TO THE MEMBERS OF HOME FIRST FINANCE COMPANY INDIA LIMITED
Report on the Audit of the Financial Statements Opinion
We have audited the financial statements of Home First Finance Company India Limited (the "Company") which comprise the balance sheet as at 31 March 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, and notes to the financial statements, including material 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 ("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 31 March 2025, and its profit and other comprehensive income, 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 SAs 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 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 on the financial statements.
Key Audit Matter
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.
Impairment loss allowance on loans
Refer to the accounting policies in "Note 1.2(iii) to the financial statements: Impairment of financial assets", "Note 1.3 Financial instruments: Impairment of financial assets", Note 5 to the financial statements: Loans and Note 28 to the financial statements: Impairment on financial instruments.
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The Key Audit Matter
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How the matter was addressed in our audit
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Impairment loss allowance on loans of ' 820.98
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In view of the significance of the matter we applied the
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million as at 31 March 2025
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following audit procedures in this area, among others to
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Charge to the statement of profit and loss - ' 284.12
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obtain sufficient audit evidence:
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million for the year ended 31 March 2025
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Testing of design, implementation and operating effectiveness of controls:
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Recognition and measurement of impairment of loans involve significant judgements made by the Company.
Under Ind AS 109, Financial Instruments, impairment loss allowance is determined using expected credit loss ('ECL') estimation model. The estimation of ECL on financial instruments involves
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Performed end to end process walkthroughs to identify the key systems, applications and controls used in the ECL process. Tested the relevant manual, general IT and application controls over key systems used in the ECL computation process.
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significant judgement and estimates. The key areas where we identified greater levels of judgement and therefore increased levels of audit focus in the Company's estimation of ECL are:
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Key aspects of our controls testing involved the following:
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The Key Audit Matter
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How the matter was addressed in our audit
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a) Data inputs -
The application of ECL model requires several data inputs. This increases the risk of completeness and accuracy of the data used to create assumptions in the model.
b) Model estimations -
Inherently judgmental models are used to estimate ECL which involves determining Probabilities of Default ('PD') and Loss Given Default ('LGD'). The PD and the LGD are the key drivers of estimation complexity in ECL and as a result are considered the most significant judgmental aspect of the Company's modelling approach.
c) Economic scenarios -
Ind AS 109 requires the Company to measure ECL on an unbiased forward-looking basis reflecting a range of future economic conditions. Significant judgement is applied in determining the economic scenarios and the probability weights applied to them.
d) Post model adjustments and additional provisions -
Adjustments to the model-driven ECL results as additional provisions are recorded by the Company to address risks not captured by models for specific exposures.
The underlying forecasts and assumptions used in the estimates of impairment loss allowance are subject to uncertainties which are often outside the control of the Company Disclosures:
The disclosures regarding the Company's application of Ind AS 109 are important in explaining the key judgements and key inputs to the Ind AS 109 ECL results.
Given the size of loan portfolio relative to the balance sheet and the impact of impairment loss allowance on the financial statements, we have considered this as a key audit matter
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• Tested the design, implementation and operating effectiveness of the controls over the completeness and accuracy of the key data inputs and assumptions into the Ind AS 109 impairment models.
• Tested governance controls over evaluation, implementation and model monitoring in line with the guidelines issued by Reserve Bank of India ('RBI').
• Tested the design, implementation and operating effectiveness of the key controls over the application of the staging criteria.
• Testing of key controls over measurement of ECL and disclosures in the financial statements.
• Tested key controls relating to selection and consideration of key macro-economic variables and the controls over the application of probability weights.
• Tested key controls operating over the information used in the computation of ECL.
• Tested controls over authorisation and computation of post model adjustments and additional provisions.
Test of Details:
Key aspects of our testing included:
• Assessed the Company's rationale for determination of criteria for significant increase in credit risk.
• Tested samples over key data inputs and assumptions impacting ECL computation to assess the completeness, accuracy and relevance of data, economic forecasts, probability weights and model assumptions applied.
• Tested computation of model-driven ECL through reperformance on a sample basis
• Tested samples over data used for assessing the judgments made in respect of methodologies, segmentation, determination of exposure at default.
• Tested details of post model adjustments considering the size and complexity of additional provisions recorded by the Company.
• Assessed the adjustments made by the Company by challenging key assumptions, methodology and tracing sample of the data used back to source data.
• Assessed the factual accuracy of the financial statements disclosures made by the Company.
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The Key Audit Matter
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How the matter was addressed in our audit
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Involvement of specialists:
We involved financial risk modelling specialists for the following:
• Evaluating the Company's Ind AS 109 impairment methodologies and assumptions used.
• Evaluating the relevance of inputs used in the model for computation of ECL.
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Information Technology ('IT') systems and controls related to financial reporting
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The Key Audit Matter
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How the matter was addressed in our audit
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The Company's key financial accounting and reporting processes are highly dependent on information systems including automated controls in these systems. There exists a risk in the IT control environment which could result in the financial accounting and reporting records being misstated.
