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Magma Fincorp Ltd.

BSE: 524000 Sector: Financials
NSE: MAGMA ISIN Code: INE511C01022
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OPEN 32.35
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VOLUME 187761
52-Week high 72.00
52-Week low 12.70
P/E 92.88
Mkt Cap.(Rs cr) 826
Buy Price 30.35
Buy Qty 200.00
Sell Price 30.65
Sell Qty 25.00
OPEN 32.35
CLOSE 32.35
VOLUME 187761
52-Week high 72.00
52-Week low 12.70
P/E 92.88
Mkt Cap.(Rs cr) 826
Buy Price 30.35
Buy Qty 200.00
Sell Price 30.65
Sell Qty 25.00

Magma Fincorp Ltd. (MAGMA) - Auditors Report

Company auditors report

To the Members of Magma Fincorp Limited Report on the Audit of the Standalone FinancialStatements

Opinion

We have audited the standalone financial statements of Magma Fincorp Limited (‘theCompany') which comprise the standalone balance sheet as at 31 March 2019 and thestandalone statement of profit and loss (including other comprehensive income) standalonestatement of changes in equity and standalone statement of cash flows for the year thenended and notes to the standalone financial statements including a summary of thesignificant accounting 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 (‘the Act') in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31 March 2019 and profit and other comprehensiveincome changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those SAs are furtherdescribed in the Auditors' Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance withthe Code of Ethics issued by the Institute of Chartered Accountants of India together withthe ethical requirements that are relevant to our audit of the standalone financialstatements under the provisions of the Act and the Rules thereunder and we have fulfilledour other ethical responsibilities in accordance with these requirements and the Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our opinion.

Emphasis of matter

We draw attention to Note 50 (B) to the standalone financial statements regarding theScheme of Amalgamation (‘the Scheme') between Magma ITL Finance Limited(‘Subsidiary') and the Company sanctioned by the National Company Law Tribunal(‘NCLT') Kolkata Bench vide its order dated 8 May 2018. The Company has accountedfor the Scheme with effect from 1 April 2017 under the pooling of interest method asprescribed by Ind AS 103 ‘Business Combination'. Accordingly the appointed dateconsidered for accounting of the Scheme under Indian Accounting Standard (‘Ind AS')is different from that prescribed by the NCLT which had sanctioned the Scheme withbinding effect from 1 October 2017. Had the Company accounted for the aforesaid Schemewith effect from 1 October 2017 the ‘Other Equity' as at 1 April 2017 would havebeen lower by INR 2482.94 lacs and the total comprehensive income (net of tax) for theprevious financial year ended 31 March 2018 would have been lower by INR 5096.45 lacs.Our opinion on the standalone financial statements 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 of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.

Transition date accounting policies

Refer to Note 53 to the Standalone Financial Statements: ‘First time adoption ofInd AS'

Key audit matter How the matter was addressed in our audit
Adoption of new accounting framework (Ind AS) Our key audit procedures included:
Effective 1 April 2018 the Company adopted the Indian Accounting Standards (‘Ind AS') notified by the Ministry of Corporate Affairs with the transition date of 1 April 2017. Design / controls
• We have confirmed the approvals of Audit Committee for the choices and exemptions made by the Company for compliance with IND AS 101.
The following are the major impact areas for the Company upon transition: Substantive tests
• Measurement of loan losses (expected credit losses) • Evaluated management's transition date choices and exemptions for compliance with under Ind AS 101.
• Classification and measurement of financial assets and financial liabilities • Understood the methodology implemented by management to give impact on the transition.
• Accounting for securitization and assignment transactions • Assessed the accuracy of the computations
• Accounting for loan fees and costs • Assessed areas of significant estimates and management judgment in line with principles under Ind AS.
• Common control transactions
The migration to the new accounting framework (Ind AS) is a complicated process involving multiple decision points upon transition. Ind AS 101 First Time Adoption prescribes choices and exemptions for first time application of Ind AS principles at the transition date.
We identified transition date accounting as a key audit matter because of significant degree of management judgment and application on the areas noted above.

