We have audited the accompanying Financial Statements of
Aavas Financiers Limited (“the Company”), which comprise
the Balance Sheet as at March 31, 2026, and the Statement
of Profit and Loss including Other Comprehensive Income,
Statement of Changes in Equity and Statement of Cash Flow
for the year then ended, and notes to the financial statements,
including material accounting policy information and other
explanatory information (hereinafter referred to as the “
financial statements”).
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
Companies (Indian Accounting Standards) Rules, 2015, as
amended (“Ind AS”), the relevant circulars, guidelines and
directions issued by the Reserve Bank of India (‘RBI’) from time
to time (‘RBI Guidelines’) and National Housing Bank (‘NHB’)
from time to time (‘NHB Guidelines’) and other accounting
principles generally accepted in India, of the state of affairs
of the Company as at March 31,2026, and its profit (including
other comprehensive income), changes in equity and its cash
flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the financial statements 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 Auditors’
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
obtained by us 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 for the year ended March 31, 2026 (current 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 matters to be communicated in our report.
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Key audit matters
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How our audit addressed the key audit matter
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Impairment of loans including Expected Credit Losses (ECL)
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At March 31,2026, the Company reported total gross loans of ' 18,50,233.84 lakhs (2025: ' 16,33,704.07 lakhs) and
' 12,964.37 lakhs of expected credit loss provisions (2025: ' 10,733.14 lakhs).
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Refer note 1 for material accounting policies and notes 5 and
28 for financial disclosures in the accompanying financial
statements.
Ind AS 109 - Financial Instruments (‘Ind AS 109’), requires
the Company to provide for impairment of its financial assets
using the expected credit loss (‘ECL’) approach involving an
estimation of probability of loss on such financial assets,
considering reasonable and supportable information about
past events, current conditions and forecasts of future
economic conditions which could impact the credit quality
of the Company’s loan assets. Expected credit loss cannot be
measured precisely but can only be estimated through use of
statistics.
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Our audit focused on assessing the appropriateness of
management’s judgment and estimates used in the expected
credit losses through the following procedures, but were not
limited to the following procedures:
• Examined the Board Policy approving methodology
for computation of ECL that addresses policies and
procedures for assessing and measuring credit risk on the
lending exposures of the Company in accordance with the
requirements of Ind AS 109. Also, obtained the policy on
restructuring of loans approved by the Board of Directors
pursuant to the RBI circulars/ guidelines in earlier years and
ensured classification of such Loans is in compliant with the
requirements of the RBI circulars / guidelines;
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Key audit matters
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How our audit addressed the key audit matter
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The estimation of impairment loss allowance on loan assets
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Performed a walkthrough of the impairment loss allowance
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involves significant judgement and estimates and applying
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process, and assessed the design and tested operating
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appropriate measurement principles in case of loss events,
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effectiveness of the key controls over completeness and
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including additional considerations on account of Reserve
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accuracy of the key inputs (including loan book as at March
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Bank of India guidelines in relation to restructuring.
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31, 2026) and assumptions considered for calculation,
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The expected credit loss is calculated using the percentage
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recording and monitoring of the impairment loss recognized;
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of probability of default (PD), loss given default (LGD) and
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•
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Tested the completeness of loans and advances included in
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exposure at default (EAD) for each of the stages of loan portfolio.
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the Expected Credit Loss calculations as of March 31, 2026
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Additional management overlay is estimated considering non
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by reconciling it with the balance as per loan balance register.
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prediction and long-term future impact. The Expected Credit
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We tested the data used in the PD and LGD model for ECL
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Loss (“ECL”) is measured at 12-month ECL for Stage 1 loan
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calculation by reconciling it to the source system. We tested
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assets and at lifetime ECL for Stage 2 and Stage 3 loan assets.
