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Poonawalla Fincorp Ltd.

BSE: 524000 Sector: Financials
NSE: POONAWALLA ISIN Code: INE511C01022
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VOLUME 1007583
52-Week high 212.90
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OPEN 196.60
CLOSE 196.70
VOLUME 1007583
52-Week high 212.90
52-Week low 35.65
P/E
Mkt Cap.(Rs cr) 15,761
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Poonawalla Fincorp Ltd. (POONAWALLA) - Auditors Report

Company auditors report

To the Members of Magma Fincorp Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the standalone financial statements of Magma Fincorp Limited ("theCompany") which comprise the standalone balance sheet as at 31 March 2021 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 ("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 2021 and loss 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 Auditor's 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 (the 'ICAI')and relevant provisions of the Act together with the ethical requirements that arerelevant to our audit of the standalone financial statements under the provisions of theAct and the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our opinionon the standalone financial statements.

Emphasis of matter

We draw attention to Note 43(ii) to the Standalone financial statements relating toremuneration paid to the Whole Time Director (upto 7 November 2020) and the Vice Chairmanand Managing Director of the Company for the financial year ended 31 March 2021 being inexcess of the limits prescribed under Section 197 read with Schedule V of the CompaniesAct 2013 by H NIL and H 49.93 lacs for Whole Time Director and Vice Chairman and ManagingDirector respectively and the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 by H 112.71 lacs and H 224.40 lacs for Whole Time Director and ViceChairman and Managing Director respectively which is subject to the approval of theshareholders. Further the Company is reasonably certain of getting the required approval.

Our opinion is not modified in respect of this matter.

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.

Loss allowance for Expected Credit Loss (ECL) on loans and advances

Refer to the accounting policies in Note 2(e) - Significant areas of estimationuncertainty critical judgements and assumptions in applying accounting policies Note2(h) (vi) - Financial Instruments - Impairment of financial assets Note 47 to theFinancial Statements: Financial risk management

Charge to the standalone Statement of Profit and Loss: Rs. 131862.63 Lakhs [Refer Note34 to the standalone financial statements]

Provision as at 31 March 2021: Rs. 107058.35 Lakhs [Refer Note 6 to the standalonefinancial statements]

(Amount in US $)

