Poonawalla Fincorp Ltd Auditor Reports

To the Members of

POONAWALLA FINCORP LIMITED

Report on the Audit of the Standalone Financial Statements

OPINION

1. We have audited the accompanying standalone financia! statements of Poonawalla Fincorp Limited (‘the Company), which comprise the Balance Sheet as at March 31, 2024, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flow and the 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, and based on the consideration of the audit report of the PFL Employee Welfare Trust (‘the Welfare Trust) as referred to in paragraph 15 below 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 March 31, 2024, 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 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 together with the audit evidence obtained by the auditors of the Welfare Trust, in terms of their audit report referred to in paragraph 15 of the Other Matters section below is sufficient and appropriate to provide a basis for our opinion.

KEY AUDIT MATTERS

4. 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 financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

5. We have determined the matters described below to be the key audit matters to be communicated in our report.

Key audit matter	How our audit addressed the key audit matter
Expected credit losses on loan assets	Our audit focused on assessing the appropriateness of managements judgment and estimates used in the impairment analysis through procedures that included, but were not limited to, the following:
Refer Note 2(h)(VI) of material accounting policies, Note 6 for the details of provision and Note 50(ii) for credit risk disclosures. Also, refer Note 40 for exceptional items.	• Obtained an understanding of the modelling techniques adopted by the Company including the key inputs and assumptions for calculation of expected credit losses;
As at March 31, 2024, the Company has reported gross financial assets (loans) aggregating to ^ 23,045.38 crores against which provision for expected credit loss of ^ 998.97 crores has been recorded as at reporting date in accordance with Ind AS 109 - Financial Instruments (‘Ind AS 109). The Company has written off ^ 1,194.90 crores during the current year.	• Tested the design and operating effectiveness of key controls over completeness and accuracy of the key inputs and assumptions considered for calculations, validation of data and monitoring of impairment loss recognised based on historical and external data. This also included testing performed by IT Specialists to test the data flows from source systems to spreadsheet- based models to test their completeness and accuracy.
The calculation of expected credit loss on loans and write- offs is complex and requires significant management judgement and the use of different modelling techniques and assumptions which could have a material impact on reported profits.	• Tested the modelling assumptions and inputs which are based on industry experience (new products) as collated by external credit bureau by benchmarking independently such inputs with data of other comparable companies to assess reasonability of such assumptions. While for remaining loan portfolio, since modelling assumptions and parameters are based on historical data, assessed whether historical experience was representative of current circumstances and was relevant in view of the recent impairment losses incurred within the portfolios;
The Company has applied a three-stage approach based on changes in credit quality to measure expected credit loss on loans which is as follows:	• Considered the Companys accounting policies for estimation of expected credit loss on loans and assessing compliance with the policies in terms of Ind AS 109;
• If the loan is not credit-impaired on initial recognition, then it is classified in ‘Stage 1 and its credit risk is continuously monitored by the Company i.e., the default in repayment is within 1 month.	• Tested the assumptions underlying the impairment identification and quantification including the forecast of future cash flows by corroborating it with the agreed repayment schedules of the borrowers;
• If a significant increase in credit risk since initial recognition is identified, it is moved to ‘Stage 2 but is not yet deemed to be credit-impaired i.e., the default in repayment is within the range of 2 to 3 months.	• Further, challenged the aforesaid assumptions through our understanding of the risk profile of the customers of the Company and other publicly available relevant macro-economic factors used with the models;
• If the loan is credit-impaired, it is then moved to ‘Stage 3 i.e., the default in repayment is more than 3 months.	• We have also examined, on a sample basis, data inputs to the discounted cash flow models, including the latest collateral valuations in supporting the estimation of future cash flows and present value;
The Expected Credit Loss ("ECL") is measured at 12-month ECL for Stage 1 loan assets and at lifetime ECL for Stage 2 and Stage 3 loan assets.	• Evaluated the appropriateness of the Companys determination of significant increase in credit risk in accordance with the applicable accounting standards and the basis for classification of various exposures into various stages. For a sample of exposures, also tested the appropriateness of the Companys categorization across various stages;
Calculation of ECL involves estimation of probability of default (PD) on loan portfolio over their life, loss given default (LGD) and exposure at default for each of the stages of loan portfolio. The management has calculated the PD and LGD as follows:	• Assessed the critical assumptions and input data used in the estimation of expected credit loss models for specific key credit risk parameters, such as the transfer logic between stages, PD or LGD;
• For new products launched from time to time and where the Company does not have sufficient historical data to estimate PD, the Company has engaged external leading credit bureau and accordingly based on industry data sourced such information from the aforesaid credit bureau.	• Performed an assessment of the adequacy of the credit losses expected within 12 months by reference to credit losses actually incurred on similar portfolios historically;
