<dhhead>Independent Auditors Report</dhhead>
To
The Members of
Northern Arc Capital Limited
Report on the Audit of the Standalone Financial
Statements
Opinion
1. We have audited the accompanying standalone financial
statements of Northern Arc Capital Limited (the Company),
which comprise the Standalone Balance Sheet as at 31 March
2025, the Standalone Statement of Profit and Loss (including
Other Comprehensive Income), the Standalone Statement of
Cash Flow and the Standalone Statement of Changes in Equity
for the year then ended, and notes to the standalone financial
statements, including material accounting policy information
and other explanatory information.
2. In our opinion and to the best of our information and
according to the explanations given to us, the aforesaid
standalone 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 Indian Accounting Standards (Ind AS) specified under
section 133 of the Act read with the Companies (Indian
Accounting Standards) Rules, 2015 and other accounting
principles generally accepted in India, of the state of affairs
of the Company as at 31 March 2025, and its profit including
other comprehensive income, its cash flows and the changes
in equity for the year ended on that date.
Basis for Opinion
3. We conducted our audit in accordance with the Standards
on Auditing specified under section 143(10) of the Act. Our
responsibilities under those standards are further described
in the Auditors Responsibilities for the Audit of the
Standalone 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 (ICAI) together with the ethical requirements that are
relevant to our audit of the standalone 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 opinion.
Emphasis of Matter: Exclusion of FLDG credit in
calculation of ECL
4. We draw attention to Note 83 to the accompanying
standalone financial statements, which describes the impact
of the regulatory directions received by the Company from
the Reserve Bank of India (RBI) vide e-mail communication
dated 16 May 2025, pursuant to which the Company is
required to exclude credit enhancements under First Loss
Default Guarantee (FLDG) arrangement available at portfolio
level as at 31 March 2025 from the computation of Expected
Credit Losses (ECL) calculated as per Ind AS 109, Financial
Instruments and provide for additional ECL on account of
such change by 30 June 2025. Our opinion is not modified in
respect of this matter.
Key Audit Matters
5. Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
standalone financial statements of the current period. These
matters were addressed in the context of our audit of the
standalone financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate
opinion on these matters.
Key audit matter |
How our audit addressed the key audit matter |
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1) Impairment of loan asset based on Expected Credit Losses (ECL) (Refer note 3 for material accounting policies and note 7 for financial disclosures in the accompanying standalone financial statements |
Our appropriateness of managements judgment and estimates used in audit procedures were focused on assessing the following: the impairment analysis that included, but were not limited to, the Examined and methodology procedures the for for computation Board assessing of Directors of and ECL measuring that policy addresses credit approving policies risk on requirements of Ind AS 109. the lending exposures of the Company in accordance with the of Involved auditors specialists and obtained an understanding the modelling techniques adopted by the Company assumptions including the and key parameters inputs and assumptions. are based on Since historical modelling data, industry benchmarks and macro-economic factors, we information was representative of current circumstances and assessed whether such historical experience and the industry within the portfolios. Further, assessed reasonableness for the was relevant in view of the recent impairment losses incurred macro-economic factors considered for the portfolio segments. |
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As at 31 March 2025, the Company reported gross loans of 1,083,753.97 lakhs against which provision for expected credit loss of 26,516.19 lakhs has been recorded in accordance with Ind AS 109 Financial Instruments. The Company has written off loans of 60,930.24 lakhs during the current year. |
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Ind Company AS 109, to provide Financial for Instruments impairment (Ind of its AS loan 109) assets requires using the the a three-stage approach based on changes in credit quality of loan expected credit loss (ECL) approach. The Company has applied assets which is primarily determined based on number of days past due for each loan asset apart from other factors considered by the management for ascertaining significant increase in credit risk. |
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The ECL is measured at 12-month ECL for Stage 1 loan assets and with the accounting policy adopted by the Company. at lifetime ECL for Stage 2 and Stage 3 loan assets in accordance Significant management judgements and assumptions are involved in measuring ECL with respect to: management overlays and default risk i.e. staging of loan assets determining the criteria for significant increase in credit risk factoring in forward-looking information (including macroeconomic factors on a portfolio level) techniques used to determine probability of default, loss |
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These given default and exposure at default. parameters are derived from the Companys internally factors. Any change in such models or assumptions could have developed statistical models, historical data, macro-economic a material impact on the accompanying standalone financial statements. |
