You are here » Home » Companies » Company Overview » Reliance Home Finance Ltd

Reliance Home Finance Ltd.

BSE: 540709 Sector: Financials
NSE: RHFL ISIN Code: INE217K01011
BSE 11:24 | 22 Jun 6.27 0.29
(4.85%)
OPEN

6.27

HIGH

6.27

LOW

6.27

NSE 11:14 | 22 Jun 5.80 0.25
(4.50%)
OPEN

5.80

HIGH

5.80

LOW

5.80

OPEN 6.27
PREVIOUS CLOSE 5.98
VOLUME 374986
52-Week high 6.27
52-Week low 1.41
P/E
Mkt Cap.(Rs cr) 304
Buy Price 6.27
Buy Qty 8299311.00
Sell Price 0.00
Sell Qty 0.00
OPEN 6.27
CLOSE 5.98
VOLUME 374986
52-Week high 6.27
52-Week low 1.41
P/E
Mkt Cap.(Rs cr) 304
Buy Price 6.27
Buy Qty 8299311.00
Sell Price 0.00
Sell Qty 0.00

Reliance Home Finance Ltd. (RHFL) - Auditors Report

Company auditors report

To The Members Reliance Home Finance Limited

Report on the Audit of the Ind AS Financial Statements Qualified

Opinion

We have audited the accompanying Ind AS financial statements of Reliance Home Finance Limited (the Company) which comprise the Balance Sheet as at March 31 2020 the Statement of Profit and Loss including the Statement of Other Comprehensive Income the Cash Flow Statement and the Statement of Changes in Equity for the year then ended and notes to the financial statements including a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us except for the possible effects of the matter described in the Basis for Qualified Opinion section of our report the aforesaid Ind AS financial statements give the information required by the Companies Act 2013 (the Act) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India of the state of affairs of the Company as at March 31 2020 its loss including other comprehensive income its cash flows and the changes in equity for the year ended on that date. .

Basis for Qualified Opinion

We draw attention to Note 5(2) of the Ind AS financial statements with regards to the loan advanced under the `General-Purpose Corporate Loan' product with significant deviations to certain bodies corporate including group companies and outstanding as at March 31 2020 aggregating to Rs 7965.24 crores (including Rs 216 crores sanctioned during the financial year 2019-20) and secured by charge on current assets of borrowers. As stated in the said note majority of Company's borrowers have undertaken onward lending transactions and end use of the borrowings from the Company included borrowings by or for repayment of financial obligation to some of the group companies. There have been overdues of Rs 7815.24 crores (including NPA of Rs 4778.13 crores) of these loans as on March 31 2020. In view of substantial overdues we are unable to substantiate the management assertion on the recoverability of principal and interest including time frame of recovery of aforesaid loans outstanding as on March 31 2020. The Company's exposure to the borrowers are secured against charge on current assets and is dependent on the recovery of onward lending of the borrowers which depends on external factors not wholly within control of the Company/borrower. Further we draw attention to Note 46 of the Ind AS financial statements on the material shift in primary business of the Company from Housing Finance to Non-Housing Finance which comprise more than 50% of total loan portfolio raising concern about Company continuing as a Housing Finance Company. We conducted our audit of the Ind AS financial statements in accordance with the Standards on Auditing (SAs) as specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the `Auditor's Responsibilities for the Audit of the Ind AS financial statements' section of our report. We are independent of the Company in accordance with the `Code of Ethics' issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of tahe financial statements under the provisions of the Act and the Rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the Ind AS financial statements

