To the Members of
Fedbank Financial Services Limited
Report on the Audit of the Financial Statements OPINION
We have audited the financial statements of Fedbank Financial Services Limited (the "Company") which comprise the balance sheet as at 31 March 2024, and the statement of profit and loss (including other comprehensive statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including material accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Companies Act, 2013 ("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 theCompanyasat31March2024, profitand other its comprehensive income, 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) specified under Section 143(10) of the Act.
Our responsibilities under those SAs are further described in the Auditor?s Responsibilities for the Audit of the 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 the 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 income), and the Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our opinion on the financial statements.
KEY AUDIT MATTER(S)
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
LOSS ALLOWANCE FOR EXPECTED CREDIT LOSS (ECL) ON LOANS AND ADVANCES
Refer to the accounting policies in "Note 3 to the Financial Statements" Charge to the Statement of Profit and Loss: Rs 646 Lakhs Loss allowance for Expected Credit Loss (ECL) as at 31 March 2024: Rs 9,387 Lakhs
The key audit matter |
How the matter was addressed in our audit |
Subjective estimate |
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: |
| Loans represent significant portion of the Company?s assets. Recognition and measurement of loss allowance for ECL management on loans and advances involves significant judgement. | Design / controls |
| Under Ind AS 109, Financial Instruments, loss allowance on loans is determined using ECL model. The Company?s loss allowance is derived from estimates including consideration of the historical default and loss ratios and forward-looking risk variables. The Company exercises judgements in determining the quantum of loss based on a range of other 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: | |
| • Segmentation of loan book | • Evaluation of the impairment principles used by management based on the requirements of Ind AS 109, business understanding and industry practice, including an assessment of management?s rationale for rebutting staging principles as per Ind AS 109 for its gold loan portfolio. |
| • Determination of exposure at default | |
| • Loan staging criteria | • Understanding and testing the processes, systems and controls implemented in relation to impairment allowance process. |
| Calculation of probability of default / loss given default Consideration of probability weighted scenarios and forward looking macro-economic factors | Testing the controls over ‘Governance Framework? in line with the RBI guidance and with Company?s laid down policy |
| The application of ECL model requires several data inputs, including estimation of 12-month ECL for a pool of loans and lifetime for other pool of loans. This increases the risk of completeness and accuracy of the data that has been used to create assumptions in the model. | • Assessing the design and implementation of key internal financial controls over identification, classification, and measurement of impairment charge, including for loans which were restructured. |
| Further, basis the nature and characteristics of its gold loan portfolio, the Company has elected of to rebut the disclosures the 90 days past on due criteria for classification of an exposure as Stage 3, basis judgements, assumptions and quantitative data with the manner in which the Company subsequently monitors default and potential loss as per its credit risk management policy. | Testing of key review controls over measurement of loss allowances and disclosures in financial statements key Assessed sufficiency respect to loss allowance in the financial statements. |
| Involvement of specialists | |
| The underlying forecasts and assumptions used in the estimates of impairment loss allowance are subject to uncertainties which are often outside the control of the Company. Given the size of loan portfolio relative to the balance sheet and the impact of impairment allowance on the financial statements, we have considered this as a key audit matter. | We involved financial risk modelling specialists for the following: |
| Substantive tests | |
| Disclosures: | Assessing management?s rationale for determination of criteria for SICR. |
| The disclosures regarding the Company?s application of Ind AS 109 are important in explaining the key judgements and material inputs to the Ind AS 109 ECL results. | Reviewing management?s assessment of rebuttal of of exposure 90 days past due norm on classification as Stage 3 in its gold loan portfolio, including reviewing management?s basis of conclusion of not considering a loan as restructured when facilities are rolled over or collaterals are repledged. |
| Tested through independent check, Company?s assessment of restructured pool impacts on segments of its loan portfolio and the resultant loss allowance. | |
| Verifying application of accounting principles, validating completeness and accuracy of the data and reasonableness of assumptions used in the model. | |
| Test of details over of calculation of loss allowance for assessing the completeness, accuracy, and relevance of data. | |
| • For model derived outputs, verifying the calculations through re-computation where practicable. | |
| • Checking data for assessing reasonableness of 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 (including collateral in the form of gold). | |
| Assessing the factual accuracy of the financial statements disclosures made by the Company. | |
| 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. The Company uses multiple systems for its overall financial reporting process. | Our audit procedures to assess the IT system management included the following: |
| We involved our IT Specialist to: | |
| We have identified ‘Information Technology systems? as key audit matter because of the significant the various layers and elements of the IT architecture. | Understand General IT Controls (GITC) i.e., Access Controls, Program/ System Change, 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 reports and system configuration. | |
| 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 during the year. | |
| Based on procedures performed above, wherever required, we extended our audit procedures over other IT application controls, periodic reconciliations, manual approval processes, tests on identified key changes and additional substantive testing. |
OTHER INFORMATION
The Company?s Management and Board of Directors are responsible for the other information. The other information comprises the information included in the Company?s Annual Report, but does not include the financial statements and auditor?s report(s) thereon. The Company?s Annual
Report is expected to be made available to us after the date of this auditor?s report.