Assessed and tested the design and operating effectiveness of inputs and assumptions considered for calculation, recording the key controls over the completeness and accuracy of the key and monitoring of the impairment loss recognized. Also, of data and related approvals. evaluated the controls over the modelling process, validation cash flows impairment on a test check basis Tested the underlying workings with forecast the of agreed future repayment schedules used in |
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Similarly, the Company is also required to make judgements to identify the loan assets which are non-recoverable and thereby determined to be written off. Further as described in note 83 the Reserve Bank of India RBI e-mail communication dated 16 to the accompanying standalone financial statements as per May 2025, the management has excluded credit enhancements the computation of ECL per Ind AS 109 as at 31 March 2025 and under First Loss Default Guarantee (FLDG) arrangements from to provide the same in the financial statements by 30 June 2025. |
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Evaluated the appropriateness of the Companys determination of significant increase in credit risk in accordance with classification the applicable of exposures accounting into standard various stages. and the For basis a sample for of exposures, we also tested the appropriateness of the managements assessment of parameters. Companys categorization across various stages by evaluating laid Evaluated the appropriateness of the methodology and policy portfolio written-off during the year and tested its compliance down and implemented by the Company for the loan on a sample basis. |
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This users understanding of the financial statements matter has also been considered as fundamental to the Considering the significance of the above matter to the standalone financial significant statements, management degree judgment of estimation involved, this uncertainty area required and significant estimates, and accordingly, this matter has been identified as a auditor attention to test such complex accounting key audit matter for the current year audit. |
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Evaluated Companys compliance with the RBI directions vide e-mail communication dated 16 May 2025, with respect to exclusion from the computation of ECL as on 31 March 2025 and verified of credit enhancements under FLDG arrangements the mathematical accuracy in such computation. |
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Challenged considering the size and complexity of management overlays, the management on post model adjustments, in order to assess the reasonableness of the adjustments. |
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Assessed presentation and disclosures in the accompanying standalone the appropriateness and adequacy of the related accounting standards and related RBI circulars. financial statements in accordance with the applicable the management. Obtained appropriate written representations from |
Key audit matter |
How our audit addressed the key audit matter |
2) Information Technology("IT") systems and controls for accounting and financial reporting process |
Our key audit procedures with the involvement of our IT specialists included, but were not limited to, the following: |
The Company is highly dependent on its IT systems for carrying to on be its processed operations on which daily require basis and large use volume of multiple of transactions software applications at central level different loan products for sourcing, processing, recording and The Company uses various loan management system (LMS) for management of loan database some of which are integrated with data from/to LMS to financial reporting systems are critical for the financial accounting and reporting software. Transfer of accurate compilation of financial information. on As a result, there is a high degree of reliance and dependency such IT systems for the accounting and financial reporting process of the Company which impacts key financial accounting of daily DPD, impairment on loans amongst others. and reporting items such as loans, interest income, computation |
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Obtained an understanding of the Companys IT related control IT environment applications, and data conducted bases and risk operating assessment systems and identified that are relevant to our audit. |
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IT controls over the IT applications as identified above; Tested the design and operating effectiveness of the Companys prepared by the managements expert and evaluated that there Reviewed the report on the assessment of cyber security breach is no impact of the same on the financial reporting IT systems. program Tested controls maintenance, for segregations security administration of duties and around key business processes. |
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Appropriate IT general controls and application controls are data, required to ensure that such IT systems are able to process the as required, completely, accurately and consistently for reliable financial reporting. |
Tested management and aspects of IT operational controls. Tested that IT General Controls such as, logical access, change request for access to systems were appropriately reviewed and of access rights; inspected requests of changes to systems for authorized; tested controls around Companys periodic review appropriate approval and authorization. |