Emphasis of Matters

(i) Going concern

We draw attention to Note 18(d) to the Ind AS Financial Statements which states that the Company has engaged with its lenders to enter into an Inter Creditor Agreement (ICA) for the resolution of its debt in accordance with the circular dated June 7 2019 issued by the Reserve Bank of India for prudential framework for resolution of stressed assets. ICA has been executed on July 6 2019 with the majority of lenders and some of lenders/debenture holders have joined the ICA subsequently through deed of Accession. Bank of Baroda has been appointed as the lead lender for the resolution process and the lenders have made the appointment of professional viz resolution plan advisors forensic auditor legal counsel cash flow monitoring agency and valuation agencies for the resolution process. The timeline of 180 days as envisaged in the RBI Circular expired on January 3 2020. However as informed to us the lenders have agreed to extend the ICA till March 31 2020 and further extended to June 30 2020 and have communicated with RBI for the same. The Company expects implementation of its resolution plan within the said extended period. There is substantial reduction in the lending business during the year. The Company has defaulted in payment of borrowings obligations amounting to Rs 5446.92 crores as on March 31 2020 and the asset cover has also fallen below hundred percent of outstanding debentures amounting to Rs 5966.67 crores. The Company's ability to meet its obligation dependent on material uncertain events including restructuring of loan portfolio implementation of Resolution Plan by Inter Creditor Agreement for the resolution of its debt as stated above and revival of housing finance business.

In view of steps taken by the company and the expected implementation of its resolution plan in extended period the statement of Ind AS financial results of the Company have been prepared by the management on a going concern basis. Our opinion is not modified in respect of this matter.

(ii) Impact of COVID-19 pandemic

We draw attention to Note 57 to the Ind AS Financial Statements which describes that the extent to which the COVID-19 pandemic will impact the Company's results will depend on future developments which are highly uncertain. Which further states that in accordance with the RBI guidelines relating to COVID-19 Regulatory Package dated March 27 2020 and April 17 2020 the Company would be granting a moratorium of three months on the payment of all instalments and / or interest as applicable falling due between March 1 2020 and May 31 2020 to all eligible borrowers classified as Standard even if overdue as on February 29 2020. For all such accounts where the moratorium is granted the asset classification has been remain stand still during the moratorium period (i.e. the number of days past-due shall exclude the moratorium period for the purposes of asset classification under the Income Recognition Asset Classification and Provisioning norms).

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 most significance in our audit of the Ind AS financial statements for the financial year ended March 31 2020. These matters were addressed in the context of our audit of the Ind AS financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters. For each matter below our description of how our audit addressed the matter is provided in that context. We have determined the matters described below to be the Key audit matters to be communicated in our report. We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the Ind AS financial statements section of our report including in relation to these matters. Accordingly our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the Ind AS financial statements. The results of our audit procedures including the procedures performed to address the matters below provide the basis for our qualified audit opinion on the accompanying Ind AS financial statements.

 