Our opinion on the financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above when it becomes available 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.
MANAGEMENT?S AND BOARD OF DIRECTORS? RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
The Company?s Management and Board of Directors are responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these financial statements that give a true and fair view of the state of affairs, profit/ loss and other comprehensive income, changes in equity and cash flows 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. 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 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Management and Board of Directors are 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 the Board of doubt on
Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The Board of Directors is also responsible for overseeing the Company?s financial reporting process.
AUDITOR?S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the 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 audit findings, decisions of users taken on the basis of these financial deficienciesin internal control that we 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 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 with reference to financial statements 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 the Management and
Board of Directors.
• Conclude on the appropriateness of the Management and Board of Directors use of the going concern basis of accounting in preparation of financial statements and, based on the audit evidence obtained, whether a material uncertainty exists related to events or the conditions that may cast significant 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 any significant 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 financial statements of the current period 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 communication.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. As required by the Companies (Auditor?s Report) Order, 2020 ("the Order") issued by the Central Government of India 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 Order, 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 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 except for the matters stated in the paragraph 2(B)(f) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014. c. The balance sheet, the statement of profit and loss (including other comprehensive income), the statement of changes in equity and the statement of cash flows dealt with by this Report are in agreement with the books of account. or provide d. In our opinion, the aforesaid financial comply with the Ind AS specified under Section 133 of the Act. e. On the basis of the written representations received from the directors between 1 April 2024 to 12 April 2024, taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2024 from being appointed as a director in terms of Section 164(2) of the Act. f. The modification relating to the maintenance of accounts and other matters connected therewith are as stated in the paragraph 2(A)(b) above on reporting under Section 143(3)(b) and paragraph 2(B)(f) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014.
g. With respect to the adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B".
B. 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, in ofsuch our opinion and to the best of our information and according to the explanations given to us: a. The Company has disclosed the impact of pending litigations as at 31 March 2024 on its financial position in its financial statements - Refer Note 53 to the financial statements. b. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses. c. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company. d (i) The management has represented that, to the best of its knowledge and belief, as disclosed in the Note 56(1) to the financial statements, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company any ("Ultimate Beneficiaries") guarantee, security or the like on behalf of the Ultimate Beneficiaries
(ii) The management has represented that, to the best of its knowledge and belief, as disclosed in the Note 56(2) to the financial statements, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Parties ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(iii) Based on the audit procedures performed that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under subclause (i) and (ii) of Rule 11(e), as provided under (i) and (ii) above, contain any material misstatement. e. The Company has neither declared nor paid any dividend during the year. f. Based on our examination which included test checks, except for the instances mentioned below, the Company has used accounting softwares for maintaining its books of account which, along with access management tool, as applicable, have a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the respective softwares:
In the absence of an independent auditor?s report in relation to controls at a service organisation for an accounting software used for maintaining the books of account relating to property, plant and equipment, which is operated by a third-party software service provider, we are unable to comment whether audit trail feature for the said software was enabled and operated throughout the year for all relevant transactions recorded in the software.
In the absence of sufficient and appropriate reporting on compliance with the audit trail requirements in the independent auditor?s report of a service organisation for an accounting software used for maintaining the books of account relating to leases, we are unable to comment whether audit trail feature for the said software was enabled and operated throughout the year for all relevant transactions recorded in the software.