The Company has put in place IT General Controls and automated IT controls to ensure the integrity, accuracy, completeness, Company which is used for its financial reporting. validity and reliability of the information produced by the Among other things, the management also uses the information the produced preparation by the and Companys presentation IT systems of the standalone for accounting financial and Since our audit strategy included focus on key IT systems and statements. controls relevant to our audit due to their pervasive impact on the use of IT systems for accounting and financial reporting as a key standalone financial statements, we have determined the audit matter for current year audit. |
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Tested other application related interfaces, layer controls integration, identified configuration during our audit and audit mainly for loans, interest income and impairment of loan and report logic for system generated reports relevant to the assets for evaluating completeness and accuracy. controls or performed alternative procedures. Where deficiencies were identified, tested compensating the management. Obtained appropriate written representations from |
Key audit matter |
How our audit addressed the key audit matter |
3) Classification and measurement of Loans Business model assessment and Fair valuation of loans held at fair value through other comprehensive income ("FVTOCI") (Refer note 3 for material accounting policies and note 7 for financial disclosures in the accompanying standalone financial statements |
Our audit procedures in relation to the business model and following: loans measured at FVTOCI included, but were not limited, to the an of the Business Model Policy |
As at 31 March 2025, the Company has loans amounting to 2,17,633.08 lakhs (31 March 2024: 2,61,483.91 lakhs) that are carried Financial and measured at FVTOCI in accordance with Ind AS 109. assets, i.e. loan assets have been classified and measured as per Ind AS 109, Financial Instruments. |
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The assessment as to how an asset should be classified is made on the basis of both the entitys business model for managing the financial asset and the contractual cash flow characteristics of the financial asset. of its approved credit policies, business plan and history of sale The management has assessed its business model on the basis of loan assets wherein certain loans have been held to collect on the amount outstanding) and certain loans are held to collect contractual cash flows (solely payments of principal and interest contractual cash flows and also for sale, and consequently, loans have been classified and measured at amortized cost and Fair value through Other Comprehensive Income (FVTOCI) respectively in accordance with principles of Ind AS 109. |
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Obtained Note and evaluated approved understanding by whether the Board the of identified Directors loans of the satisfy Company, the conditions of Ind AS 109 for measurement at amortized cost or FVTOCI. Tested the sale of loan assets made during the year to validate the managements conclusion for classification and and compared with the managements plan and intent, measurement of loans. |
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internal Assessed the design and tested the operating effectiveness of controls over classification of loans on the basis of over inputs used in the valuation model. managements intent and managements key internal controls |
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In used measuring based on the inputs fair value that are of loans, not directly valuation observable methods from are management has an internal team for arriving at the fair value of market information and certain other unobservable inputs. The aforesaid loans. Such fair value is derived using discounted cash adjustment for credit risk including default risk. flow models wherein the key assumptions include discount rate, |
Involved fair appropriate and tested the reasonableness of the underlying valuation auditors methodology specialists adopted and assessed by the management whether the is assumptions used such as discount rates, future cash flows, etc basis tested the completeness of source data and arithmetical to estimate the fair value of the such loans. Also, on test check accuracy of the management working. |
Given the subjectivity and degree of complexity involved in aforesaid ascertaining loans, the business relative significance model and the of fair these valuation loans to of the the standalone financial statements and the nature and extent of audit procedures involved, we determined this to be a key audit matter. |
Assessed presentation and disclosures in the accompanying standalone the appropriateness and adequacy of the related financial statements in accordance with the applicable accounting standards. |
from the management Obtained appropriate written representations |
financial position, financial performance including other
comprehensive income, changes in equity and cash flows
of the Company in accordance with the Ind AS specified
under section 133 of the Act and other accounting principles
generally accepted in India. 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.
8. In preparing the standalone financial statements, the Board
of Directors is responsible for assessing the Companys 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 Directors either
intends to liquidate the Company or to cease operations, or
has no realistic alternative but to do so.
9. The Board of Directors is also responsible for overseeing the
Companys financial reporting process.
Auditors Responsibilities for the Audit of the
Standalone Financial Statements
10. Our objectives are to obtain reasonable assurance about
whether the standalone financial statements as a whole
are free from material misstatement, whether due to fraud
or error, and to issue an auditors 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 Standards on Auditing 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 standalone financial statements.