Key audit mattersHow our audit addressed the key audit matter
1. Impact of COVID-19 pandemic on the future financial performance and position of the CompanyOur audit procedures considered the guidance laid down by the `ICAI Accounting & Auditing Advisory March 2020 - Impact of Corona virus on Financial Reporting and the Auditors Consideration' highlighting few important areas which require particular attention in respect of the audit of the financial statements for the year 2019-20 including:
(as described in Note 57 of the Ind AS Financial Statements)
The extent to which the COVID-19 pandemic will impact the Company's financial performance and position will depend on future developments which are highly uncertain.
 Impairment of Non-financial Assets
 Impairment Losses (ECL Bad-debts etc.)
 Revenue
 Borrowing Costs
 Provisions Contingent Liabilities and Contingent Assets
 Modifications or termination of Contracts or Arrangements
 Going Concern Assessment
 Post Balance Sheet Events
 Presentation of Financial Statements
 Changes in Internal Controls
 External Confirmations
 Audit evidences through electronic mode
We considered the above guidance and appropriately applied to our response to modification of our audit procedures to obtain sufficient appropriate audit evidence on the significant audit areas and reached appropriate conclusions thereon.
Subjective EstimateOur audit procedures included considering the appropriateness of the Company's accounting policies for impairment of financial assets and assessing compliance with Ind AS 109.
2. Recognition and measurement of impairment relating to loans and advances to customers involves significant management judgement.
As per Ind AS 109 credit loss assessment is now based on Expected Credit Loss (ECL) model and applicable to the Company. Understood Company's new processes systems and controls implemented relating to impairment allowance process including governance controls over the development and implementation of the ECL model;
The Impairment loss provision is computed based on management estimates including the historical default and loss ratios. Management exercises judgement in determining the quantum of loss based on a range of factors. Test checked the design and implementation of key internal financial controls over loan impairment process used to calculate the impairment charge and test checked management review controls over measurement of impairment allowances and disclosures in the financial statements;
The most significant areas involving significant management estimates are:
 Loan staging criteria Evaluated appropriateness of the impairment principles based on the requirements of Ind AS 109 considering our business understanding and industry practice;
 Calculation of probability of default / Loss given default/ Exposure at default.  Performed substantive procedures over validating completeness and accuracy of the data and reasonableness of assumptions used in the model;
 Consideration of probability weighted scenarios and forward looking macro-economic factors.
Ind AS 109 requires an entity to determine Expected Credit Loss (ECL) amount on a probability weighted basis. There is a large increase in the data inputs required for the computation of ECL. This increases the risk of completeness and accuracy of the data that has been used as a basis of significant assumptions in the model. We engaged our specialists to test the working of the ECL model and reasonableness of assumptions used;
 Broadly evaluated management's judgement in the determination of ECL;
 Performed cut off procedures on a sample basis relating to recoveries at year end that would impact staging of loans;
3. Valuation of Market Linked Debentures:
(as described in Note 16 and Note 37(c) of the Ind AS Financial Statements)Our audit procedures included an assessment of internal controls over valuation methodologies inputs judgments made and assumptions used by management in determining fair valuation of MLD.
The Company has issued Market Linked Debentures (MLD) during previous years. The outstanding balance of MLD as on March 31 2020 is Rs 232.27 crores. These MLDs are economically hedged with Exchange instruments like Nifty Bank Nifty & Stock Options. The Company has done an internal valuation of the outstanding MLD using internal valuation techniques.We have assessed and reviewed the fair valuation of MLD by the Company for compliance with Ind AS.
We compared resulted valuations against independent sources and externally available market valuation data for sample cases.
Considering that internal valuation of MLD is significant to overall financial statements and the degree of management's judgement involved in the estimate any error in the estimate could lead to material misstatement in the financial statements. Therefore it is considered as a key audit matter.
4. Impairment of Goodwill:We have understood the basis of significant estimate judgement and assumptions taken by management for annual impairment test of goodwill allocated to a cash-generating unit with respect to following criterion:
(as described in Note 1(k) and Note 12 of the Ind AS Financial Statements)
Company has recognised goodwill of Rs 209.96 generated pursuant to the scheme of arrangements approved by NCLT on April 5 2017 and August 10 2017 and under Indian GAAP the Company had determined to amortize the goodwill so generated over the next few years. Future growth and long-term life of housing finance industry.
 Long term benefits to the Company from the use of existing assets.
 Government focus on housing finance sector.
As required under Ind AS 36-Impairment of Assets A cash- generating unit to which goodwill has been allocated shall be tested for impairment annually and whenever there is an indication that the unit may be impaired by comparing the carrying amount of the unit including the goodwill with the recoverable amount of the unit which is based on many factors involving significant management estimate and judgement.Market exposure having a Company's stock listed on an exchange could attract the attention of mutual and hedge funds market makers and institutional traders.
 Other various economic factors and conclusion that goodwill generated will bring additional benefit in future and fair value is more than the carrying value hence no impairment triggered as required under Ind AS 36.
Considering that goodwill impairment is significant to overall financial statements and the degree of management's judgement involved in the estimate any error in the estimate could lead to material misstatement in the financial statements. Therefore it is considered as a key audit matter.We have assessed the management contention as mentioned above and also considered various steps taken by the management including entering into ICA for resolution of debts as mentioned in Note 18(d) and continue to be going concern government policy for housing finance company and company's focusing on retail loan segment.

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

The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Annual Report but does not include the Ind AS financial statements and our Auditor's Report thereon. Our opinion on the Ind AS financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the Ind AS financial statements our responsibility is to read the other information and in doing so consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If based on the work we have performed we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these Ind AS financial statements that give a true and fair view of the financial position financial performance including other comprehensive income cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records relevant to the preparation and presentation of the Ind AS financial statements that give a true and fair view and are free from material misstatement whether due to fraud or error. In preparing the Ind AS financial statements the Board of Directors is responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.

