1. We have audited the accompanying Financial Statements
of Sakthi Finance Limited ("the Company"), which comprise
the Balance Sheet as at March 31, 2025, and the Statement
of Profit and Loss (including Other Comprehensive
Income), Statement of Changes in Equity and Statement
of Cash Flows for the year then ended on that date and
notes to the Financial Statements, including a summary
of material accounting policies 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
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 prescribed under section 133
of the Act read with the Companies (Indian Accounting
Standards) Rules, 2015, as amended, ("Ind AS") and other
accounting principles generally accepted in India, of the
state of affairs of the Company as at March 31, 2025, its
profit including other comprehensive income, the changes
in equity and its cash ffows for the year ended on that
date.
Basis for Opinion
3. 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 (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 made 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
4. Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
Financial Statements of the current period. These matters
were addressed in the context of our audit of the Financial
Statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on
these matters. We have determined the matters described
below to be the key audit matters to be communicated in
our report.
Description of key Audit Matter
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Description of key Audit Matter
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Description of Auditors' Response
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4.1 Asset Classification
Accuracy in identification and categorization of Loan
receivables into performing and non-performing assets
and in ensuring appropriate asset classification, existence
of security, income recognition, provisioning/ write
off thereof and completeness of disclosure including
compliance with applicable guidelines/directions issued
by Reserve Bank of India (RBI) (hereinafter referred to as
RBI guidelines).
We observed that Asset classification and Provisioning
based on various factors including existence of security
in accordance with RBI guidelines has bearing on the
Financial Statements. Hence,we determine this to be a
Key audit matter.
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• We have assessed the systems and processes laid down
by the company to appropriately identify and classify
the Loan receivables including those in place to ensure
correct classification, income recognition and provisioning/
write-off as per applicable RBI guidelines.
• The audit approach includes testing the existence and
effectiveness of the control environment laid down by the
management in Asset classification and conducting detailed
substantive verification on selected samples of continuing
and new transactions in accordance with the principles laid
down in the Standards on Auditing and other guidance issued
by Institute of Chartered Accountants of India.
• Agreements entered by management with customers on
significant transactions including related to Loan receivables
have been examined to ensure compliance.
• We have also reviewed the reports obtained from Information
systems audit, Internal audit, Secretarial audit and Inspection
reports issued by RBI. The impact of all significant external
and internal events including those if any, subsequent to
Balance Sheet date have been taken into consideration for
the above purposes.
• Compliance with material disclosure requirements prescribed
by RBI guidelines and other statutory requirements have
been verified.
• Based on the test of controls and other substantive audit
procedures performed, the asset classification, provisioning,
and the related disclosure in the Financial Statements are
reasonable.
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Description of key Audit Matter
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description of auditors' Response
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4.2 information technology system
The dependence of Information technology (IT) system is
run throughout the operating cycle of the company. Hence
the reliability on Company's key financial accounting and
reporting processes are tied with the effectiveness and
efficiency of IT systems, IT controls over the voluminous
transactions, process around such information systems
and the usage of information from such systems.
We observed that any probability of deficiencies in control
over IT systems such as validation failures, incorrect input
data, improper segregation of duties, unauthorized access
to IT system, lack of monitoring may result in the financial
reporting being misstated. In view of the same, we have
considered this as Key Audit Matter.
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Our audit procedures focused on the following:
• Our audit procedures focused on the IT infrastructure and
applications relevant to the financial reporting:
• Evaluating the IT policy and procedures of the Company
in accordance with accepted standards, guidelines and
practices.
• Reviewing the organizational structure with job description,
managerial policy and deployment of IT resources with
respect to segregation of duties in IT environment to
ensure that unauthorized data entry cannot take place and
unauthorized programs are not allowed to run.
• The aspects covered in the IT systems General Control audit
were
(i) User Access Management
(ii) System maintenance control
• have been ensured by understanding the design and the
operating effectiveness of such controls in the system;
• Understanding updation that were made to the IT landscape
during the audit period and assessing the relevant
information for financial reporting.
• Application level embedded controls have been reviewed by
performing validation checks, test check on logical access
controls, a run through test to ensure non-manipulation of
transaction entered into the system and other compensatory
controls, wherever applicable.
• Based on our verification of checks and evaluation of controls
over information technology and based on the reports
obtained from information system audit, management's
assessment on impact of information technology over
financial reporting is considered to be reasonable.
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4.3 impairment Loss allowance
Management's judgements in the calculation of
impairment allowances have significant impact on the
Financial Statements. The estimates regarding impairment
allowances are complex and require a significant degree
of judgement, which increased with Expected Credit Loss
("ECL") model as required by Ind Accounting Standard 109
(Ind AS 109) relating to "Financial instruments."
Management is required to determine the expected credit
loss that may occur over either a 12-month period or the
remaining life of an asset, depending on the categorisation
of the individual asset.
The key areas of judgement include:
1. Categorisation of loans in Stage 1, 2 and 3 based on
identification of:
a. exposures with significant increase in credit risk
since their origination and
b. Individually credit impaired/default exposures.
2. Techniques used to determine Loss Given Default
('LGD') and Probability of Default ('PD') to calculate ECL
3. The impact of different forwardlooking information
including future macroeconomic conditions in the
determination of ECL.