11. As part of an audit in accordance with Standards on Auditing,
specified under section 143(10) of the Act we exercise
professional judgment and maintain professional skepticism
throughout the audit. We also:
Identify and assess the risks of material misstatement
of the standalone 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
Annual Re
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 management;
? Conclude on the appropriateness of Board of Directors
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 Companys
ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to
draw attention in our auditors report to the related
disclosures in the standalone 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 auditors report. However,
future events or conditions may cause the Company to
cease to continue as a going concern; and
? Evaluate the overall presentation, structure and content
of the standalone financial statements, including the
disclosures, and whether the standalone financial
statements represent the underlying transactions and
events in a manner that achieves fair presentation.
12. 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.
13. 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.
14. From the matters communicated with those charged with
governance, we determine those matters that were of
most significance in the audit of the standalone financial
statements of the current period and are therefore the key
audit matters. We describe these matters in our auditors
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
t 2024-25
would reasonably be expected to outweigh the public interest
benefits of such communication.
Other Matter
15. The standalone financial statements of the Company for the
year ended 31 March 2024 were audited by the predecessor
auditor, S.R. Batliboi & Associates LLP, who have expressed an
unmodified opinion on those standalone financial statements
vide their audit report dated 29 May 2024.
Report on Other Legal and Regulatory Requirements
16. As required by section 197(16) of the Act, based on our
audit, we report that the Company has paid remuneration
to its directors during the year in accordance with the
provisions of and limits laid down under section 197 read
with Schedule V to the Act.
17. As required by the Companies (Auditors 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.
18. Further to our comments in Annexure A, as required by
section 143(3) of the Act based on our audit we report, to the
extent applicable, 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 purpose of our audit of the
accompanying standalone financial statements;
b) Except for the matters stated in paragraph 18(h)(vi)
below on reporting under Rule 11(g) of the Companies
(Audit and Auditors) Rules, 2014 (as amended), 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 standalone financial statements dealt with by this
report are in agreement with the books of account;
d) In our opinion, the aforesaid standalone financial
statements comply with Ind AS specified under section
133 of the Act;
e) On the basis of the written representations received
from the directors and taken on record by the Board of
Directors, none of the directors is disqualified as on 31
March 2025 from being appointed as a director in terms
of section 164(2) of the Act;
f) The qualification relating to the maintenance of
accounts and other matters connected therewith are
as stated in, paragraph 18(b) above on reporting under
section 143(3)(b) of the Act and paragraph 18(h)(vi)
below on reporting under Rule 11(g) of the Companies
(Audit and Auditors) Rules, 2014 (as amended);
g) With respect to the adequacy of the internal financial
controls with reference to financial statements of
the Company as on 31 March 2025 and the operating
effectiveness of such controls, refer to our separate
report in Annexure B wherein we have expressed an
unmodified opinion; and
h) 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
(as amended), in our opinion and to the best of our
information and according to the explanations given to us;
i. The Company, as detailed in note 38 to the
standalone financial statements, has disclosed
the impact of pending litigations on its financial
position as at 31 March 2025
ii. The Company, as detailed in note 12 to the
standalone financial statements, has made
provision as at 31 March 2025, as required under
the applicable law or accounting standards, for
material foreseeable losses, if any, on long-term
contracts including derivative contracts;
iii. There were no amounts which were required
to be transferred to the Investor Education and
Protection Fund by the Company during the year
ended 31 March 2025;
iv. a. The management has represented that, to the
best of its knowledge and belief, as disclosed
in note 86 (B)(v) to the standalone financial
statements, no funds have been advanced or
loaned or invested (either from borrowed
funds or securities premium or any other
sources or kind of funds) by the Company to
or in any person(s) or entity(ies), including
foreign entities (the intermediaries), with
the understanding, whether recorded in
writing or otherwise, that the intermediary
shall, whether, directly or indirectly lend or
invest in other persons or entities identified
in any manner whatsoever by or on behalf of
the Company (the Ultimate Beneficiaries)
or provide any guarantee, security or the like
on behalf the Ultimate Beneficiaries;
b. The management has represented that,
to the best of its knowledge and belief,
as disclosed in note 86 (B)(vi) to the
standalone financial statements, no funds
have been received by the Company from
any person(s) or entity(ies), including
foreign entities (the Funding Parties),
with the understanding, whether recorded
in writing or otherwise, that the Company
shall, whether directly or indirectly, lend or
invest in other persons or entities identified
in any manner whatsoever by or on behalf of
the Funding Party (Ultimate Beneficiaries)
or provide any guarantee, security or the like
on behalf of the Ultimate Beneficiaries; and
c. Based on such audit procedures performed
as considered reasonable and appropriate
in the circumstances, nothing has come to
our notice that has caused us to believe that
the management representations under
sub-clauses (a) and (b) above contain any
material misstatement.