The Board of Directors are also responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Ind AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the Ind AS Financial Statements as a whole are free from material misstatement whether due to fraud or error and to issue an Auditor's Report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of these Ind AS financial statements. As part of an audit in accordance with SAs we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 Identify and assess the risks of material misstatement of the Ind AS Financial Statements whether due to fraud or error design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal control.

 Obtain an understanding of internal control relevant to the audit in order to design 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 has adequate internal financial controls system in place and the operating effectiveness of such controls.

 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

 Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists we are required to draw attention in our auditor's report to the related disclosures in the financial statements or if such disclosures are inadequate to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However future events or conditions may cause the Company to cease to continue as a going concern.

 Evaluate the overall presentation structure and content of the Financial Statements including the disclosures and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation..

We communicate with those charged with governance regarding among other matters the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine those matters that were of most significance in the audit of the Ind AS financial statements for the financial year ended March 31 2020 and are therefore the key Audit Matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when in extremely rare circumstances we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 (the Order) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act we give in the Annexure A a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. 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 best of 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 the Company so far as it appears from our examination of those books.

(c) The Balance Sheet the Statement of Profit and Loss including the statement of Other Comprehensive Income the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account.

(d) In our opinion the aforesaid Ind AS financial statements comply with the Accounting Standards specified under Section 133 of the Act read with Companies (Indian Accounting Standards) Rules 2015 as amended;

(e) On the basis of the written representations received from the directors as on March 31 2020 taken on record by the Board of Directors none of the directors is disqualified as on March 31 2020 from being appointed as a director in terms of Section 164 (2) of the Act;

(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company with reference to these Ind AS financial statements and the operating effectiveness of such controls refer to our separate Report in Annexure B to this report;

(g) In our opinion and as per information and explanation provided to us the managerial remuneration for the year ended March 31 2020 has been paid/provided by the Company to its directors in accordance with the provisions of section 197 read with Schedule V to the Act;

(h) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended in our opinion and 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 March 31 2020 on its financial position in its financial statements. Refer Note 49.

ii. The Company has made provision as at March 31 2020 wherever required under the applicable law or accounting standards for material foreseeable losses on long-term contracts including derivative contracts. Refer Note 56.

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

For Dhiraj & Dheeraj

Chartered Accountants

Firm's Registration Number: 102454W

Pritesh Shah

Partner

Membership Number: 109573

Place : Mumbai

Date : May 08 2020

UDIN: 20109573AAAAAB6963

ANNEXURE `A' TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 1 under `Report on Other Legal and Regulatory Requirements' section of our report to the Members of Reliance Home Finance Limited of even date)

i. In respect of the Company's fixed assets:

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

(b) The fixed assets of the Company have been physically verified by the management during the year and no material discrepancies have been noticed on such verification. In our opinion this frequency of verification is reasonable.

(c) According to the information and explanations given to us and on the basis of our examination of the records the title deeds of immovable properties as disclosed in Note 11 on Property plant and equipment to the financial statements are held in the name of the Company.

ii. The Company is in the business of rendering services and consequently does not hold any physical inventory. Accordingly the requirements under paragraph 3(ii) of the Order are not applicable to the Company.

iii. According to the information and explanation given to us and based upon audit procedure performed during the year the Company has not granted any loan secured or unsecured to companies firms limited liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act 2013. Accordingly provisions of clause 3(iii) (a) (b) and (c) of the order are not applicable to the Company.

iv. In our opinion and according to the information and explanations given to us by the management the Company has not granted any loan or provided any guarantee or security in connection with any loan taken by parties covered under section 185 of the act. The Company is registered as a Housing Finance Company with the National Housing Bank. Therefore the provisions of Section 186 except sub section (1) of Section 186 of the Act are not applicable to the Company. Further the Company has not made any investments to the parties covered under Section 186. Therefore the provisions of Clause 3(iv) of the order in respect of section 186 (1) are not applicable to the Company.

v. The Company has not accepted any deposits from public within the meaning of Sections 73 to 76 of the Act and the rules framed there under to the extent notified.

vi. The Central Government of India has not specified the maintenance of Cost records under section 148 (1) of Act for any of the products of the Company. vii. According to the information and explanations given to us and records examined by us in respect of statutory dues:

(a) The Company is generally being regular in deposit of undisputed statutory dues including Income Tax Provident Fund Goods and Service Tax and any other material statutory dues applicable to the Company. As explained to us the Company does not have any dues on account of Sales Tax Wealth Tax duty of Custom and duty of Excise.