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assets in stage 1,2 and 3 on a sample basis to verify that they
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Significant management judgment and assumptions involved
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were allocated to the appropriate stage and is in compliance
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in measuring ECL is required with respect to:
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with the requirements of Ind AS 109;
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• Segmentation of loan book in buckets
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•
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Obtained an understanding of the modelling techniques
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• Determining the criteria for a significant increase in credit risk
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adopted by the Company including the key inputs and
assumptions;
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• Factoring in future economic assumptions
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Tested the appropriateness of determining Exposure at
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• Techniques used to determine probability of default, loss
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Default (EAD), PD and LGD, on sample basis. For exposure
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given default and exposure at default
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determined to be individually impaired, we tested samples of
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These parameters are derived from the Company’s internally
developed statistical models with the help of management
experts and other historical data. Considering the significance
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loans and advances and examined management’s estimate
of future cash flows, assessed their reasonableness and
checked the resultant provision calculations;
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of the above matter to the financial statements and since the
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•
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Performed an overall assessment of the ECL provision
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matter required our significant attention to test the calculation
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levels at each stage, including Management’s assessment
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of expected credit losses, we have identified this as a key audit
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and provision on account of the Company’s portfolio, risk
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matter for current year audit.
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profile, credit risk management practices as well as the
macroeconomic environment;
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•
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Ensured compliance with Reserve Bank of India (Non¬
Banking Financial Companies - Income Recognition,
Asset Classification and Provisioning) Directions, 2025
dated November 28, 2025 as amended, issued by Reserve
Bank of India, in relation to identification, upgradation and
provisioning of nonperforming assets (NPAs); and
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•
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Assessed the appropriateness and adequacy of the related
presentation and disclosures in the accompanying financial
statements in accordance with the applicable accounting
standards and related RBI circulars / guidelines.
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Key audit matters
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How our audit addressed the key audit matter
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Information Technology (“IT”) Systems and Controls for the financial reporting process
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The Company is highly dependent on its Information
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Our key audit procedures with the involvement of our IT specialists
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Technology (“IT”) systems for carrying on its operations
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included, but were not limited to the following:
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which require large volume of transactions to be processed
in numerous locations on a daily basis. Amongst other things,
management also uses the information produced by the IT
systems for accounting and preparation and presentation of
the financial statements.
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• For testing the IT general controls, application controls and IT
dependent manual controls, we involved IT specialists as part
of the audit. The team also assisted in testing the accuracy of
the information produced by the Company IT systems.
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The Company’s 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,
computation of daily DPD, assignment of loans amongst
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• Obtained a comprehensive understanding of IT applications
landscape implemented at the Company. It was followed by
process understanding, mapping of applications to the same
and understanding financial risks posed by people-process
and technology.
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others. The controls implemented by the Company in its IT
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• Key IT audit procedures includes testing design and operating
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environment determine the integrity, accuracy, completeness
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effectiveness of key controls operating over user access
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and validity of data that is processed by the applications and
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management (which includes user access provisioning,
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is ultimately used for financial reporting.
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de-provisioning, access review, password configuration
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Our areas of audit focus included user access management,
changes to the IT environment and segregation of duties
Further, we focused on key automated controls relevant for
financial accounting and reporting systems.
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review, segregation of duties and privilege access), change
management (which include change release in production
environment are compliant to the defined procedures and
segregation of environment is ensured), program development
(which include review of data migration activity), computer
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We have identified ‘IT systems and controls’ as a key audit
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operations (which includes testing of key controls pertaining
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matter considering the high level of automation, significant
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to, backup, Batch processing (including interface testing),
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number of systems being used by Management and the
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incident management and data centre security), System
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complexity of the IT architecture and its impact on overall
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interface controls. This included testing that requests for
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financial reporting process and regulatory expectation on
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access to systems were appropriately logged, reviewed, and
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automation
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authorized.
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• In addition to the above, the design and operating effectiveness
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of certain automated controls, that were considered as
key internal system controls over financial reporting were
tested. Using various techniques such as inquiry, review
of documentation / record / reports, observation, and re¬
performance. We also tested few controls using negative
testing technique.