v. The Company has not declared or paid any
dividend during the year ended 31 March 2025.
vi. As stated in Note 85 to the standalone financial
statements and based on our examination which
included test checks, except for instances/
matters mentioned below, the Company, in
respect of financial year commencing on 1
April 2024, has used accounting software for
maintaining its books of account which have a
feature of recording audit trail (edit log) facility
and the same have been operated throughout
the year for all relevant transactions recorded
in the software. Further, during the course of
our audit we did not come across any instance
of audit trail feature being tampered with, other
than the consequential impact of the exceptions
given below. Furthermore, except for instances/
matters mentioned below the audit trail has been
preserved by the Company as per the statutory
requirements for record retention.
Nature of exception noted |
Details of Exception |
Instances of
accounting software for maintaining |
(i) The audit trail feature
was not enabled at the database level for |
(ii) The audit trail (edit
logs) was not retained for the period 01 |
|
Instances of accounting software
maintained by a |
The loan management systems for
two other loan products are |
Annexure A
referred to in paragraph 17 of the Independent Auditors Report of even
date to the members of Northern Arc Capital Limited on
the standalone financial statements for the year ended 31 March 2025
In terms of the information and explanations sought by us and
given by the Company and the books of account and records
examined by us in the normal course of audit, and to the best of
our knowledge and belief, we report that:
(i) (a) (A) The Company has maintained proper
records showing full particulars, including
quantitative details and situation of property,
plant and equipment and relevant details of
right-of-use assets.
(B) The Company has maintained proper records
showing full particulars of intangible assets.
(b) The Company has a regular programme of physical
verification of its property, plant and equipment and
relevant details of right-of-use assets under which the
assets are physically verified in a phased manner over a
period of three years, which in our opinion, is reasonable
having regard to the size of the Company and the nature
of its assets. In accordance with this programme, certain
property, plant and equipment were verified during the
year and no material discrepancies were noticed on
such verification.
(c) The Company does not own any immovable property
(other than properties where the Company is the lessee
and the lease agreements are duly executed in favour of
the lessee). Accordingly, reporting under clause 3(i)(c)
of the Order is not applicable to the Company.
(d) The Company has adopted cost model for its Property,
Plant and Equipment (including right-of-use assets) and
intangible assets. Accordingly, reporting under clause
3(i)(d) of the Order is not applicable to the Company.
(e) No proceedings have been initiated or are pending
against the Company for holding any benami property
under the Prohibition of Benami Property Transactions
Act, 1988 (as amended) and rules made thereunder.
(ii) (a) The Company does not hold any inventory. Accordingly,
reporting under clause 3(ii)(a) of the Order is not
applicable to the Company.
(b) As disclosed in Note 14 & 15 to the standalone financial
statements, the Company has been sanctioned a
working capital limit in excess of Rs. 5 crores by banks
based on the security of current assets. The quarterly
returns/statements, in respect of the working capital
limits have been filed by the Company with such banks
and such returns/statements are in agreement with
the books of account of the Company for the respective
periods, which were subject to review.
(iii) (a) The Company is a Non-Banking Finance Company
and its principal business is to give loans. Accordingly,
reporting under clause 3(iii)(a) of the Order is not
applicable to the Company.
(b) In our opinion, and according to the information
and explanations given to us, the investments made,
guarantees provided, security given and terms and
conditions of the grant of all loans and advances in the
nature of loans and guarantees provided are, prima
facie, not prejudicial to the interest of the Company.