According to the information and explanations given to us and based on audit procedures performed there are no undisputed statutory dues payable in respect of Income Tax Provident Fund Goods and Service Tax and any other material statutory dues applicable to the Company which are outstanding as on March 31 2020 for a period of more than six months from the date they became payable. As explained to us the Company does not have any dues on account of Sales Tax Wealth Tax duty of Custom and duty of Excise.

(b) According to the information and explanations given to us there are no dues of Goods and Service Tax and other material statutory dues applicable to the Company which have not been deposited with the appropriate authorities on account of any dispute. However according to information and explanations given to us the following dues of income tax have not been deposited by the Company on account of disputes:

Name of the StatuteNature of the duesAmountPeriod to which the amount relatesForum where dispute is pending
(Rs In Crs)
Income Tax Act 1961Income Tax0.48*Assessment Year 2018-19CIT(Appeals)

*The Company has deposited Rs 0.10 crore against the disputed amount. viii. The Company has defaulted in repayment of loans and borrowings (including accrued interest on defaulted amount) to banks financial institutions and dues to debenture holders during the year. The details of default as on the Balance Sheet date in repayment of borrowings are as follows:

Nature of BorrowingsName of LenderAmount of default as at 31st March 2020Period of default
(Rs in crores)
Term LoanAndhra Bank135.37Jun 2019 - Mar 2020
WCDL & Cash CreditAxis Bank40.96Aug 2019 - Mar 2020
Term Loan & Cash CreditBank of Baroda220.57Jul 2019 - Mar 2020
Term LoanBank of India111.49Jun 2019 - Mar 2020
Term LoanBank of Bahrain and Kuwait7.92Oct 2019 - Mar 2020
Term Loan WCDL & Cash CreditCanara Bank190.42Oct 2019 - Mar 2020
Term LoanDena Bank138.38Jun 2019 - Mar 2020
Term LoanHDFC Bank Ltd48.80Sep 2019 - Mar 2020
Term LoanICICI Bank3.56Oct 2019 - Mar 2020
Term LoanIndian Bank35.96Oct 2019 - Mar 2020
Term LoanKarnataka Bank11.15Sep 2019 - Mar 2020
Term Loan & Cash CreditPunjab & Sind Bank168.48Sep 2019 - Mar 2020
Term LoanPunjab National Bank45.73Nov 2019 - Mar 2020
Term LoanState Bank of India68.73Sep 2019 - Mar 2020
Term LoanSyndicate Bank15.17Oct 2019 - Mar 2020
Term LoanThe Federal Bank Limited75.08Aug 2019 - Mar 2020
Term Loan & Cash CreditThe Jammu & Kashmir Bank85.60Oct 2019 - Mar 2020
Cash CreditThe Lakshmi Vilas Bank53.63May 2019 - Mar 2020
Term LoanUCO Bank58.47May 2019 - Mar 2020
Term LoanUnited Bank of India182.99Jun 2019 - Mar 2020
Term LoanVijaya Bank54.83Oct 2019 - Mar 2020
Commercial PaperYES Bank377.92Sep 2019 - Mar 2020
Commercial PaperAxis Bank81.47Dec 2019 - Mar 2020
NCDsNon-Convertible3018.87Aug 2019 - Mar 2020
Debentures
Total5231.52

ix. The Company did not raise any money by way of initial public offer or further public offer (including debt instruments) during the year. According to the information and explanation provided to us the Company did not raise any money by way of term loans during the year.

x. During the course of our examination of the books and records of Company carried out in accordance with the generally accepted auditing practice in India and according to the information and explanation given to us by the management we have neither came across any instance of fraud by the Company or any fraud on the Company by its officer or employee noticed or reported during the year nor have we been informed of any such instance by the management.