Key audit matter How the matter was addressed in our audit
Subjective estimate
Loans represent a significant portion of the Company's assets. Recognition and measurement of loss allowance on ECL on loans and advances involve significant management judgement. Under Ind AS 109 Financial Instruments loss allowance on loans are determined using ECL model. In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence-
Design / controls
Computation of loss allowance on loans basis ECL model involves significant judgments and estimates.
The Company's loss allowance is derived from estimates including the historical default loss ratios and forward looking risk variables.
The Company exercises judgements in determining the quantum of loss based on a range of factors. • Performed walkthroughs and assessed the design and implementation of controls in respect of the Company's loss allowance process such as the timely recognition of impairment loss the completeness and accuracy of reports used in the impairment allowance process and management review processes over the measurement of loss allowance and the related disclosures on credit risk management.
The most significant factors are: • Evaluation of the impairment principles used by management based on the requirements of Ind AS 109 our business understanding and industry practice.
- Segmentation of loan book
- Determination of expos ure at default • Understanding and testing continuing and enhanced processes systems and controls implemented in relation to impairment allowance process particularly in view of COVID-19 regulatory package.
- Loans taging criteria
- Calculation of probability of default / loss given default
- Consideration of probability weighted scenarios and forward looking macro-economic factors
• Evaluating key controls over collation of relevant information used for determining estimates for management overlays on account of COVID-19
- Past experience and forecas t data on customer behaviour on repayments captured in the form of roll forwards and roll backs of monthly instalments
The application of ECL model requires several data inputs including estimation of 12 month ECL for a pool of loans and life time ECL for other pool of loans. This increases the risk of completeness and accuracy of the data that has been used for ECL calculation in the model. • Testing the controls over 'Governance Framework' in line with the RBI guidance and with Company's laid down policy
• Assessing the design and implementation of key internal financial controls over identification and measurement of impairment charge.
• Testing of key review controls over measurement of loss allowances and disclosures in financial statements.
Impact of COVID-19 • Assessed sufficiency of the disclosures on key judgements
The Company has identified the impact of and uncertainty related to the COVID-19 pandemic as a key element and cons ideration for recognition and meas urement of loss allowance for expected credit loss on loans in particular the level of estimation on account of: assumptions and quantitative data with respect to loss allowance in the financial statements.
- short and long term macro economic effect on businesses in the country and globally and its consequential first order and cascading negative impact on revenue and employment generation opportunities ; Involvement of specialists
- impact of the pandemic on the Company's customers and their ability to repay dues ; and We involved financial risk modelling specialists for the following:
- application of regulatory package announced by the Reserve Bank of India (RBI) and its consequential impact on as set classification and provisioning. • Test of details over of calculation of loss for assessing the completeness accuracy and relevance of data. inancial risk modelling specialists for the following:
The Company has conducted a qualitative assessment of significant increase in credit risk (SICR) of the loan portfolio considering the moratorium benefit to borrowers prescribed by the RBI and considered updated macroeconomics cenarios and the use of management overlays to reflect potential impact of COVID-19 on loss allowance on its loan portfolio. • Evaluating the appropriateness of the Company's Ind AS 109 impairment methodologies and reasonableness of assumptions
used (including those used for management overlays); and
• The reasonableness of the Company's considerations of the impact of the current economic environment due to COVID-19 on the loss allowance determination.
Substantive tests
• Assessing management's rationale for determination of criteria for SICR considering both: adverse effects of COVID-19 and mitigants in the form of the RBI / Government financial relief package.
• Assessing changes made in macroeconomic factors and management overlays to calibrate the risks that are not yet fully captured by the existing model.
• Tested through independent check Company's assessment of COVID-19 impact on segments of its loan portfolio and the resultant loss allowance
On account of COVID - wave 2 the challenges relating to collections both on account of operations and customer ability have compounded. Hence management's outlook on credit default has changed from the past and it is expected that probability of default would accelerate beyond the projections made through the ECL model. • Verifying application of accounting principles validating completeness and accuracy of thedata and reasonableness of assumptions used in the model.
• Test of details over of calculation of loss for assessing the completeness accuracy and relevance of data.
Accordingly management has adopted a methodology to project future roll forwards and roll backs of ins talments to capture the likely defaults in as tressed scenario by using assumptions on collection trends. This is a subject matter of significant estimate. • For model derived outputs verifying the calculations through recomputation where practicable.
Accordingly given the significant level of estimates and judgements involved in determining loss allowance for ECL on Loans we have considered measurement of this to be a key audit matter • Challenged managements judgments made in respect of calculation methodologies segmentation economic factors the period of historical loss rates used and the valuation of recovery assets and collateral
• Assessing the factual accuracy of the additional financial statements disclosures made by the Company regarding impact of COVID-19.
Information technology
The Company's key financial accounting and reporting processes are highly dependent on information systems including automated controls 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 response
The Company uses multiple systems for its overall financial reporting process. Further the prevailing COVID-19 situation has caused the required IT applications to be made accessible on a remote basis. Our audit procedures to assess the IT system management included the following:
We have identified 'Information Technology systems' as key audit matter because of the significant level of automation the various layers and elements of the IT architecture and the risks associated with remote access of key applications by staff during the year. We involved our IT Specialist to:
• Understand General IT Controls (GITC) i.e. Access Controls Program/ System Change Program Development Computer Operations (i.e. Job Processing Data/System Backup) over key financial accounting and reporting systems and supporting control systems (referred to as in-scope systems).
• Understand IT infrastructure i.e. operating systems and databases supporting the in-scope systems.
• Test the General IT Controls for design and operating effectiveness for the audit period over the in-scope systems.
• Understand IT application controls covering:
- user access and roles segregation of duties; and - key interfaces reports reconciliations and system processing.
• Test the IT application controls for design and operating effectiveness for the audit period.
• Test the automated controls supporting financial reporting process to determine whether these controls remained unchanged during the audit period or were changed following the standard change management process.
• Test the controls over the IT infrastructure covering user access (including privilege users) and system changes; and
• Enquiry on data security controls in the context of staff working from remote location at the year end.

