KIFS Financial Services Ltd Auditors Report.

To the members of

KIFS Financial Services Limited,

Report on the financial statements

We have audited the accompanying financial statements of KIFS Financial Services Limited ("the company"), which comprise the balance sheet as at March 31, 2018, the statement of profit and loss, the cash flow statement, and a summary of the significant accounting policies and other explanatory information.

Managements responsibility for the financial statements

The companys board of directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the company in accordance with the accounting principles generally accepted in India, including the accounting standards specified under section 133 of the Act, read with rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the preparation of the act for safeguarding 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.

Auditors responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the rules made there under.

We conducted our audit in accordance with the standards on auditing specified under section 143(10) of the Act. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the companys preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the company has in place an adequate internal financial control system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the companys directors, as well as evaluating the overall presentation of thefinancial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.

Opinion

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 Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India,

a) in the case of the balance sheet of the state of affairs of the companys at March 31, 2018; b) in the case of the profit and loss, of the profit for the year ended on that date; and c) in the case of the cash flow statement, of the cash flow for the year ended on that date.

Report on other legal and regulatory requirements

1. As required by the Companies (Auditors Report) Order, 2016 ("the order"), as issued by central government of India in terms of sub section (11) of section 143 of Companies Act, 2013 we give in the Annexure – 1 a statement on the matters specified in paragraph 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, and the cash flow statement dealt with by this report are in agreement with the books of account;

(d) in our opinion, the aforesaid financial statements comply with the accounting standards specified under section 133 of the Act, read with rule 7 of the Companies (Accounts) Rules, 2014;

(e) on the basis of the written representations received from the directors as on March 31, 2018 taken on record by the board of directors, none of the directors is disqualified as on March 31, 2018 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 and the operating effectiveness of such controls, refer to our separate report in

Annexure – 2; and

(g) with respect to the other matters to be included in the auditors report in accordance with rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. the company does not have any pending litigations which would impact its financial position;

ii. the company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses; and

iii. there were no amounts which were required to be transferred to the investor education and protection fund by the company.

For Bimal Shah Associates,
Chartered accountants
FRN: 101505W
Bimal A. Shah
(Proprietor)
Membership no.: 042372
Ahmedabad, May 22, 2018

Annexure – 1 to the independent auditors report

1. (a) The company is maintaining proper records showing full particulars, including full particulars, including quantitative details and situation of fixed assets;

(b) The company has regular programs of physical verification of its fixed assets by which fixed assets are verified in a phase manner over a period of the year. in accordance with this verification, certain fixed assets were verified during the year and no material discrepancies were noticed on such verification. in our opinion, this periodicity of physical verification is reasonable having regard to the size of the company and the nature of its assets;

(c) As the company has no immovable property as fixed assets, information required under this para is not applicable.

2. The company is a non-banking finance company. Accordingly, it does not hold any physical inventories. thus, paragraph 3(ii) of the order is not applicable to the company.

3. (a) According to the information and explanation given to us, the company has granted loans, secured or unsecured to companies, firms, limited liability partnerships or other related parties covered in the register maintained u/s 189 of the Companies Act, the closing balance due from the above parties as at March 31, 2018 is Rs 201.42 lacs and the maximum amount involved during the year was Rs 201.42 lacs. However, the terms & conditions for grant of such loans are not prejudicial to the companys interest.

(b) In respect of loans granted to companies covered in the register maintained under section 189 of the Companies Act, 2013. The principal amounts, are repayable on demand and there is no repayment schedule.

(c) In respect of aforesaid loan specified in para 3(a) above, there are no overdue amount.

4. In our opinion and according to the information and explanations given to us, the provisions of section 185 and 186 of the Act, has been complied with considering the exemptions given to NBFC companies.

5. In our opinion and according to the information and explanations given to us, the company has not accepted any deposits within the meaning of section 73 to 76 of the Companies Act, 2013 and rules framed thereunder.