xi. According to the information and explanations given to us by the management and based upon the audit procedure performed the Company has paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provision of section 197 read with Schedule V of the act.

xii. In our opinion and according to the information and explanations given to us the Company is not a nidhi company. Accordingly the requirements under paragraph 3(xii) of the Order are not applicable.

xiii. According to the information and explanations given to us and records examined by us transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the Ind AS financial statements as required by the applicable accounting standards. Also refer Note 5(2) of Ind AS Financial Statements.

xiv. According to the information and explanations give to us and records examined by us the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. Accordingly the requirements under paragraph 3(xiv) of the Order are not applicable to the Company.

xv. According to the information and explanations given to us and records examined by us the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly the requirements under paragraph 3(xv) of the Order are not applicable to the Company. xvi. The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.

For Dhiraj & Dheeraj

Chartered Accountants

Firm's Registration Number: 102454W

Pritesh Shah

Partner

Membership Number: 109573

Place : Mumbai Date : May 08 2020

UDIN: 20109573AAAAAB6963

Annexure B to the Independent Auditor's Report on the Financial Statement

(Referred to in paragraph 2(f) under `Report on Other Legal and Regulatory Requirements' section of our report to the Members of Reliance Home Finance Limited of even date)

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 (the Act)

We have audited the internal financial controls over financial reporting of Reliance Home Finance Limited (the Company) as of March 31 2020 in conjunction with our audit of the Ind AS financial statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's Management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business including adherence to the Company's policies the safeguarding of its assets the prevention and detection of frauds and errors the accuracy and completeness of the accounting records and the timely preparation of reliable financial information as required under the Act.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting with reference to these Ind AS financial statements based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the Guidance Note) and the Standards on Auditing as specified under section 143(10) of the Act to the extent applicable to an audit of internal financial controls and both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting with reference to these Ind AS financial statements was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls over financial reporting with reference to these Ind AS financial statements and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting with reference to these Ind AS financial statements assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor's judgement including the assessment of the risks of material misstatement of the financial statements whether due to fraud or error. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the internal financial controls over financial reporting with reference to these Ind AS financial statements.

Meaning of Internal Financial Controls Over Financial Reporting with Reference to these Ind AS Financial Statements

A Company's internal financial control over financial reporting with reference to these Ind AS financial statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Company's internal financial control over financial reporting with reference to these Ind AS financial statements includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the Company's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting with Reference to these Ind AS Financial Statements

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

Basis for Qualified Opinion

According to the information and explanation given to us and based on our audit the following material weaknesses have been identified in operating effectiveness of Company's Internal Financial Control during the year 2019-20: a. The Company's internal financial control over financial reporting is not operating effectively in respect of General-Purpose Corporate Loan product and needs to be strengthened for credit evaluation risk assessment and documentation for disbursement of loan to mitigate the risk of the Company recognizing revenue without establishing reasonable certainty for ultimate collection. The Company needs to substantially strengthen its existing credit policy for these loan products and make it more broad based well defined and robust.

b. In our opinion scope of internal auditor was not commensurate with the size and nature of Company's business and operations specifically in respect of loan sanctioned under General Purpose Corporate Loan product and hence the scope should be enlarged and extended. A `material weakness' is a deficiency or a combination of deficiencies in Internal Financial Control with reference to financial statements such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

Qualified Opinion

In our opinion except for the possible effects of the material weaknesses described above on the achievement of the objectives of the control criteria the Company has in all material respects adequate internal financial controls over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31 2020 based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. We have considered the material weaknesses identified and reported above in determining the nature timing and extent of audit tests applied in our audit of the Ind AS financial statements of the Company as at and for the year ended March 31 2020 and these material weaknesses have affected our opinion on the Ind AS financial statements of the Company and we have issued a qualified opinion on the Ind AS financial statements.

For Dhiraj & Dheeraj

Chartered Accountants

Firm's Registration Number: 102454W

Pritesh Shah

Partner

Membership Number: 109573 Place : Mumbai Date : May 08 2020

UDIN: 20109573AAAAAB6963