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

The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the financial statements and our auditor's reportthereon.

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

In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.

Management's and Board of Directors' Responsibility for the Standalone FinancialStatements

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/loss 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 accuracy and completeness of the accounting records relevant tothe preparation and presentation of the standalone financial statements that give a trueand fair view and are free from material misstatement whether due to fraud or error.

In preparing the standalone financial statements the Management and Board of Directorsare responsible 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 the Board of Directors either intends to liquidate the Companyor to cease operations or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing the Company's financialreporting process.

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

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

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

• Identify and assess the risks of material misstatement of the 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 in the standalone financial statementsmade by the Management and Board of Directors.

• Conclude on the appropriateness of the Management's and Board of Director's 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 standalone financial statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor's report. However future events orconditions may cause the Company to cease to continue 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 theOrder to 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 2021 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2021 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 2021 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 - Refer note 44 to the standalonefinancial statements;

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 2021.

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

We draw attention to Note 43(ii) to the standalone financial statements for the yearended 31 March 2021 according to which the remuneration paid to the Whole Time Director(upto 7 November 2020) and the Vice Chairman and Managing Director of the Company for thefinancial year ended 31 March 2021 amounting to H 112.71 lacs and H 224.40 lacsrespectively and consequently the total managerial remuneration for the financial yearended 31 March 2021 (amounting to Rs. 337.11 lacs) exceeds the prescribed limits underSection 197 read with Schedule V of the Companies Act 2013 by H NIL and H 49.93 lacs forWhole Time Director (upto 7 November 2020) and the Vice Chairman and Managing Directorrespectively. As per provisions of the Act the excess remuneration is subject to theapproval of the shareholders which the Company proposes to obtain in the forthcomingAnnual General Meeting.

The Ministry of Corporate Affairs has not prescribed other details under Section197(16) which are required to be commented upon by us.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No. 101248W /W-100022
Ashwin Suvarna
Partner
Place: Mumbai Membership No. 109503
Date: 31 May 2021 UDIN: 21109503AAAABS9617

Annexure A to the Independent Auditor's Report

Annexure A to the Independent Auditor's Report on the Standalone Financial Statementsof Magma Fincorp Limited for the year ended 31 March 2021

(Referred to in our report of even date)

(i) a) According to the information and explanations given to us the Company hasmaintained proper records showing full particulars including quantitative details andsituation of property plant and equipment;

b) The Company has a regular programme of physical verification of its property plantand equipment by which property plant and equipment are verified in a phased manner overa period of three years. In our opinion the periodicity of the physical verification isreasonable having regards to the size of the Company and the nature of its assets.Pursuant to the programme certain fixed assets were verified during the year and nomaterial discrepancies were noticed on such verification;

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 thestandalone financial statements are held in the name of the Company except for thefollowing:

(Amount in US $)

(Rs. in Lakhs)
Particulars (Buildings) Amount
Total number of cases 4
Gross block as at 31 March 2021 1262.35
Net block as at 31 March 2021 1133.26

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

(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms limited liabilitypartnerships or other parties covered in the register maintained under Section 189 of theAct. Thus paragraph 3(iii) of the Order is not applicable to the Company.

(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 made by the Central Government for maintenance of cost records under section148(1) of the Act in respect of power generated from windmills and are of the opinionthat prima facie the prescribed accounts and records have been made and maintained.However we have not made a detailed examination of the records. The Central Governmenthas not prescribed the maintenance of cost records under section 148 (1) of the CompaniesAct 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 books of account of the Company amounts deducted / accrued in thebooks of account in respect of undisputed statutory dues including Provident FundEmployees' State Insurance Income tax Goods and service tax cess and any other materialstatutory dues have generally been regularly deposited during the year by the Company withthe appropriate authorities except for professional tax which is deposited withappropriate authorities with few delays. As explained to us the Company did not have anydues on account of Sales-tax duty of customs and duty of excise.