Impairment of loans and other financial assets

Charge to the Statement of Profit and Loss: INR 26241.44 lacs [Refer Note 34 tostandalone the financial statements] Provision as at 31 March 2019: INR 54960.03lacs [Refer Note 6 and Note 8 to the standalone financial statements]

The key audit matter How the matter was addressed in our audit
Subjective estimate Our audit procedures included:
Recognition and measurement of impairment on loans and advances involve significant management judgement. Design / controls
With the applicability of Ind AS 109 credit loss assessment is now based on expected credit loss (ECL) model. The Company's impairment allowance is derived from estimates including the historical default and loss ratios. • Evaluation of the appropriateness of the impairment principles based on the requirements of Ind AS 109
• Assessing the design and implementation of key internal financial controls over loan impairment process used to calculate the impairment charge.
Management exercises judgement in determining the quantum of loss based on a range of factors. • We used our modelling specialist to test the model methodology and reasonableness of assumptions used.
The most significant areas are:
• Segmentation of loan book; • Testing of management review controls over measurement of impairment allowances and disclosures in financial statements.
• Loan staging criteria;
• Calculation of probability of default / Loss given default; Substantives tests
• Consideration of probability weighted scenarios and forward looking macro-economic factors. • We focused on appropriate application of accounting principles validating completeness and accuracy of the data and reasonableness of assumptions used in the model.
• Compliance of disclosures with the applicable accounting standards • Test of details over calculation of impairment allowance for assessing the completeness accuracy and relevance of data.
• Model calculations were tested through re-performance where possible.
• The appropriateness of management's judgments was also independently reconsidered in respect of calculation methodologies segmentation economic factors the period of historical loss rates used and loss emergence periods
Valuation of financial instruments

Financial assets classified as Amortised cost: INR 1182240.77 lacs as at 31 March2019 Financial assets classified as FVOCI: INR 234577.18 lacs as at 31 March 2019

Refer Note 46 to the Financial Statements: ‘Financial Instruments-Fair value andrisk management'

Key audit matter How the matter was addressed in our audit
Subjective estimate Our key audit procedures included:
The fair value of financial instruments is determined through application of valuation techniques and the use of assumptions and estimates. Due to the significance of financial instruments and the related estimation uncertainty this is also considered a key audit focus area. Key financial assets being fair valued include: • Assessing the design implementation and operating effectiveness of management's key internal controls over the valuation process and inputs.
• Loans accounted for as Fair value through Other Comprehensive Income (‘FVOCI') – INR 234577.18 lacs • Engaging our internal valuation specialists to assist us in evaluating the valuation models used by the Company to value level 3 financial Instruments and to perform on a sample basis independent valuations of the financial instruments and compare these valuations with the Company's valuations.
The effect of fair value adjustments impact the Other Comprehensive Income. • Assessed the appropriateness of the valuation methodology and challenging the valuation model by testing the key inputs used such as discount factors. Compared the valuation methodology with the criteria in the Indian accounting standards.
Where observable data is not readily available as in the case of level 3 financial instruments then estimates need to be developed which can involve significant management judgement.
The Company has developed its own models to value certain level 3 financial instruments which also involve significant management judgement. • Assessing whether the financial statement disclosures appropriately reflected the Company's exposure to financial instrument valuation risk with reference to the requirements of the Indian Accounting standards.
We identified assessing the fair value of financial instruments as a key audit matter because of the degree of complexity involved in valuing financial assets and the degree of judgement exercised by management in determining the inputs used in the valuation models.
IT Systems and Controls
The key audit matter How the matter was addressed in our audit
Our response
The Company's key financial accounting and reporting processes are highly dependent on the automated controls in information systems such that there exists a risk that gaps in the IT control environment could result in the financial accounting and reporting records being misstated. Our audit procedures to assess the IT system management included the following:
General IT controls / user access management
Due to the large transaction volumes and the increasing challenge to protect the integrity of the Company's systems and data cyber security has become more significant. • We tested key controls operating over the information technology in relation to financial accounting and reporting systems including system access and program change management and computer operations.
We have focused on user access management program change management segregation of duties system reconciliation controls and system application controls over key financial accounting and reporting systems • We tested the design and operating effectiveness of key controls over user access management which includes granting access right new user creation user role modification periodic user access review revocation of user rights and preventative controls designed to enforce segregation of duties.
• For a selected group of key controls over financial and reporting system we independently performed procedures to determine that these controls remained unchanged during the year or were changed following the standard change management process.
• Evaluating the design implementation and operating effectiveness of the significant accounts-related IT automated controls which are relevant to the accuracy of system calculation
• Other areas that were independently assessed included password policies security configurations controls over changes to applications and databases and controls over segregation of duties between development and production environment.