(c) The Company is a Non-Banking Financial Company (NBFC), registered
under provisions of the Reserve Bank of India Act,
1934 and rules made thereunder and is regulated by various regulations, circulars and
norms issued by the Reserve Bank of
India including Master Circular - Prudential norms on Income Recognition, Asset
Classification and Provisioning pertaining
to Advances. In respect of loans and advances in the nature of loans granted by the
Company, we report that the schedule of
repayment of principal and payment of interest has been stipulated and the repayments/
receipts of principal and interest are
regular except for instances as below, as also disclosed under Note 86B to the
standalone financial statements:
Particulars - Days Past Due |
Aggregate amount
outstanding |
No. of Cases |
SMA 0 (upto 30 days) |
30,683 |
94,081 |
SMA 1 (31-60 days) |
15,747 |
51,596 |
SMA 2 (61- 90 days) |
8,019 |
51,674 |
More than 90 days |
15,636 |
19,561 |
Statutory Reports
Financial Statements
Having regard to the nature of business of the Company and volume of
the transactions, it is impractical to furnish the item-wise
listing for the above-mentioned cases of delay in repayment of principal and interest.
(d) According to the information and explanations given to us, the
total amount which is overdue for 90 days or more in respect
of loans and advances in the nature of loans given in the course of the business
operations of the Company aggregates to Rs.
15,636 lakhs as at 31 March 2025 in respect of 19,561 number of loans, as also disclosed
in Note 86B to the standalone financial
statements. Further, reasonable steps as per the policies and procedures of the Company
have been taken for recovery of such
principal and interest amounts overdue.
(e) The Company is a Non-Banking Finance Company and its principal
business is to give loans. Accordingly, reporting under clause
3(iii)(e) of the Order is not applicable to the Company.
(f) The Company has not granted any loans or advances in the nature of
loans, which is/are repayable on demand or without
specifying any terms or period of repayment.
(iv) In our opinion, and according to the information and explanations
given to us, the Company has complied with the provisions of
section 186 of the Act in respect of loans and investments made and guarantees and
security provided by it, as applicable. Further,
the Company has not entered into any transaction covered under section 185 of the Act.
(v) The provisions of the sections 73 to 76 and any other relevant
provisions of the Act and the Companies (Acceptance of Deposits)
Rules, 2014 (as amended), are not applicable to the Company being an non-banking financial
company registered with the Reserve
Bank of India (the RBI), and also the Company has not accepted any deposits from public
or there are no amounts which have been
deemed to be deposits within the meaning of sections 73 to 76 of the Act. Accordingly,
reporting under clause 3(v) of the Order is not
applicable to the Company.
(vi) The Central Government has not specified maintenance of cost
records under sub-section (1) of section 148 of the Act, in respect of
Companys services. Accordingly, reporting under clause 3(vi) of the Order is not
applicable.
(vii) (a) In our opinion and according to the information and explanations given to us, the Company is regular in depositing undisputed
statutory dues including goods and services tax, provident fund,
employees state insurance, income-tax, and other material
statutory dues, as applicable, with the appropriate authorities. Further, no undisputed
amounts payable in respect thereof were
outstanding at the year-end for a period of more than six months from the date they became
payable.
(b) According to the information and explanations given to us, we
report that there are no statutory dues referred in sub-clause (a)
which have not been deposited with the appropriate authorities on account of any dispute
except for the following:
Name of the statute |
Nature of dues |
Gross |
Amount |
Period to |
Forum where |
Remarks, if |
Income-Tax Act, 1961 |
Tax and interest |
255.99 |
AY 2014-15 |
Income tax |
Income-Tax |
|
Income-Tax Act, 1961 |
Tax and interest |
172.54 |
AY 2017-18 |
Commissioner |
Income-Tax |
(viii) According to the information and explanations given to us, we
report that no transactions were surrendered or disclosed
as income during the year in the tax assessments under the
Income Tax Act, 1961 (43 of 1961) which have not been
previously recorded in the books of accounts.
(ix) (a) In our opinion and according to the information and
explanations given to us, the Company has not defaulted
in repayment of its loans or borrowings or in the
payment of interest thereon to any lender.
