclosures and whether the financial results represent the underlyingtransactions and events in a manner that achieves fair presentation.

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.

Our responsibility is to express an opinion on these financial statements based on ouraudit. We have taken into account the provisions of the Act the Accounting and AuditingStandards and matters which are required to be included in the Audit Report under theprovisions of the Act and the Rules made there under. We conducted our audit in accordancewith the Standards on Auditing specified under Section 143(10) of the Act. Those Standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from materialmisstatement.

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give a true and fair view of in conformitywith the:

(a) In the case of Balance sheet of the State of Affairs of the Company as at March31 2020; and

(b) In the case of Statement of profit and loss of the Profit for the Year ended onMarch 31 2020; and

(c) Its cash flow statement for the year ended March 31 2020.

(d) Statement of changes in the equity for the year ended March 31 2020.

Basis for Opinion

We conducted our audit in accordance with Standards on Auditing (SAs) specified undersection 143(10) of the Companies Act 2013. Our responsibilities under those Standards arefurther described in the Auditor's Responsibilities for the Audit of the FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the financial statements under theprovisions of the Companies Act 2013 and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics.

Key Audit Matters

Key audit matters are those matters that in our professional judgement were of mostsignificance in our audit of the financial statements 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.

Key Audit Matters How addressed in Audit Ho w addressed in Audit
Indian Accounting Standards (Ind-AS) as specified under Section 133 of the Act read with relevant rules there under have been made mandatorily applicable for specified Non-Banking Finance Companies applicable with effect from April 1st 2019 and consequently these standalone financial statements have been prepared by the management in compliance with the Ind AS framework. As against the provisioning norms earlier prescribed by Reserve Bank of India and adopted by the company in prior years Ind-AS 109 (Financial Instruments) requires the Company to recognise Expected credit Loss (ECL) on financial assets which involves application of significant judgement and estimates including use of key assumptions such as probability of default and loss given default Refer Note 29 to the Financial Statements We co all have evaluated the management's process and tested key controls around the determination of expected credit loss allowances including controls relating to: The identification of events leading to a significant increase in risk and credit impairment events; and
The determination of the impaired credit loss allowances and the key assumptions including probability of default and loss given default on a forward looking basis having regard to historical experiences.
We understood and assessed the appropriateness of the Impairment methodology developed and used by the management at the entity level. This included assessing the appropriateness of key judgements. We tested the accuracy of data inputs and calculations used in this regard. found that these key controls as above were designed implemented and operated effectively and therefore have placed reliance on these key controls for the purposes of our audit of ECL and impairment loss allowances

Emphasis of Matters

We draw attention to note 31 to the Ind AS financial statements which describes theuncertainty caused by Novel Coronavirus (COVID-19) pandemic with respect to the Company'sestimates of impairment of loans to customers and that such estimates may be affected bythe severity and duration of the pandemic. Our opinion is not modified in respect of thismatter.

We would like to draw emphasis on the matter of Contingent Liability on Inter CorporateLoan which arises through the pass through transaction on NIM basis entered by theCompany consequent to asset under pass through arrangement becoming NPA on account ofdispute in transaction. Loss likely to arise is to the extent of interest liability onaccount of negative outcome of litigation. Our opinion is not modified in respect of thismatter.

Information Other than the Financials Statements and Auditor's Report thereon (OtherInformation)

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Corporate Overview Board's ReportManagement Discussion and Analysis Report and Report on Corporate Governance in the AnnualReport of the Company for the financial year 2019-20 but does not include the financialstatements and our auditor's report thereon. The reports containing the other informationas above are expected to be made available to us after the date of this auditor's report.

Our opinion on the financial statements does not cover the other information and wewill not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements our responsibility is to readthe other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated.

When we read the reports containing the other information if we conclude that there isa material misstatement therein we are required to communicate the matter to thosecharged with governance.

Report on other Lesal and Regulatory Requirements

(1) As required by the Companies (Auditor's Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Companies Act 2013 we give in the Annexure 1 statement on thematters 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 the best of ourknowledge and belief were necessary for the purpose of our audit;

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

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

d) In our opinion the balance sheet and statement of profit and loss and Cash FlowStatement dealt with by this report comply with the accounting standards referred to insection 133 of the Act read with rule 7 of Companies (Accounts) Rules 2014; and

e) On the basis of written representations received from the directors as at March 31st2020 and taken on record by the Board of Directors we report that none of the directorsis disqualified as at March 31st 2020 from being appointed as a director interms of subsection (2) of section 164 of the Companies Act 2013.

f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and operating effectiveness of such controls refer to ourseparate Report in "Annexure 2" to this report.

g) With respect to the matters to be included in the Auditor' Report in accordance withsection 197 (16) of the Act in our opinion and to the best of our information andaccording to the explanations given to us the remuneration paid/provided by the company toits directors during the year is in accordance with the provisions of section 197 of theAct.:

h) With respect to the matters to be included in the auditors report in accordance withrule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to the bestof our information and according to the explanations given to us

i. The Company has disclosed impact of pending litigations on its financial positionsin its financial statements.

ii. The Company has not entered into any long-term contracts including derivativecontracts applicable laws or accounting standards for material foreseeable losses.requiring provision under

iii. There is no amounts which required to be transferred to the Investor Educationand Company. Protection Fund by the

FOR D G M S & Co.
(Chartered Accountants)
Reg No. : 112187W
Hiren Jayantilal Maru
Date : July 30 2020 Partner
Place : Jamnagar M. No. : 115279
UDIN: 20115279AAAACH4006

Annexure 2 to The Independent Auditor's Report of Even Date on the Financial Statementsof Karnavati Finance Limited Report on the Internal Financial Controls under Clause (i) ofSub Section 3 of section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of KarnavatiFinance Limited ("the company") as of 31st March 2020 in conjunctionwith our Audit of the standalone financial statements of the company for the period endedon that date. 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 (ICAI). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies 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.

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 deemed to beprescribed under section 143 (10) of the Companies Act 2013 to the extent applicable toan audit of internal financial controls both applicable to an audit of Internal FinancialControls and both issued by the Institute of Chartered Accountants of India ThoseStandards and the Guidance Note require that we comply with the ethical requirements andplan and perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to 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 Company's internal financial controls systemover financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external Purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that

(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company

(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with authorizations of management anddirectors of the company and

(3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial 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 controlsover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance may 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 2020based on the internal financial control over financial reporting criteria established bythe Company considering the essential components of internal control stated in theGuidance note on Audit of Internal Financial Controls Over Financial Reporting issued byInstitute of Chartered Accountants of India.

FOR D G M S & Co.
(Chartered Accountants)
Reg No. : 112187W
Hiren Jayantilal Maru
Date : July 30 2020 Partner
Place : Jamnagar M. No. : 115279
UDIN: 20115279AAAACH4006

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