• For the remaining portfolio, the Company has continued to use their existing internally developed modelling techniques using historical observable data and inputs to estimate PD and LGD.	• On test check basis, tested the reasonableness of estimates of expected realizable values of underlying collaterals;
Significant management judgement and assumptions are involved in measuring ECL which also includes management overlays especially while calculating the PD and LGD and involves the following critical factors which are applied to such modelling techniques:
• Segmentation of loan book	• Obtained the managements rational for writing off the loans during the current year and tested for appropriate management approvals for the same;
• Determination of exposure at default	• Obtained written representations from management and those charged with governance on whether they believe significant assumptions used in calculation of expected credit losses are reasonable;
• Loan staging criteria	• Assessed the appropriateness and adequacy of the related presentation and disclosures of Note 50 "Financial risk management" disclosed in the accompanying standalone financial statements in accordance with the applicable accounting standards and related RBI circulars.
• Consideration of probability weighted scenarios and forward looking macro-economic factors
• Criteria for a significant increase in credit risk
• Past experience and forecast data on customer behavior on repayments
• Estimation of realizable value of underlying collaterals
Considering the significance of the above matter to the standalone financial statements, significant level of estimates and judgements involved in determination of ECL and write offs, this matter required our significant attention. Therefore, we have identified this as a key audit matter for current year audit.
Information Technology system 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 Information Technology ("IT") systems for carrying on its operations which require large volume of transactions to be processed in numerous locations.	• Obtained an understanding of the Companys IT systems, IT General Controls and automated IT controls and conducted risk assessment for identified IT applications, data bases and operating systems that are relevant to our audit;
Further, the Companys accounting and financial reporting processes are dependent on automated controls enabled by IT systems which impacts key financial accounting and reporting items such as loans, interest income, impairment on loans amongst others.	• Obtained an understanding of the changes/ modifications that were made to the identified IT applications during the audit period and tested those changes that had a significant impact on financial reporting including managements process for monitoring and authorisation of such changes/ modifications
The Company has put in place IT General Controls and automated IT Controls to ensure the integrity, accuracy, completeness, validity and reliability of the information produced by the Company. Among other things, the management also uses the information produced by the Companys IT systems for accounting and the preparation and presentation of the standalone financial statements.	• Evaluated the appropriateness of controls for security governance to protect systems and data from unauthorised use, including logging of security events and procedures to identify vulnerabilities;
The Company uses loan management system (LMS) for sourcing, processing, recording and management of loan database which is fully integrated with the financial accounting and reporting system. The Company has implemented necessary preventive and detective controls across critical IT applications and infrastructure, which are most relevant from the perspective of financial reporting. Our audit approach relies on the effectiveness of automated controls and controls around interface of different systems.	• Tested segregations of duties controls around program maintenance, security administration and key business processes;
Our areas of audit focus included user access management, developer access to the production environment and changes to the IT environment.	• Tested IT General Controls particularly, logical access, change management and aspects of IT operational controls. Tested that request for access to systems were appropriately reviewed and authorized; tested controls around Companys periodic review of access rights; inspected requests of changes to systems for appropriate approval and authorization;
Further, we focused on key automated controls relevant for financial reporting.	• Tested related interfaces, configuration and other application layer controls identified during our audit and report logic for system generated reports relevant to the audit mainly for loans, interest income and impairment of loan assets for evaluating completeness and accuracy;
Accordingly, since our audit strategy included focus on key IT systems and controls relevant to our audit due to their pervasive impact on the financial statements, we have determined the use of IT systems for accounting and financial reporting as a key audit matter for current year audit.	• Tested the design and operating effectiveness of the Companys IT controls over the IT applications as identified above;
	• Where deficiencies were identified, tested compensating controls or performed alternative procedures;
	• Obtained written representations from management and those charged with governance on whether IT general controls and automated IT controls are designed and were operating effectively during the period covered by our audit.

INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITORS REPORT THEREON

6. The Companys Board of Directors is responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the standalone financial statements and our auditors report thereon. The Annual Report is expected to be made available to us after the date of this auditors report.