6. We have been informed by the management, no cost audit records have been prescribed under section 148(1) of the Companies Act, 2013 in respect of financial services provided by the company.

7. According to the information and explanations given to us and on the basis of our examination of the records of the company, amounts deducted / accrued in the books of account in respect of undisputed statutory dues including income tax, service tax and other material statutory dues have been generally regularly deposited during the year by the company with the appropriate authorities. However, in case of delays in few instances the same has been deposited along with interest due thereon.

According to the information and explanations given to us, no undisputed amount payable in respect of income tax, wealth tax, value added tax, service tax and other statutory dues applicable to the company were in arrears as on March 31, 2018 for a period of more than six months from the date become payable.

8. Based on our verification and according to the information and explanations given by the management, the company has not defaulted in repayment of loans or borrowings to a financial institution, bank, government or dues to debenture holders.

9. The company did not raise any money by way of initial public offer or further public offer (including debt instruments) during the year. Accordingly, para 3(ix) of the order is not applicable.

10. According to the information and explanations given to us, no material fraud by the company or on the company by its officers or employees has been noticed or reported during the course of our audit.

11. According to the information and explanations given to us and based on our examination of the records of the company, the company has paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with schedule v of the Act.

12. In our opinion and according to information and explanations given to us, the company is not a nidhi company. Accordingly, para 3(xii) of the order is not applicable.

13. According to the information and explanations given to us and based on our examination of records of the company, transactions with related parties are in compliance with section 177 and 188 of the Act, wherever applicable, and details of such transactions have been disclosed in the financial statements as required by applicable accounting standards.

14. According to the information and explanations given to us and based on our examination of 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, the provisions of clause 3(xiv) of the order are not applicable to the company.

15. According to the information and explanations given to us and based on our examination of records of the company, the company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, para 3(xv) is not applicable.

16. The company being an NBFC, is required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. The company is registered as a non-banking financial company ("NBFC") with the Reserve Bank of India ("RBI") and has got classified as a non-banking financial company with effect from February 18, 1998.

For Bimal Shah Associates,
Chartered accountants
FRN: 101505W
Bimal A. Shah
(Proprietor)
Membership no.: 042372
Ahmedabad, May 22, 2018

Annexure – 2 to the independent auditors report

Report on the internal financial controls 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 KIFS Financial Services Limited ("the company") as of March 31, 2018 in conjunction with our audit of the standalone financial statements of the company for the year ended on that date.

Managements responsibility for internal financial controls

The companys management is responsible for establishing and maintaining internal financial controls based on the guidance note on audit of internal financial controls over financial reporting issued by the Institute of Chartered Accountants of India (ICAI). 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 companys 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 Companies Act, 2013.

Auditors responsibility

Our responsibility is to express an opinion on the companys internal financial controls over financial reporting 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, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial control, both applicable to an audit of internal financial control 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 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 system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understating of internal financial controls over financial reporting, 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 auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud of error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the companys internal financial controls system over financial reporting.

Meaning of internal financial controls over financial reporting

A companys internal financial control over financial reporting 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 companys internal financial control over financial reporting includes those policies and procedures that;

i. pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

ii. 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

iii. provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the companys assets that could have a material effect on the financial statement.

Inherent limitations of internal financial controls over financial reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatement due to error or fraud may occur and not be detected. Also, projections of any evaluation of internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting 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, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2018, based on;

i. existing policies and procedures adopted by the company for ensuring orderly and efficient conduct of business;

ii. continuous adherence to companys policies;

iii. existing procedures in relation to safeguarding of companys fixed assets, investments, inventories, receivables, loans and advances made and cash and bank balances;

iv. existing system to prevent and detect fraud and errors; v. accuracy and completeness of companys accounting records; and vi. existing capacity to prepare timely and reliable financial information.

For Bimal Shah Associates,
Chartered accountants
FRN: 101505W
Bimal A. Shah
(Proprietor)
Membership no.: 042372
Ahmedabad, May 22, 2018