Considering the interpretations and assumptions
made by Management in developing ECL models, the
accuracy of data ffows required for the estimating
impairment loss and on considering high degree of
Management's judgement involved such estimation,
it is considered as a key audit matter.
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• We obtained understanding of management's assessment
of impairment of loans including the impairment allowance
policy and ECL modelling methodology.
• We assessed the design and implementation, and tested
the operating effectiveness of controls over the modelling
process including governance over monitoring of the model
and approval of key assumptions.
• We also assessed the approach of the Company for
categorisation of the loans in various stages reflecting the
inherent risk in the respective loans.
• For a sample of financial assets, we tested the correctness of
stage-wise categorisation, reasonableness of PD, accuracy of
LGD and ECL computation.
• We also assessed the appropriateness of the impairment
methodology adopted by the management. This included
assessing the appropriateness of key judgements. We tested
the accuracy of key data inputs and calculations used in this
regard.
• Based on the above work performed, management's
assessment of impairment loss allowance and related
disclosure are considered to be reasonable.
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information Other than the Financial Statements and
Auditor's Report thereon
5. The Company's Board of Directors is responsible for
the preparation of the other information. The other
information comprises the Management Discussion
and Analysis, Board's Report including Annexures to
Board's Report, Corporate Governance and Shareholder's
Information, but does not include the Financial Statements
and our auditor's report thereon.
6. The other information is expected to be made available
to us after the date of this auditor's report. Our opinion
on the Financial Statements does not cover the other
information and we do not express any form of assurance
conclusion thereon.
7. In connection with our audit of the Financial Statements,
our responsibility is to read the other information
identified above when it becomes available and in
doing so, consider whether the other information is
materially inconsistent with the Financial Statements
or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. Based on the work
we have performed on other information, if we conclude
that there is a material misstatement, if any, of this other
information, we are required to report that fact. We have
nothing to report in this regard.
Other Matters
8. The Audited Financial Statement for the year ended
March 31,2024 have been audited by the predecessor
auditor vide their Auditor's report dated 25.05.2024.
who expressed an unmodified opinion on those financial
statements. Our opinion on the statement is not modified
in respect of this matter.
Responsibilities of Management and Those Charged with
Governance for the Financial Statements
9. 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 (including other comprehensive income),
changes in equity and cash fiows of the Company in
accordance with the accounting principles generally
accepted in India, including the Ind AS. 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.
10. 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.
11. 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
12. 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.
13. As part of an audit in accordance with SAs, we exercise
professional judgment and maintain professional
skepticism throughout the audit. We also:
a. 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.
b. Obtain an understanding of internal controls 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.
c. Evaluate the appropriateness of accounting policies
used and the reasonableness of accounting estimates
and related disclosures made by management.
d. 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.
e. 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.
14. 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.
15. 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.
16. 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
17. As required by the Companies (Auditor's Report) Order,
2020 ("the Order"), issued by the Central Government
of India in terms of sub-section (11) of section 143 of
the Companies Act, 2013, we give in the "Annexure A" a
statement on the matters specified in paragraphs 3 and 4
of the Order.
18. 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 (including Other Comprehensive Income), the
Statement of Changes in Equity and the Statement of
Cash Flows dealt with by this Report are in agreement
with the books of account.
d. In our opinion, the aforesaid Financial Statements
comply with the Indian Accounting Standards specified
under Section 133 of the Act, read with Companies
(Indian Accounting Standard) Rules, 2015 as amended.
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 matter to be included in the Auditors'
Report under 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 year is in accordance with the
provisions of Section 197 of the Act.
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 disclosed the impact of pending
litigations on its financial position in its Financial
Statements - Refer note no: 32 to the Financial
Statements.
ii) The Company did not have any long-term contracts
including derivative contracts for which there were
any material foreseeable losses;
iii) There has been no delay in transferring amounts
required to be transferred to the Investor Education
and Protection Fund by the Company except for
' 500 that has not been transferred to IEpF for
the reason described in Note 18 to the Financial
Statements.
iv) a) The management has represented that, to the
best of its knowledge and belief, 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 persons or entities, including
foreign entities ("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
("Ultimate Beneficiaries") or provide any
guarantee, security or the like on behalf of the
Ultimate Beneficiaries.
b) The management has represented, that, to the
best of its knowledge and belief, no funds
have been received by the Company from any
persons or entities, including foreign entities
("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 as considered
reasonable and appropriate in the circumstances,
nothing has come to our notice that has caused
us to believe that the representations under
subclause (i) and (ii) of Rule 11 (e), as provided
under (a) and (b) above, contain any material
mis-statement
v) The equity dividend declared and paid during the
year by the Company relating to financial year 2023¬
24 is in compliance with Section 123 of the Act.
The interim dividend declared and paid by the
company on Redeemable, Cumulative, Preference
Shares during the current year is in compliance with
Section 123 of the Act.
vi) Based on our examination which included test
checks, the company has used an accounting
software for maintaining its books of account
which has a feature of recording audit trail
(edit log) facility. The audit trail function has operated
throughout the year for all relevant transactions
since ivss
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 and the
audit trail has been preserved by the Company as
per the statutory requirements for record retention.
For P N RAGHAVENDRA RAO &CO.,
Chartered Accountants
Firm Registration Number: 003328S
P R Vittel
Partner
Coimbatore Membership Number: 018111
30th May 2025 UDIN: 25018111BMRJZV2916
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