We have audited the accompanying financial statements of UGRO Capital Limited (the 'Company'), which comprise the Balance
Sheet as at March 31,2025, the Statement of Profit and Loss, the Statement of Changes in Equity and the Statement of Cash Flows
for the year then ended, and notes to the financial statements, including a summary of material and other accounting policies and
other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give
the information required by the Companies Act, 2013 (the 'Act') in the manner so required and give a true and fair view in conformity
with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2025, and its profit,
changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specified under Section 143(10) of the Act. Our
responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements
section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered
Accountants of India (the ' 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 is sufficient and appropriate to provide a
basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements
of the current financial year. 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.
We have determined the matters described below to be the key audit matter to be communicated in our report.
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Key Audit Matter
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How the Key Audit Matter was addressed in our audit
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Impairment of loans including Expected Credit Loss (ECL)
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Total loans as at March 31, 2025 was Rs. 791,910.95 lakh (net of
ECL), (Refer Note 6 to the financial statements)
Impairment provision as at March 31, 2025: Rs. 10,794.49 lakh,
(Refer Note 6 to the financial statements)
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Our audit procedures were focussed on assessing the appropriateness of
management's judgement and estimates used in the impairment analysis
that included, but were not limited to, the following:
Process understanding and Test of Controls:
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Ind AS 109, Financial Instruments requires the Company to provide
for impairment of its financial assets using the ECL approach.
The Company has Board approved Policy on ECL to ensure
the compliance with Ind AS 109 requirements and the basis of all
assumptions for underlying inputs to ECL model.
ECL model involves an estimation of probability of loss on financial
assets over their life, considering reasonable and supportable
information about past events, current conditions, and forecasts of
future economic conditions which could impact the credit quality of
the loans and advances.
In the process, a significant degree of judgement has been applied
by the management of the Company including but not limited to the
following matters:
a) Grouping of loan portfolio under various categories on the basis of
homogeneity and thereby expected to demonstrate similar credit
characteristics;
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1. Read the Company's Board approved Policy on ECL and accounting
policies for estimation of ECL loss on financial assets (as explained
in Note 2B - (14)(c) to the financial statements) and evaluated the
appropriateness of the same with the principles of the Standard Ind AS
109 and Prudential Norms laid down by Reserve Bank of India (RBI).
2. Tested the design and effectiveness of internal controls over the
completeness and accuracy of the Exposure At Default (EAD) and the
classification thereof into stages consistent with the definitions applied
in accordance with the approved Policy, including the appropriateness
of the qualitative factors to be applied.
Test of details:
3. Performed, on test check basis, procedures for testing of ECL model
and computation of ECL amount including and not limited to the
following:
a. Evaluated underlying data related to estimates and judgements
used for developing ECL models.
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b) Estimation of losses in respect of groups of loans which had no/
minimal defaults in the past;
c) Staging of loans and estimation of behavioural life;
d) Models developed by the Company that derive key assumptions
used within the provision calculation such as Probability of Default
(PD) and Loss Given Default (LGD).
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b.
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Verified that PD is computed as per the internally developed
model, which is a dynamic evaluation based on repayment history,
corporate ratings, specific market estimates as applicable to the
respective portfolio segments from time to time. Loss Given Default
(LGD) is as per the Foundational-Internal Rating Based (F-IRB)
approach and an internal model which factors post default recovery
rates and collateral value in case of secured loans.
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Since, the impairment of loans including ECL requires a significant
level of estimation and given its significance to the overall audit, we
have ascertained impairment of loans including ECL as a key audit
matter.
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c.
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Verified whether appropriate staging of assets have been performed
basis their days past due. Ensured the assumptions used by the
Company for grouping and staging of loan portfolio into various
categories and default buckets for determining the PD and LGD
rates.
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d.
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Verified the impairment provision for Stage 3 exposures
considering the management's estimate of future cash flows for
those exposures and checked the resultant provision.
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e.
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Verified the adequacy of the adjustment including
management's assessment of additional provision on
stressed loan.
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f.
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Verified the ECL provision on restructured cases pursuant to the
RBI Circular, on a sample basis.
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g.
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Verified the computation of ECL by using PD and LGD and other qualitative
factors to ensure arithmetical accuracy.
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h.