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

I n connection with our audit of the standalone 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 standalone financial statements or our knowledge

obtained in the audit or otherwise appears to be materially misstated.

When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

RESPONSIBILITIES OF MANAGEMENT AND

THOSE CHARGED WITH GOVERNANCE FOR

THE STANDALONE FINANCIAL STATEMENTS

7. The accompanying standalone financial statements have been approved by the Companys Board of Directors. The Companys Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the 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 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 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 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 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 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 contin?e 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 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;

• 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; and

• Obtain sufficient appropriate audit evidence regarding the financial information/financial statements of the Company and its Welfare Trust or the business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit of financial statements of the Company, of which we are the independent auditors. For the Welfare Trust included in the financial statements, which have been audited by other auditor, such auditor remain responsible for the direction, supervision and performance of the audit carried out by them. We remain solely responsible for our audit opinion.

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 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 would reasonably be expected to outweigh the public interest benefits of such communication.

OTHER MATTER

15. We did not audit the financial statements of the Welfare Trust included in the standalone financial statements of the Company whose financial statements reflects total assets of 199.33 crores as at March 31, 2024, total revenues of 0.01 crores, total net loss after tax of 0.86 crores, total comprehensive loss of 0.86 crores, and net cash inflows of 0.97 crores respectively for the year ended on that date, as considered in the standalone financial statements. These financial statements have been audited by another auditor whose report have been furnished to us by the management. Further, the aforementioned financial statements of this trust have been prepared in conformity with the Accounting Standards specified under section 133 of the Act, read with the Companies (Accounting Standards) Rules, 2021. The Companys management has converted these financial statements of this trust to the accounting principles enunciated under the Indian Accounting Standards (‘Ind AS) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 as applicable to the Company. We have audited these conversion adjustments made by the Companys management. Our opinion on the standalone financial statements, in so far as it relates to the amounts and disclosures included in respect of the Welfare Trust, and our report in terms of sub-section (3) of section 143 of the Act in so far as it relates to the aforesaid Welfare Trust, is based solely on the report of such other auditors and the conversion adjustments prepared by the management of the Company which have been audited by us.

Our opinion above on the standalone financial statements, and our report on other legal and regulatory requirements below, are not modified in respect of the above matter with respect to our reliance on the work done by and the report of the other auditors.

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, and on the consideration of the report of the Welfare Trust as referred to in paragraph 15 above, 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) 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 paragraph 18(g)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended);

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 March 31, 2024 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 with reference to financial statements of the Company as on March 31, 2024 and the operating effectiveness of such controls, refer to our separate report in Annexure B wherein we have expressed an unmodified opinion; 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 (as amended), in our opinion and to the best of our information and according to the explanations given to us and based on the consideration of the audit report of the Welfare Trust as referred to in paragraph 15 above:

i. The Company, as detailed in Note 47 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position as at March 31, 2024;

? i. The Company did not have any long- term contracts including derivative contracts for which there were any material foreseeable losses as at March 31, 2024;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the year ended March 31, 2024;

iv. a. The management has represented

that, to the best of its knowledge and belief, as disclosed in Note 55(f) 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 55(g) 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. a) The interim dividend declared and paid by the Company during the year ended March 31, 2024 and until the date of this audit report is in compliance with section 123 of the Act.

b) The final dividend paid by the Company during the year ended March 31, 2024 in respect of such dividend declared for the previous year is in accordance with section 123 of the Act to the extent it applies to payment of dividend.

vi. As stated in Note 55(k) to the financial statements and based on our examination which included test checks, except for instances mentioned below, the Company, in respect of financial year commencing on April 1, 2023, has used an accounting software for maintaining its books of account which has 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 exception given below:

Nature of exception noted	Details of Exception
Instances of accounting software for maintaining books of account for which the feature of recording audit trail (edit log) facility was not operated throughout the year for all relevant transactions recorded in the software	1) The audit trail feature was not enabled at the database level for accounting software Finmechanics from implementation date June 01, 2023 to March 20, 2024 to log any direct data changes, used for maintenance of borrowing records by the Company.
	2) The audit trail feature was not enabled at the database level for accounting software CCA to log any direct data changes, used for maintenance of loan records by the Company.
Instances of accounting software maintained by a third party where we are unable to comment on the audit trail feature	The accounting software Finnone, used for maintenance of books of account of the Company is operated by a third party software service provider. In absence of the ‘Independent Service Auditors Assurance Report on the Description of Controls, their Design and Operating Effectiveness (‘Type 2 report issued in accordance with SAE 3402, Assurance Reports on Controls at a Service Organisation), we are unable to comment on whether audit trail feature of the said software was enabled at the database level and operated throughout the year for all relevant transactions recorded in the respective software.