We have identified 'IT systems and controls' as a key audit matter considering the high level of automation and the complexity of the IT architecture. Further, it impacts overall financial reporting process and the regulatory expectation on automation.
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In view of the significance of the matter, we applied the following audit procedures in this area, among others to obtain sufficient audit evidence for scoped in applications by involving our IT specialist:
• Evaluated and tested the design, implementation and operating effectiveness of the IT application automated controls as relevant for our audit of the financial statements and financial reporting process of the Company.
• Evaluated and tested the design, implementation and operating effectiveness of key General IT Controls of the in-scope IT systems. This included controls on access management, change management and computer operations.
• Tested the design, implementation and operating effectiveness of key controls over user access management. This included access authentication through password configuration management, granting or modification of user access, creating new users, deactivating user access for exiting users, user access and privileged access examination basis their role and function.
• Tested the controls over changes to applications including access to configure changes, approvals required to deploy the changes, segregation of environment and segregation of duties in change management.
Based on procedures performed above, wherever required, we extended our audit procedures over other IT application automated controls, periodic reconciliations, manual approval processes, tests on identified key changes and additional substantive testing.
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Other Information
The Company's Management and Board of Directors are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and auditor's report thereon. The annual report 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 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 annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and take necessary actions, as applicable under the relevant laws and regulations.
Management's and Board of Directors' Responsibilities 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 state of affairs, profit/ loss and other comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) 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 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 is 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 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 the Management and Board of Directors.
• Conclude on the appropriateness of the Management and Board of Directors use of the going concern basis of accounting in preparation of financial statements 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.
• 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.
Other Matter
a. The financial statements of the Company for the year ended 31 March 2024 were audited by the predecessor auditor who had expressed an unmodified opinion on 8 May 2024.
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 A. 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 except for the matters stated in the paragraph 2B(f) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014.
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 Ind AS specified under Section 133 of the Act.
e. On the basis of the written representations received from the directors as on 1 April 2025 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2025 from being appointed as a director in
terms of Section 164(2) of the Act.
f. The observation relating to the maintenance of accounts and other matters connected therewith are as stated in the paragraph 2B(f) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014.
g. 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".
B. 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:
a. The Company does not have any pending litigations which would impact its financial position.
b. 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 46 (iii) to the financial statements.
c. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
d. (i) The management has represented that, to the
best of its knowledge and belief, as disclosed in the Note 55(a) to the financial statements, 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.
(ii) The management has represented that, to the best of its knowledge and belief, as disclosed in
the Note 55(b) to the financial statements, 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, 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 Parties ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(iii) Based on the audit procedures that have been considered reasonable and appropriate in the circumstances, 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), as provided under (i) and (ii) above, contain any material misstatement.
e. The final dividend paid by the Company during the year, in respect of the same declared for the previous year, is in accordance with Section 123 of the Act to the extent it applies to payment of dividend.
As stated in Note 20 (vii) to the financial statements, the Board of Directors of the Company has proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting. The dividend declared is in accordance with Section 123 of the Act to the extent it applies to declaration of dividend.
f. Based on our examination which included test checks, except for the instances mentioned below, the Company has used accounting softwares for maintaining its books of account which have a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all relevant transactions recorded in the respective softwares:
(i) The feature of recording audit trail (edit log) facility was not enabled at the database level for the accounting software used for maintaining general ledger to log any direct data changes.
(ii) In the absence of sufficient and appropriate
Place: Mumbai Date: 01 May 2025
reporting on compliance with the audit trail requirements in the independent auditor's report of a third party operated service organisation from 1 April 2024 to 31 October 2024 and in absence of an independent auditor's report from 1 November 2024 to 31 March 2025 in relation to controls on audit trail at the said service organization, for the accounting software used for maintaining the books of account relating to loan origination and loan management, we are unable to comment whether audit trail feature for the said accounting software was enabled and operated from 1 April 2024 to 31 March 2025 for all relevant transactions recorded in the software.
Further, for the periods where audit trail (edit log) facility was enabled and operated for the respective accounting softwares, we did not come across any instance of audit trail feature being tampered with.
Additionally, the audit trail in respect of the previous year has been preserved by the Company as per the statutory requirements for record retention except for the instances mentioned below:
(a) In case of accounting software used for maintaining general ledger, the audit trail is not preserved for the database level; and
(b) In case of accounting software used for maintaining the books of account relating to loan origination and loan management, we are unable to comment whether the audit trail has been preserved by the Company for the reasons explained in 2Bf(ii) above.
C. With respect to the matter to be included in the Auditor's 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 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. The Ministry of Corporate Affairs has not prescribed other details under Section 197(16) of the Act which are required to be commented upon by us.
For B S R & Co. LLP
Chartered Accountants Firm's Registration No. 101248W/W-100022
Ashwin Suvarna
Partner
Membership No. 109503 ICAI UDIN:25109503BMOQBE4292
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