(b) According to the information and explanations
given to us including confirmations received from
banks/ financial institution and other lenders and
representation received from the management of the
Company, and on the basis of our audit procedures,
we report that the Company has not been declared a
willful defaulter by any bank or financial institution or
government or any government authority.
(c) In our opinion and according to the information and
explanations given to us, money raised by way of
term loans were applied for the purposes for which
these were obtained.
(d) In our opinion and according to the information and
explanations given to us, and on an overall examination
of the financial statements of the Company, funds raised
by the Company on short term basis have, prima facie,
not been utilised for long term purposes.
(e) In our opinion and according to the information and
explanations given to us and on an overall examination
of the financial statements of the Company, the Company
has not taken any funds from any entity or person on
account of or to meet the obligations of its subsidiaries
and associates.
(f) In our opinion and according to the information and
explanations given to us, the Company has not raised
any loans during the year on the pledge of securities
held in its subsidiaries and associate companies.
(x) (a) In our opinion and according to the information and
explanations given to us, money raised by way of initial
public offer were applied for the purposes for which
these were obtained.
(b) During the year, the Company has made private
placement of shares. In our opinion and according to the
information and explanations given to us, the Company
has complied with the requirements of section 42 and
section 62 of the Act and the rules framed thereunder
with respect to the same. Further, the amounts so raised
have been utilised by the Company for the purposes for
which these funds were raised.
(xi) (a) To the best of our knowledge and according to the
information and explanations given to us, no fraud by
the Company or no material fraud on the Company
has been noticed or reported during the period
covered by our audit.
(b) According to the information and explanations given
to us including the representation made to us by the
management of the Company, 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
Companies (Audit and Auditors) Rules, 2014, with the
Central Government for the period covered by our audit.
(c) According to the information and explanations
given to us including the representation made to us
by the management of the Company, there are no
whistle-blower complaints received by the Company
during the year.
(xii) The Company is not a Nidhi Company and the Nidhi Rules,
2014 are not applicable to it. Accordingly, reporting under
clause 3(xii) of the Order is not applicable to the Company.
(xiii) I n our opinion and according to the information and
explanations given to us, all transactions entered into by
the Company with the related parties are in compliance
with sections 177 and 188 of the Act, where applicable.
Further, the details of such related party transactions have
been disclosed in the standalone financial statements, as
required under Indian Accounting Standard (Ind AS) 24,
Related Party Disclosures specified in Companies (Indian
Accounting Standards) Rules 2015 as prescribed under
section 133 of the Act.
(xiv) (a) In our opinion and according to the information and
explanations given to us, the Company has an internal
audit system which is commensurate with the size and
nature of its business as required under the provisions
of section 138 of the Act.
(b) We have considered the reports issued by the
Internal Auditors of the Company till date for the
period under audit.
(xv) According to the information and explanation given to us,
the Company has not entered into any non-cash transactions
with its directors or persons connected with its directors and
accordingly, reporting under clause 3(xv) of the Order with
respect to compliance with the provisions of section 192 of
the Act are not applicable to the Company.
(xvi) (a) The Company is required to be registered under section
45-IA of the Reserve Bank of India Act, 1934 and such
registration has been obtained by the Company.
(b) In our opinion and according to the information and
explanations given to us, the Company has conducted
Non-Banking Financial activities during the year under
a valid Certificate of Registration (CoR) from the RBI as
per the Reserve Bank of India Act, 1934.
(c) In our opinion and according to the information and
explanations given to us, the Company is not a Core
Investment Company (CIC) as defined in the regulations
made by the RBI. Accordingly, reporting under clause
3(xvi)(c) of the Order is not applicable to the Company.
(d) Based on the information and explanations given to us
and as represented by the management of the Company,
the Group (as defined in Core Investment Companies
(Reserve Bank) Directions, 2016) does not have any CIC.
(xvii) The Company has not incurred any cash losses in the
current financial year as well as the immediately preceding
financial year.
(xviii) There has been no resignation of the statutory auditors
during the year. Accordingly, reporting under clause 3(xviii)
of the Order is not applicable to the Company.