Information Other than the Standalone Financial

Statements and Auditors' Report Thereon

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 financial statements and our auditors' report thereon.

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

In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially 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.

Management's Responsibility for the Standalone Financial Statements

The Company's management and Board of Directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the state of affairs profit and othercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under Section 133 of the Act. 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 designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the accuracy and completeness of the accounting records relevantto the preparation and presentation of the standalone financial statements that give atrue and fair view and are free from material misstatement whether due to fraud or error.

Inpreparingthestandalonefinancial statementsmanagement and Board of Directors areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

Board of Directors is also responsible for overseeing the Company's financial reportingprocess.

Auditors' 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 auditors' 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 standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the company 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 reasonablenessof accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basisof accounting 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 auditors' report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditors' report. However future events or conditions may cause the Company to cease tocontinue as a going concern.

• Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent 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 statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditors' report unless law or regulation precludes public disclosure about thematter or when 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.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors' Report) Order 2016 (‘the Order')issued by the Central Government in terms of section 143 (11) of the Act we give in the‘Annexure A' a statement on the matters specified in paragraphs 3 and 4 of the Orderto the extent applicable.

2. (A) As required by Section 143(3) of the Act we report that:

a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.

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

c) The standalone balance sheet the standalone statement of profit and loss (includingother comprehensive income) the standalone statement of changes in equity and thestandalone statement of cash flows dealt with by this Report are in agreement with thebooks of account

d) In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified under section 133 of the Act.

e) On the basis of the written representations received from the directors as on 31March 2019 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.

f) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in ‘Annexure B'.

(B) With respect to the other matters to be included in the Auditors' Report inaccordance with Rule 11 of the Companies (Audit and Auditors') Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations as at 31 March 2019 onits financial position in its standalone financial statements - Refer Note 44 to thestandalone financial statements;

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

iv. The disclosures in the standalone financial statements regarding holdings as wellas dealings in specified bank notes during the period from 8 November 2016 to 30 December2016 have not been made in these financial statements since they do not pertain to thefinancial year ended 31 March 2019.

(C) With respect to the matter to be included in the Auditors' Report under section197(16):

In our opinion and according to the information and explanations given to us theremuneration paid by the Company to its directors during the current year is in accordancewith the provisions of section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under section 197(16) which arerequired to be commented upon by us.

for B S R & Co. LLP
Chartered Accountants
Firm Registration No: 101248W/ W-100022
Manoj Kumar Vijai
Place: Mumbai Partner
Date: 15 May 2019 Membership Number: 046882

(i) The Annexure referred to in the Independent Auditors' Report to the members ofMagma Fincorp Limited (‘the Company') on the standalone financial statements for theyear ended 31 March 2019 we report that:

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

b) The Company has a regular programme of physical verification of its fixed assets bywhich fixed assets are verified in a phased manner over a period of three years. In ouropinion the periodicity of the physical verification is reasonable having regards to thesize of the Company and the nature of its assets. Pursuant to the programme certain fixedassets were verified during the year and no material discrepancies were noticed on suchverification.

c) In our opinion and according to the information and explanations given to us and onthe basis of our examination of the records of the Company the title deeds of immovableproperties included in property plant and equipment as disclosed in Note 11 to theannual standalone financial statements are held in the name of the Company except for thefollowing:

(` in Lacs)

Particulars (Buildings) Amount
Total number of cases 3
Gross block as at 31 March 2019 1258.96
Net block as at 31 March 2019 1194.64

(ii) The Company is a Non-Banking Finance Company (‘NBFC') primarily engaged inthe business of financing. Accordingly it does not hold any physical inventories. Thusparagraph 3(ii) of the Order is not applicable to the Company