 

For Walker Chandiok & Co LLP	For Kirtane & Pandit LLP
Chartered Accountants	Chartered Accountants
Firms Registration No.: 001076N/N500013	Firms Registration No.:105215W/W100057
Khushroo B. Panthaky	Sandeep D. Welling
Partner	Partner
Membership No.: 042423	Membership No.: 044576
UDIN: 24042423BKCMMQ1185	UDIN: 24044576BKAUBH2295
Place: Pune	Place: Pune
Date: April 29, 2024	Date: April 29, 2024

ANNEXURE A REFERRED TO IN PARAGRAPH 17 OF THE INDEPENDENT AUDITORS REPORT OF EVEN DATE TO THE MEMBERS OF POONAWALLA FINCORP LIMITED ON THE STANDALONE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2024

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, investment property and relevant details of right-of-use assets.

(B) The Company has maintained proper records showing full particulars of intangible assets.

(b) The property, plant and equipment, investment property and right-of-use assets have been physically verified by the management during the year and no material discrepancies were noticed on such verification. In our opinion, the frequency of physical verification programme adopted by the Company, is reasonable having regard to the size of the Company and the nature of its assets.

(c) The title deeds of all the immovable properties including investment properties held by the Company (other than properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee), disclosed in Note 11 to the standalone financial statements, are held in the name of the Company, except for the following properties:

Description of property	Gross carrying value (?)	Held in name of	Whether promoter, director or their relative or employee	Period held	Reason for not being held in name of company
Investment Property	0.09 crores	Gouri Shankar Rajgarhia and Om Prakash Rajgarhia	No	Since July 15, 2004	Disputed

(d) The Company has not revalued its property, plant and equipment including right-of-use assets or intangible assets during the year.

(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 20 to the standalone financial statements, the Company has been sanctioned a working capital limit in excess of 5 crores by banks based on the security of current assets during the year. The quarterly returns/statements, in respect of the working capital limits have been filed by the Company with such banks and financial institutions 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:

Particulars - Days Past Due	Aggregate amount outstanding for overdue loans as at March 31, 2024 (^ In crores)	No. of Cases
SMA 0 (upto 30 days)	73.88	1,44,344
SMA 1 (31-60 days)	86.12	84,913
SMA 2 (61- 90 days)	59.56	54,047
More than 90 days	123.65	48,765

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 123.65 crores as at March 31, 2024 in respect of 48,765 number of loans. 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 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 investments made and loans granted as applicable. Further, the Company has not entered into any transaction covered under section 185 and section 186 of the Act in respect of guarantees and security.

(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 a 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 specified maintenance of cost records under sub-section (1) of section 148 of the Act only in respect of specified products of the Company. For such products, we have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under the aforesaid section, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) (a) In our opinion, and according to the information and explanations given to us, undisputed statutory

dues including goods and services tax, provident fund, employees state insurance, income-tax, sales- tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues, as applicable, have generally been regularly deposited with the appropriate authorities by the Company, though there have been slight delays in a few cases. Further, undisputed provident fund which were outstanding at the year-end for a period of more than six months from the date they became payable are as follows:

Name of the statute	Nature of dues	Amount (in Crore)	Period to which the amount relates	Due Date	Date of Payment	Remarks, if any
Employees Provident Fund Act	Provident Fund	0.01	April 2022 to November 2022	15th of next month respectively	Unpaid