ANNEXURE A TO THE INDEPENDENT AUDITOR?S REPORT ON THE FINANCIAL STATEMENTS OF FEDBANK FINANCIAL SERVICES LIMITED FOR THE YEAR ENDED 31 MARCH 2024
(Referred to in paragraph 1 under ‘Report on Other Legal and Regulatory Requirements? section of our report of even date)
(i) (a) (A) The Company has maintained proper records showing full particulars, including quantitative details and situation of Property, Plant and Equipment.
(B) The Company has maintained proper records by the Company showing full particulars of intangible assets.
(c) The Company does not have any immovable property (other than immovable properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee). Accordingly, clause 3(i)(c) of the Order is not applicable.
(d) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has not revalued its Property, Plant and Equipment (including Right of Use assets) or intangible assets or both during the year.
(e) According to the information and explanations given to us and on the basis of our examination of the records of the Company, there are no proceedings initiated or pending against the Company for holding any benami property under the Prohibition of Benami Property Transactions Act, 1988 and rules made thereunder.
(b) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has been sanctioned working capital limits in excess of five crore rupees, in aggregate, from banks or financial institutions on the basis of security of current assets. In our opinion, the quarterly returns with such or statements filed banks or financial institutions are in agreement with the books of account of the Company.
A) In case of Gold Loans:
Amount in Lakhs |
Number of Delays# | Extent of Delay# |
| 24,171 | 28,726 | 1-29 days |
| 17,435 | 20,768 | 30-59 days |
| 9,768 | 11,805 | 60-89 days |
| 2,952 | 2,963 | 90 days and |
| above |
B) In case of Other than Gold Loans:
Amount in Lakhs |
Number of Delays# | Extent of Delay# |
| 418 | 1,494 | 1-29 days |
| 685 | 1,005 | 30-59 days |
| 330 | 385 | 60-89 days |
| 14,711 | 1,673 | 90 days and |
| above |
computed basis loan wise Days Past (DPD) position as at each quarter end during FY 2023-24. Further, if a loan is in DPD multiple quarters continuously, same considered only once in number of delays and highest DPD is considered for extent delay.
(d) According to the information and explanations given to us and on the basis of our examination of the records of the Company, there is no overdue amount for more than ninety days in respect loans (and advance in the nature of loan) except an amount of Rs. 14,839 Lakhs (principal amount) and Rs 2,120 Lakhs (interest) overdue for more than ninety days as at 31 March 2024
In our opinion, reasonable steps have been by the Company for recovery of the principal interest. Further, the Company has not given advance in the nature of loan to any party during the year.
(v) The Company has not accepted any deposits or amounts which are deemed to be deposits from the public. Accordingly, clause 3(v) of the Order is not applicable.
(vii) (a) The Company does not have liability in respect of Service tax, Duty of excise, Sales tax and Value added tax during the year. since effective 1 July 2017, these statutory dues has been subsumed into GST.
According to the information and explanations given to us and on the basis of our examination of the records of the Company, in our opinion amounts deducted / accrued in the books of account in respect of undisputed statutory dues including Goods and Service Tax, Provident Fund, Employees State Insurance, Income-Tax, Duty of Customs or Cess or other statutory dues have generally been regularly deposited with the appropriate authorities, though there have been delays in a few cases of Provident Fund and Professional Tax.