(iii) The Company has granted loans to one company covered in the register maintainedunder section 189 of the Companies Act 2013 (‘the Act').

a) In our opinion and according to the information and explanations given to us theterms and conditions on which the loans had been granted to the company listed in theregister maintained under section 189 of the Act are not prejudicial to the interest ofthe Company.

b) In the case of loans granted to the company listed in the register maintained undersection 189 of the Act the borrower has been regular in the repayment of the principaland payment of interest wherever stipulated.

c) There is no overdue amount of the loan granted to the Company listed in the registermaintained under section 189 of the Act.

(iv) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the Company has not undertaken any transactionin respect of loans guarantees and securities covered under section 185 of the Act. TheCompany has complied with section 186(1) of the Act in relation to investments made by theCompany. The remaining provisions related to section 186 of the Act do not apply to theCompany as it is an NBFC registered with the Reserve Bank of India (‘RBI').

(v) The Company is an NBFC and consequently is exempt from provisions of section 73 tosection 76 of the Act. Thus paragraph 3(v) of the Order is not applicable to the Company.

(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the rules prescribed by the Central Government for maintenance of cost records undersection 148(1) of the Act in respect of sale of power generated from windmills and are ofthe opinion that prima facie the prescribed accounts and records have been made andmaintained. However we have not made a detailed examination of the records. The CentralGovernment has not prescribed the maintenance of cost records under section 148 (1) of theCompanies Act 2013 for any of the other services rendered by the Company.

(vii) a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted / accrued in the books ofaccount in respect of undisputed statutory dues including Provident Fund employees' StateInsurance Income -tax goods and service tax cess and any other material statutory dueshave generally been regularly deposited during the year by the Company with theappropriate authorities except for delays ranging from 1 day to 61 days with respect todeposit of professional tax with appropriate authorities. With the advent of Central Goodsand Services Tax Act 2017 and the respective State Goods and Services tax Act Servicetax and value added tax have been subsumed into goods and services tax. As explained tous the Company did not have any dues on account of Sales-tax duty of customs and duty ofexcise.

According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund employees' State Insurance Income -tax goods andservice tax cess and other material statutory dues were in arrears as at 31 March 2019for a period of more than six months from the date they became payable As explained tous the Company did not have any dues on account of Sales-tax duty of customs and duty ofexcise.

b) According to the information and explanations given to us there are no material duesof cess and other material statutory dues which have not been deposited by the Companywith the appropriate authorities on account of any disputes. However according to theinformation and explanations given to us the following dues of income tax service taxand value added tax have not been deposited by the Company on account of disputes:

Name of the Statute Nature of Dues Amount Paid under Protest Amount Period to which amount relates Forum where dispute is pending
(` in Lacs) (` in lacs)
Income Tax Act 1961 Income Tax 136.34 - 2010-11 and 2013-14 Income Tax Appellate Tribunal
Income Tax Act 1961 Income Tax 81.06 75.12 2011-12 and 2013-14 Commissioner of Income Tax (Appeals)
Income Tax Act 1961 Income Tax 99.42 10.95 2014-15 to 2015-16 Commissioner of Income Tax (Appeals)
Finance Act 1994 Service Tax 208.00 93.00 2002-03 to 2005-06 Customs Excise and Service Tax Appellate Tribunal (CESTAT) Kolkata
Finance Act 1994 Service Tax 131.77 8.09 2008-09 to 2011-12 Customs Excise and Service Tax Appellate Tribunal (CESTAT) Kolkata
Finance Act 1994 Service Tax 184.52 - 2010-11 to 2013-14 High Court Kolkata
West Bengal Value Added Tax Act 2003 VAT 13.72 6.86 2008-09 West Bengal Taxation Tribunal Kolkata
West Bengal Value Added Tax Act 2003 VAT 21.73 7.21 2009-10 and 2013-14 West Bengal Commercial Taxes Appellate and Revisional Board
Rajasthan Value Added Tax Act 2003 VAT 44.60 1.10 2013-14 to 2016-17 Appellate Authority Rajasthan
The Rajasthan Tax on Entry of Goods into Local Areas Act 1999 Entry Tax 1.43 - 2015-16 Jurisdictional Authority
Jharkhand Value Added Tax Act 2005 VAT 21.57 4.30 2006-07 to 2009-10 Sales Tax Tribunal Jharkhand Ranchi
Madhya Pradesh Value Added Tax Act 2002 VAT 133.75 - 2008-09 to 2009-10 Madhya Pradesh High Court Jabalpur
Orissa Value Added Tax 2004 VAT 68.89 11.48 2007-08 to 2011-12 Sales Tax Tribunal Orissa
Delhi Value Added Tax Act 2004 VAT 16.26 - 2012-13 Delhi Commissioner of Tax
Delhi Value Added Tax Act 2004 VAT 33.11 2.59 2013-14 Sales Tax Tribunal Delhi
The Maharashtra Value Added Tax Act 2002 VAT 850.78 - 2013-14 Bombay High Court