(b) According to the information and explanations given to us, 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 (^ in crores)	Amount paid under Protest (^ in crores)	Period to which the amount relates	Forum where dispute is pending	Remarks, if any
Income Tax Act, 1961	Income tax	0.01	0.01	2009-10	Commissioner of Income Tax (Appeals)
	Income tax	0.02	0.00	2012-13	Commissioner of Income Tax (Appeals)
	Income tax	0.99	0.99	2014-15 to 2016-17	Commissioner of Income Tax (Appeals)
	Income tax	0.21	0.21	2017-18	Commissioner of Income Tax (Appeals)
	Income tax	0.16	0.16	2018-19	Commissioner of Income Tax (Appeals)
	Income tax	0.89	0.89	2019-20	Commissioner of Income Tax (Appeals)
	Income tax	0.11	0.11	2020-21	Commissioner of Income Tax (Appeals)
Finance Act, 1994	Service tax	10.22	4.04	2002-03 to 2006-07	High Court, Kolkata
	Service tax	1.85	Nil	2010-11 to 2013-14	High Court, Kolkata
Jharkhand Value Added Tax Act, 2005	VAT	0.11	0.04	2006-07 to 2009-10	Sales Tax Tribunal, Jharkhand, Ranchi
Madhya Pradesh Value Added Tax Act, 2002	VAT	1.34	Nil	2008-09 to 2009-10	Madhya Pradesh High Court, Jabalpur
Orissa Value Added Tax, 2004	VAT	0.69	0.11	2007-08 to September 30, 2012	Sales Tax Tribunal, Orissa
Haryana VAT Act	VAT	4.36	Nil	2013-14	Punjab and Haryana High Court
Delhi Value Added Tax Act, 2004	VAT	0.02	0.00	2014-15, 2016-17 and 2017-18	Assessing Officer, Department of Trade and Taxes, Delhi
West Bengal GST Act	GST	0.61	0.10	2017-18	High Court, Kolkata
West Bengal GST Act	GST	0.01	0.00	2017-18	CGST& CX Commissionerate, Kolkata
Telangana GST Act	GST	0.30	0.03	2018-19 and 2019-20	GST Commissionerate, Hyderabad

(viii) According to the information and explanations given to us, 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) 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, though idle funds which were not required for immediate utilisation have been invested in readily realisable liquid investments.

(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) 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 subsidiary or joint venture.

(f) 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 subsidiary or joint venture.

(x) (a) The Company has not raised any money by way of initial public offer or further public offer (including debt instruments), during the year. Accordingly, reporting under clause 3(x)(a) of the Order is not applicable to the Company.

(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, partially or optionally) convertible debentures during the year. Accordingly, reporting under clause 3(x)(b) of the Order is not applicable to the Company.

(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) In 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) According to the information and

explanations given to us, the Company has conducted Non-Banking Financial activities during the year under a valid Certif?cate of Registration (CoR) from the RBI as per the Reserve Bank of India Act, 1934.

(c) 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) 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) 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.

For Walker Chandiok & Co LLP	For Kirtane & Pandit LLP
Chartered Accountants	Chartered Accountants
Firms Registration No.: 001076N/N500013	Firms Registration No.:105215W/W100057
Khushroo B. Panthaky	Sandeep D. Welling
Partner	Partner
Membership No.: 042423	Membership No.: 044576
UDIN: 24042423BKCMMQ1185	UDIN: 24044576BKAUBH2295
Place: Pune	Place: Pune
Date: April 29, 2024	Date: April 29, 2024

ANNEXURE B TO THE INDEPENDENT AUDITORS REPORT OF EVEN DATE TO THE MEMBERS OF POONAWALLA FINCORP LIMITED ON THE STANDALONE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2024

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 financia! statements of Poonawalla Fincorp Limited (‘the Company) as at and for the year ended March 31, 2024, we have audited the internal financial controls with reference to 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 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 (‘the Guidance Note) 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 FINANCIAL STATEMENTS

3. Our responsibility is to express an opinion on the Companys internal financial controls with reference to 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 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 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 financial statements and their operating effectiveness. Our audit of internal financial controls with reference to 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 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 financial statements .

MEANING OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIAL STATEMENTS

6. A companys internal financial controls with reference to financial statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys 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 companys assets that could have a material effect on the financial statements.

INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIAL STATEMENTS

7 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

8. In our opinion, the Company has, in all material respects, adequate internal financial controls with reference to financial statements and such controls were operating effectively as at March 31, 2024, based on 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 issued by the ICAI.

For Walker Chandiok & Co LLP	For Kirtane & Pandit LLP
Chartered Accountants	Chartered Accountants
Firms Registration No.: 001076N/N500013	Firms Registration No.:105215W/W100057
Khushroo B. Panthaky	Sandeep D. Welling
Partner	Partner
Membership No.: 042423	Membership No.: 044576
UDIN: 24042423BKCMMQ1185	UDIN: 24044576BKAUBH2295
Place: Pune	Place: Pune
Date: April 29, 2024	Date: April 29, 2024