According to the information and explanations given to us and on the basis of our examination of the records of the Company, no undisputed amounts payable in respect of Goods and Service Tax, Provident Fund, Employees State Insurance, Income-Tax, Duty of Customs or Cess or other statutory dues were in arrears as at 31 March 2024 for a period of more than six months from the date they became payable, except as mentioned below:
Name of the statute |
Nature of the dues | Amount (Rs. in lacs) | Period to which the amount relates | Due date | Date of payment | Remarks, if any |
IncomeTax Act, 1961 |
Professional Tax | 6.6 | April 2023 to September 2023 | 15 th of next month | Yet to be paid | For one of the state, due date is 1st October for the period April to September 2023 |
(b) According to the information and explanations given to us and on the basis of our examination of the records of the Company, statutory dues relating to Goods and Service Tax, Provident Fund, Employees State Insurance, Income-Tax, Duty of Customs or Cess or other statutory dues which have not been deposited on account of any dispute are as follows:
Name of the statute |
Nature of the dues | Amount (Rs.) | Period to which the amount relates | Forum where dispute is pending | Remarks, if any |
Income Tax Act, 1961 |
Income Tax and Interest | 32,18,290 | AY 2011-2012 | Commissioner of Income Tax (Appeals) | Disallowance of expenses for increase in Share capital |
Income Tax Act, 1961 |
Income Tax and Interest | 9,29,088 | AY 2017-2018 | Commissioner of Income Tax (Appeal) | Disallowance of Corporate Social Responsibility (CSR) Expenses |
Income Tax Act, 1961 |
Income Tax and Interest | 61,52,035 | AY 2022-2023 | Commissioner of Income Tax (Appeal) | Assessing officer considered income as per Intimation u/s 143(1) instead of income as per Income Tax Return as mentioned in Assessment order under section 143(3) |
Goods and Services Tax (GST) Act, 2017 |
GST, interest and penalty | 9,17,128 | FY 2017-2018 | Sales Tax Officer | Appeal filed against incorrect demand raised for Input Tax Credit (ITC) already reversed under rule 38 of Central Goods and Services Tax (CGST) Act and demand for non reconciliation of ITC with GSTR-2A. |
GST Act, 2017 |
GST, interest and penalty | 15,46,584 | FY 2017-2018 | State tax officer | Appeal filed against incorrect demand raised for ITC already reversed u/r 38 of CGST Act and demand for non reconciliation of ITC with GSTR 2A. |
(viii) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has not surrendered or disclosed any transactions, previously unrecorded as income in the books of account, in the tax assessments under the Income Tax Act, 1961 as income during the year.
(ix) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has not defaulted in repayment of loans and borrowing or in the payment of interest thereon to any lender.
(b) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has not been declared a wilful defaulter by any bank or financial institution or government or government authority.
(c) In our opinion and according to the information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained, though idle/surplus funds which were not required for immediate utilisation were invested in liquid assets.
(d) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long-term purposes by the Company.
(e) The Company does not hold any investment in any subsidiaries, associates or joint ventures (as defined under the Act) during the year. ended 31 March 2024. Accordingly, clause 3(ix)(e) is not applicable.
(f) The Company does not hold any investment in any subsidiaries, associates or joint ventures (as defined under the Act) during the year ended 31 March 2024. Accordingly, clause 3(ix)(f) is not applicable.
(x) (a) In our opinion and according to the information and explanations given to us, the Company has utilised the money raised by way of initial public offer for the purposes for which they were raised.
(b) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. Accordingly, clause 3(x)(b) of the Order is not applicable.
(xi) (a) During the course of our examination of the books and records of the Company and according to the information and explanations given to us, no fraud by the Company or on the Company has been noticed or reported during the year. except that 13 cases of fraud aggregating to Rs. 321.84 lakhs on the Company were noticed or reported during the year as disclosed in note 48.13 to the financial statement The fraud mainly pertains to customer induced fraud involving pledge of spurious gold/ theft of gold and misrepresentation of property mortgaged by the customer for valuation.
(b) According to the information and explanations given to us, no report under sub-section (12) of Section 143 of the Act has been filed by the auditors in Form ADT-4 as prescribed under Rule 13 of the Companies (Audit and Auditors) Rules, 2014 with the Central Government.
(c) We have taken into consideration the whistle blower complaints received by the Company during the year. while determining the nature, timing and extent of our audit procedures.
(xii) According to the information and explanations given to us, the Company is not a Nidhi Company. Accordingly, clause 3(xii) of the Order is not applicable.
(xiii) In our opinion and according to the information and explanations given to us, the transactions with related parties are in compliance with Section 177 and 188 of the Act, where applicable, and the details of the related party transactions have been disclosed in the financial statements as required by the applicable accounting standards.
(xiv) (a) Based on information and explanations provided to us and our audit procedures, in our opinion, the Company has an internal audit system commensurate with the size and nature of its business.
(b) We have considered the internal audit reports of the Company issued till date for the period under audit.
(xv) In our opinion and according to the information and explanations given to us, the Company has not entered into any non-cash transactions with its directors or persons connected to its directors and hence, provisions of Section 192 of the Act are not applicable to the Company.
(xvi) (a) In our opinion and according to the information and explanation provided to us, the Company is required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934 and has obtained the registration.
(b) In our opinion and according to the information and explanations given to us, the Company has not conducted any Non-Banking Financial or Housing Finance activities without a valid Certificate of Registration (CoR) from the Reserve Bank of India as per the Reserve Bank of India Act, 1934. (c) The Company is not a Core Investment Company (CIC) as defined in the regulations made by the Reserve Bank of India. Accordingly, clause 3(xvi) (c) of the Order is not applicable.