As explained to us the Company did not have any dues on account of Sales-tax duty ofcustoms and duty of excise

(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in repayment of dues to any financial institutions banks orto debenture holders during the year. The Company did not have any outstanding loans orborrowings from the government during the year.

(ix) In our opinion and according to the information and explanations given to us termloans were applied for the purpose for which they were raised. The Company has not raisedany money by way of initial public offer or further public offer (including debtinstruments) during the year.

(x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us except for 10 cases aggregatingto INR 160.54 lacs we have neither come across any instance of fraud by the Company or onthe Company by its officers or employees noticed or reported during the year nor have webeen informed of such case by the Management.

(xi) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid managerial remuneration inaccordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V to the Act.

(xii) In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Thus paragraph 3(xii) of the Order is not applicable tothe Company.

(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with section 177 and 188 of the Act where applicable and details of suchrelated party transactions have been disclosed in the standalone financial statements asrequired by the applicable accounting standards.

(xiv) According to the information and explanations given by the Management theCompany has complied with provisions of section 42 of the Companies Act 2013 in respectof the private placement of equity shares during the year. According to the informationand explanations given by the Management we report that the amounts raised have beenused for the purposes for which the funds were raised.

(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into any non-cashtransactions with the director or persons connected with him. Thus paragraph 3(xv) of theOrder is not applicable to the Company.

(xvi) The Company is required to be registered under section 45-IA of the Reserve Bankof India Act 1934 and such registration has been obtained by the Company on 23 September2008.

for B S R & Co. LLP
Chartered Accountants
Firm Registration No: 101248W/ W-100022
Manoj Kumar Vijai
Place: Mumbai Partner
Date: 15 May 2019 Membership Number: 046882

Report on the internal financial controls with reference to the aforesaid standalonefinancial statements under Clause (i) of Sub-section 3 of Section 143 of the CompaniesAct 2013

Referred to in paragraph 2(A)(f) under ‘Report on Other Legal and RegulatoryRequirements' section of our report of even date

Opinion

We have audited the internal financial controls with reference to financial statementsof Magma Fincorp Limited (‘the Company') as of 31 March 2019 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.

In our opinion the Company has in all material respects adequate internal financialcontrols with reference to financial statements and such internal financial controls wereoperating effectively as at 31 March 2019 based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India (the ‘Guidance Note').

Management's Responsibility for Internal Financial

Controls

The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013 (hereinafter referred to as‘the Act').

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing prescribed undersection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols with reference to financial statements. 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 with reference tofinancial statements were established and maintained and whether such controls operatedeffectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of such internal financial controlsassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditors' judgement including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror.

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 withreference to financial statements.

Meaning of Internal Financial controls with Reference to Financial Statements

A company's internal financial controls with reference to financial statements is aprocess 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 controlswith reference to financial statements include 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 with Reference to FinancialStatements

Because of the inherent limitations of internal financial controls with reference tofinancial statements 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 withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

for B S R & Co. LLP
Chartered Accountants
Firm Registration No: 101248W/ W-100022
Manoj Kumar Vijai
Place: Mumbai Partner
Date: 15 May 2019 Membership Number: 046882