(xix) According to the information and explanations given to us and
on the basis of the financial ratios, ageing and expected dates
of realisation of financial assets and payment of financial
liabilities, other information in the standalone financial
statements, our knowledge of the plans of the Board of
Directors and management 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 indicating
that 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.
(xx) (a) In our opinion and according to the information and
explanations given to us, there are no unspent amounts
towards Corporate Social Responsibility pertaining to
other than ongoing projects as at end of the current
financial year. Accordingly, reporting under clause 3(xx)
(a) of the Order is not applicable to the Company.
(b) In our opinion and according to the information and
explanations given to us, there are no unspent amounts
towards Corporate Social Responsibility pertaining to
any ongoing project as at end of the current financial
year. Accordingly, reporting under clause 3(xx)(b) of the
Order is not applicable to the Company.
(xxi) The reporting under clause 3(xxi) of the Order is not
applicable in respect of audit of standalone financial
statements of the Company. Accordingly, no comment has
been included in respect of said clause under this report.
?
T
N RTHERN
ARC
Annexure B
to the Independent Auditors Report of even date to the members of
Northern Arc Capital Limited on the standalone financial
statements for the year ended 31 March 2025
Independent Auditors Report on the internal
financial controls with reference to the standalone
financial statements under Clause (i) of Sub-section 3
of Section 143 of the Companies Act, 2013 (the Act)
1. In conjunction with our audit of the standalone financial
statements of Northern Arc Capital Limited (the Company)
as at and for the year ended 31 March 2025, we have audited
the internal financial controls with reference to standalone
financial statements of the Company as at that date.
Responsibilities of Management and Those Charged
with Governance for Internal Financial Controls
2. The Companys Board of Directors is responsible for
establishing and maintaining internal financial controls
based on the internal financial controls with reference to
the standalone 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 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 the Companys business, including
adherence to the 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 Act.
Auditors Responsibility for the Audit of the Internal
Financial Controls with Reference to Standalone
Financial Statements
3. Our responsibility is to express an opinion on the Companys
internal financial controls with reference to standalone
financial statements based on our audit. We conducted
our audit in accordance with the Standards on Auditing
issued by the Institute of Chartered Accountants of India
(ICAI) prescribed under Section 143(10) of the Act, to the
extent applicable to an audit of internal financial controls
with reference to standalone financial statements, and the
Guidance Note on Audit of Internal Financial Controls Over
Financial Reporting (the Guidance Note) issued by the ICAI.
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 standalone
financial statements were established and maintained and if
such controls operated effectively in all material respects.
4. Our audit involves performing procedures to obtain audit
evidence about the adequacy of the internal financial
controls with reference to standalone financial statements
and their operating effectiveness. Our audit of internal
financial controls with reference to standalone financial
statements includes obtaining an understanding of such
internal financial controls, 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 judgement, including the assessment of the risks of
material misstatement of the standalone financial statements,
whether due to fraud or error.
5. 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 with
reference to standalone financial statements.
Meaning of Internal Financial Controls with
Reference to Standalone Financial Statements
6. A companys internal financial controls with reference
to standalone financial statements is a process designed
to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of standalone
financial statements for external purposes in accordance
with generally accepted accounting principles. A companys
internal financial controls with reference to standalone
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 standalone
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 companys assets that could have a material
effect on the standalone financial statements.
Inherent Limitations of Internal Financial Controls
with Reference to Standalone Financial Statements
7. Because of the inherent limitations of internal financial
controls with reference to standalone 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 standalone financial statements to future
periods are subject to the risk that the internal financial
controls with reference to standalone financial statements
may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures
may deteriorate.
Opinion
8. In our opinion, the Company has, in all material respects,
adequate internal financial controls with reference to
standalone financial statements and such controls were
operating effectively as at 31 March 2025, based on the
internal financial controls with reference to the standalone
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 issued by the ICAI.
For Walker Chandiok & Co LLP |
Chartered Accountants |
Firms Registration No: 001076N/N500013 |
Khushroo B. Panthaky |
Partner |
Membership No.: 042423 |
UDIN: 25042423BMNRBP8866 |
Place: Nagpur |
Date: 19 May 2025 |
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