(d) The Company is not part of any group (as per the provisions of the Core Investment Companies (Reserve Bank) Directions, 2016 as amended). Accordingly, the requirements of clause 3(xvi)(d) are not applicable.
(xvii) The Company has not incurred cash losses in the current and in the immediately preceding financial year.
(xviii) There has been no resignation of the statutory auditors during the year. Accordingly, clause 3(xviii) of the Order is not applicable.
(xix) According to the information and explanations given to us and on the basis of the expected dates of realisation of financial assets and payment of financial liabilities, our knowledge of the Board of Directors and management plans and based on our examination of the evidence supporting the assumptions, nothing has come to our attention, which causes us to believe that any material uncertainty exists as on the date of the audit report that the Company is not capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date. We, however, state that this is not an assurance as to the future viability of the Company. We further state that our reporting is based on the facts up to the date of the audit report and we neither give any guarantee nor any assurance that all liabilities falling due within a period of one year from the balance sheet date, will get discharged by the Company as and when they fall due.
Also refer to the Other Information paragraph of our main audit report which explains that the other information comprising the information included in Annual report is expected to be made available to us after the date of this auditor?s report.
(xx) (a) In our opinion and according to the information and explanations given to us, there is no unspent amount under sub-section (5) of Section 135 of the Act pursuant to any project other than ongoing projects. Accordingly, clause 3(xx)(a) of the Order is not applicable.
(b) In our opinion and according to the information and explanations given to us, there is no unspent amount under sub-section (5) of Section 135 of the Act pursuant to any ongoing project. Accordingly, clause 3(xx)(b) of the Order is not applicable.
For B S R & Co. LLP
Chartered Accountants
Firm?s Registration No.: 101248W/W-100022
Ashwin Suvarna
Partner
Membership No.: 109503 ICAI
UDIN: 24109503BKCSJV6939
Place: Mumbai
Date: 29 April 2024
ANNEXURE B TO THE INDEPENDENT AUDITOR?S REPORT ON THE FINANCIAL STATEMENTS OF FEDBANK FINANCIAL SERVICES LIMITED FOR THE YEAR ENDED 31 MARCH 2024
Report on the internal financial controls with reference to the aforesaid financial statements under Clause (i) of Sub-section 3 of Section 143 of the Act (Referred to in paragraph 2.(A).(g) under ‘Report on Other Legal and Regulatory Requirements? section of our report of even date)
We have audited the internal financial controls with reference to financial statements of Fedbank Financial Services Limited ("the Company") as of 31 March 2024 in conjunction with our audit of the financial statements of the Company for the year ended on that date.
MANAGEMENT?S RESPONSIBILITIES FOR INTERNAL FINANCIAL CONTROLS
The Company?s Management and the Board of Directors are responsible for establishing and maintaining internal financial controls based on the internal financial controls with reference to financial statements 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 ial statements is afinanc issued by the Institute of Chartered Accountants of India (the "Guidance Note"). 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 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 with reference to financial statements based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing, prescribed under Section 143(10) of the Act, to the extent applicable to an audit of internal financial controls with reference to financial statements. 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 with reference to financial statements were 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 with reference to financial statements and their operating effectiveness. Our audit of internal financial controls with reference to financial statements included obtaining an understanding of internal financial controls with reference to 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 audit opinion on the Company?s internal financial controls with reference to financial statements.
MEANING OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIAL STATEMENTS
A company?s internal financial controls with reference to 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 controls with reference to financial statements include 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 authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised 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 WITH REFERENCE TO FINANCIAL STATEMENTS
Because of the inherent limitations of internal financial controls with reference to 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 with reference to financial statements to future periods are subject to the risk that the internal financial controls with reference to financial statements may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
OPINION
In our opinion, the Company has, in all material respects, adequate internal financial controls with reference to financial statements and such internal financial controls were operating effectively as at 31 March 2024, based on the internal financial controls with reference to financial statements criteria established by the Company considering the essential components of internal control stated in the
Guidance Note.
For B S R & Co. LLP
Chartered Accountants
Firm?s Registration No.: 101248W/W-100022
Ashwin Suvarna
Partner
Membership No.: 109503 ICAI
UDIN: 24109503BKCSJV6939
Place: Mumbai
Date: 29 April 2024
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