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• Tested compensating controls and performed alternate
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procedures, where necessary. In addition, understood where
relevant changes made to the IT landscape during the audit
period.
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Information Other than the Financial Statements
and Auditors’ Report Thereon
The Company’s 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 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 financial statements does not cover the
other information and we will 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 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.
When we read the Director’s Report, if we conclude that
there is a material misstatement therein, we are required to
communicate the matter to those charged with governance
under SA 720 ‘The Auditors’ responsibilities Relating to
Other Information’.
Responsibilities of Management and Board of
Directors for the Financial Statements
The Company’s Management and Board of Directors are
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 Accounting Standards specified
under section 133 of the Act, the RBI Guidelines and the NHB
Guidelines. 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 Management and
Board of Directors are 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.
The Board of Directors are also responsible for overseeing the
Company’s financial reporting process.
Auditors’ 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 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 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 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 and
Board of Directors.
• Conclude on the appropriateness of management and
Board of Director’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 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.
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 for the
year ended March 31,2026 (current year) 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.
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 sub-section (11) of section 143 of the
Act, we give in “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 of
the aforesaid financial statements.
(b) In our opinion, proper books of account as required by
law relating to preparation of the aforesaid financial
statements 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 Flow dealt with by this Report are in agreement
with the books of account maintained for the
purpose of preparation of the financial statements.
(d) In our opinion, the aforesaid financial statements
comply with the Indian Accounting Standards
specified under Section 133 of the Act.
(e) On the basis of the written representations received
from the directors as on March 31, 2026 taken
on record by the Board of Directors, none of the
directors are disqualified as on March 31,2026 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 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 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 36 and Note
37 (b) 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 as at March 31,2026;
iii. There were no amounts which were required
to be transferred to the Investor Education and
Protection Fund by the Company during the
year ended March 31,2026.
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 person(s) or entity(ies), including
foreign entities (“Intermediaries”), with
the understanding, whether recorded in
writing or otherwise, that the Intermediary
shall, 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. Refer Note 47.12(a) to the
financial statements.
b. The Management has represented, that,
to the best of its knowledge and belief, no
funds have been received by the Company
from any person(s) or entity(ies), including
foreign entities (Funding Parties), with
the understanding, whether recorded
in writing or otherwise, as on the date of
this audit report, that the Company shall,
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. Refer Note 47.12(b) to the
financial statements.
c. Based on the audit procedures performed
that have been considered reasonable
and appropriate in the circumstances,
and according to the information and
explanations provided to us by the
Management in this regard nothing has
come to our notice that has caused us
to believe that the representations under
sub-clause (i) and (ii) of Rule 11(e) contain
any material mis-statement.
v. The Company has not declared or paid any
dividend during the year ended March 31,2026.
vi. Based on our examination which included
test checks, the Company has used certain
accounting softwares for maintaining its books
of account which has a feature of recording
audit trail (edit log) facility and the same has
operated throughout the year for all relevant
transactions recorded in the softwares.
Further, during the course of our audit, we did
not come across any instance of audit trail
feature being tampered with. Additionally, the
audit trail of prior year(s) has been preserved by
the Company as per the statutory requirements
for record retention.
3. In our opinion, according to information, explanations
given to us, the remuneration paid or provided by the
Company to its directors is within the limits laid prescribed
under Section 197 read with Schedule V of the Act.
For M S K A & Associates LLP For Borkar & Muzumdar
(Formerly known as M S K A & Associates) Chartered Accountants
Chartered Accountants
ICAI Firm Registration Number: 105047W/W101187 ICAI Firm Registration Number: 101569W
Tushar Kurani Brijmohan Agarwal
Partner Partner
Membership Number: 118580 Membership Number: 033254
UDIN: 26118580ESIZIE2755 UDIN: 26033254EMAVVE2840
Mumbai Mumbai
May 05, 2026 May 05, 2026
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