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 2021for 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 dutyof excise.

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 dispute. 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:

(Amount in US $)

Name of the Statute Nature of Dues Amount (INR Lakhs) Paid under Protest Amount (INR Lakhs) Period to which amount relates Forum where dispute is pending
Income Tax Act 1961 Income Tax 0.63 0.63 2009-10 Commissioner of Income Tax (Appeals)
Income Tax Act 1961 Income Tax 81.06 81.06 2011-12 and 2013-14 Commissioner of Income Tax (Appeals)
Income Tax Act 1961 Income Tax 2.25 0.34 2012-13 Commissioner of Income Tax (Appeals)
Income Tax Act 1961 Income Tax 123.96 123.96 2014-15 to 2016-17 Commissioner of Income Tax (Appeals)
Income Tax Act 1961 Income Tax 20.64 20.64 2017-18 Commissioner of Income Tax (Appeals)
Finance Act 1994 Service Tax 1002.03 404.00 2002-2003 to 2006-07 High Court Kolkata
Finance Act 1994 Service Tax 107.99 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 1.08 - 2013-14 Joint Commissioner Kolkata
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 2006-2007 to 20092010 Sales Tax Tribunal Jharkhand Ranchi
Madhya Pradesh Value Added Tax Act 2002 VAT 133.75 - 2008-2009 to 20092010 Madhya Pradesh High Court Jabalpur
Orissa Value Added Tax 2004 VAT 68.89 11.48 2007-08 to 30 September 2012 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

(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in repayment of loans or borrowing to financialinstitutions banks or to debenture holders during the year. During the year the Companydid not have any loans or borrowings from the government.

(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 though idle/surplus fundswhich were not required for immediate utilisation were invested in liquid assets. TheCompany has not raised any money by way of initial public offer or further public offer(including debt instruments) 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 7 cases aggregatingto Rs. 6.73 Lakhs 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 due to inadequate profits during the currentyear the managerial remuneration paid to the directors of the Company is in excess of thelimits specified under Section 197 of the Act read with Schedule V to the Act and limitprescribed under the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015. The Company is in the process of obtaining approval from shareholders for suchexcess remuneration paid and the Company is reasonably certain of getting the requiredapproval.

(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 entered into by the Company withthe related parties are in compliance with section 177 and 188 of the Act whereapplicable and details of such related party transactions have been disclosed in thestandalone financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us by the Management andbased on our examination of the records the Company has commenced process of preferentialallotment of shares during year ended 31 March 2021 for which allotment were done andfunds were received post 31

March 2021. Hence for the purpose of this report we have neither checked compliancewith section 42 of the Act nor examined whether funds so raised from private placement ofshares were applied for the purpose for which these securities were issued.

The Company has not made preferential allotment of fully or partly convertibledebentures or any private placement of shares or fully or partly convertible debenturesduring the year ended 31 March 2021.

(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) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company is required to be registered underSection 45-IA of the Reserve Bank of India Act 1934 and holds a valid certificate ofregistration (Registration no. B-05.02795 and dated 19-Nov- 2007) under the same.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No. 101248W /W-100022
Ashwin Suvarna
Partner
Place: Mumbai Membership No. 109503
Date: 31 May 2021 UDIN: 21109503AAAABS9617

Annexure B to the Independent Auditor's Report

Annexure B to the Independent Auditors' report on the standalone financial statementsof Magma Fincorp Limited for the year ended 31 March 2021 (Referred to in our report ofeven date)

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 the standalonefinancial statements of Magma Fincorp Limited ("the Company") as of 31 March2021 in conjunction with our audit of the standalone financial statements of the Companyfor the year ended on that date.

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 2021 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 the standalone financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note and the Standards on Auditingprescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls with reference to financial statements. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols with reference to financial statements were established and maintained andwhether such controls operated effectively 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 auditor's 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 the standalone 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 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 generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and

(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.

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 inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No. 101248W /W-100022
Ashwin Suvarna
Partner
Place: Mumbai Membership No. 109503
Date: 31 May 2021 UDIN: 21109503AAAABS9617

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