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Verified the impairment provision under the Standard, Ind AS 109 and the
provisioning required under Income Recognition, Asset Classification and
Provisioning Norms (IRACP) (including standard asset provisioning) to
determine the need to create an Impairment Reserve.
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i.
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Reconciled the total financial assets considered for ECL
estimation with the books of account to ensure the completeness.
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j.
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Assessed the adequacy and appropriateness of the presentation
and disclosures in compliance with the applicable Standard.
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Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the other information. The other information comprises the information included
in the Board's Report including Annexures to Board's Report, Management Discussion and Analysis, Business Responsibility and
Sustainability Report, Corporate Governance Report and Shareholder's Information, but does not include the financial statements
and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained during the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation
of these financial statements that give a true and fair view of the financial position, financial performance, changes in equity and
cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting
Standards specified under Section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in
accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and
other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable
and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively
for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial
statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors is responsible for assessing the Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the
audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances. Under Section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company
has adequate internal financial controls system in place and the operating effectiveness of such controls;
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management;
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However,
future events or conditions may cause the Company to cease to continue as a going concern; and
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in
the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our
auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order, 2020 (the 'Order'), issued by the Central Government of India in terms
of Section 143(11) of the Act, we give in the Annexure ‘A' a Statement on the matters specified in paragraphs 3 and 4 of the
Order, to the extent applicable.
2. As required by Section 143(3) of the Act, we report that:
(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were
necessary for the purposes of our audit;
(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our
examination of those books;
(c) The Balance Sheet, the Statement of Profit and Loss, the Statement of Changes in Equity and the Statement of Cash Flows
dealt with by this Report are in agreement with the books of account;
(d) In our opinion, the aforesaid financial statements comply with the Indian Accounting Standards specified under Section 133
of the Act read with the relevant rules thereunder;
(e) On the basis of the written representations received from the directors as on March 31,2025 taken on record by the Board
of Directors, none of the directors is disqualified as on March 31, 2025 from being appointed as a director in terms of
Section 164(2) of the Act;
(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating
effectiveness of such controls, refer to our separate Report in Annexure ‘B';
(g) With respect to the other matters to be included in the Auditor's Report in accordance with the Section 197(16) of the Act,
in our opinion and according to the information and explanations given to us, the remuneration paid by the Company to its
directors during the current year is in accordance with the provisions of Section 197 of the Act. The remuneration paid to
any director is not in excess of the limit laid down under Section 197 of the Act. Further, the Ministry of Corporate Affairs has
not prescribed other details under aforesaid section which are required to be commented upon by us; and
(h) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit
and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
(i) The Company has no pending litigations on its financial position in its financial statements - (Refer Note 41 to the
financial statements);
(ii) The Company has made provision, as required under the applicable law or accounting standards, for material
foreseeable losses, if any, on long-term contracts including derivative contracts - (Refer Note 59(g)(1) to the financial
statements);
(iii) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the
Company;
(iv) (a) The management of the Company has represented that, to the best of its knowledge and belief, other than as
disclosed in the notes to the financial statements, during the year, no funds have been advanced or loaned or
invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company
to or in any other person or entity, 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 of the Ultimate Beneficiaries;
(b) The management of the Company has represented, that, to the best of its knowledge and belief, other than as
disclosed in the notes to the financial statements, during the year, no funds have been received by the Company
from any person or entity, 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 (the 'Ultimate
Beneficiaries') or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
(c) Based on such audit procedures, we have considered reasonable and appropriate in the circumstances that
nothing has come to our notice that has caused us to believe that the representations under paragraph (a) and
(b) above, contain any material misstatement;
(v) The Company neither declared nor paid dividend during the year. Accordingly, the Company is not required to comply
with Section 123 of the Act; and
(vi) Based on our examination, which included test checks, the Company has used accounting software systems
for maintaining its books of account for the financial year ended March 31, 2025 which have the feature
of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant
transactions recorded in the software systems.
Further, during the course of our audit we did not come across any instance of the audit trail feature being
tampered with and the audit trail has been preserved by the Company as per the statutory requirements for
record retention.
For Sharp & Tannan Associates
Chartered Accountants
Firm's Registration No. 109983W
by the hand of
Tirtharaj Khot
Partner
Mumbai, April 26, 2025 Membership No. (F) 037457
UDIN: 25037457BMMBFP7817
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