We have audited the accompanying Standalone
Financial Statements of IndoStar Capital Finance
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 Flows for the year then ended,
and notes to the Standalone Financial Statements,
including material accounting policy information and
other explanatory information (hereinafter referred
to as the "Standalone Financial Statements”).
In our opinion and to the best of our information
and according to the explanations given to us, the
aforesaid Standalone Financial Statements give the
information required by the Companies Act, 2013
("the Act’) in the manner so required and give a
true and fair view in conformity with the Indian
Accounting Standards prescribed under section 133
of the Act read with Companies (Indian Accounting
Standards) Rules, 2015, as amended (the “Ind AS”),
the RBI Guidelines and other accounting principles
generally accepted in India, of the state of affairs
of the Company as at March 31, 2026, and 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 Standalone 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 'Auditor’s Responsibilities
for the Audit of the Standalone Financial Statements’
section of our report. We are independent of the
Company in accordance with the Code of Ethics
issued by the Institute of Chartered Accountants of
India (“ICAI”) together with the ethical requirements
that are relevant to our audit of the Standalone
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 Standalone Financial Statements
for the year ended March 31, 2026. These matters
were addressed in the context of our audit of the
Standalone 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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Sr.
No
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Key Audit Matters
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How the Key Audit Matters was addressed in our
audit
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1
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Impairment of loans including Expected Credit
Losses (“ECL”):
Total Loans as at March 31, 2026: ' 7,43,446.77
lakhs (net of ECL)
Impairment Provision as at March 31, 2026: '
41,563.38 lakhs
(Refer Note 5 of the Standalone Financial
Statements)
As per Ind AS 109 - Financial Instruments (“Ind
AS 109”) requires the Company to provide for
impairment of its financial assets using 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 financial
assets.
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Our audit procedures in respect of this area included,
but not limited to:
• Obtained and read Company’s Board approved
policies on ECL and evaluated the appropriateness
of the Company’s accounting policies for
impairment of financial instruments and assessed
compliance of the same with Indian Accounting
Standard 109 - Financial Instruments ('Ind AS 109’).
• Performed a walkthrough of the impairment loss
allowance process, and assessed the design and
tested operating effectiveness of the key controls
over completeness and accuracy of the key inputs
(including loan book as at March 31, 2026) and
assumptions considered for calculation, recording
and monitoring of the impairment loss recognized.
These controls, amongst others, included controls
over the staging of the loan portfolio along
with passing of journal entries and preparing
disclosures.
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Sr.
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Key Audit Matters
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How the Key Audit Matters was addressed in our
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No
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audit
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The estimation of impairment loss allowance
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•
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We, along with the assistance of the auditor’s expert,
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on loan assets involves significant judgement
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tested the modelling assumptions and inputs which
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and estimates, which are subject to uncertainty,
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are based on industry experience (new products)
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and involves applying appropriate measurement
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as collated by external credit bureau in line with
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principles in case of loss events.
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the Company’s ECL policy. While for remaining
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ECL is calculated using the percentage of
probability of default (“PD”), loss given default
(“LGD”) and exposure at default (“EAD”) for
each of the stages of loan portfolio. Significant
management judgment and assumptions
involved in measuring ECL is required with
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loan portfolio, since modelling assumptions and
parameters are based on historical data, assessed
whether historical experience was representative
of current circumstances and was relevant in view
of the recent impairment losses incurred within the
portfolios.
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respect to:
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•
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Verified the completeness of loans included in the
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• Segmentation of loan book in buckets based
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ECL calculations as of March 31, 2026.
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on common risk characteristics;
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•
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Selected samples and verified appropriateness of
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• Staging of loans and in particular determining
the criteria, which includes qualitative
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classification of loan assets in stage 1, 2 and 3 in
accordance with the policy approved by the Board
of Directors.
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factors for identifying a significant increase
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in credit risk (i.e. Stage 2) and credit-
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•
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Selected samples of exposure and verified the
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impaired (i.e. Stage 3);
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appropriateness of determining EAD, PD and
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• Factoring in future macro-economic and
industry specific estimates and forecasts;
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LGD. Further, also checked the appropriateness of
information used in the estimation of PD and LGD
for the different stages depending on the nature of
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• past experience and forecast data on
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the portfolio.
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customer behaviour on repayments and;
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•
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Evaluated the appropriateness of the Company’s
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• varied statistical modelling techniques
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determination of significant increase in credit risk
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to determine probability of default, loss
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in accordance with the applicable Ind AS and the
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given default and exposure at default basis,
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basis for classification of various exposures into
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the default history of loans, subsequent
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various stages. For a sample of exposures, also
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recoveries made and other relevant factors
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tested the appropriateness of the Company’s
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using probability weighted scenarios.
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categorization across various stages.
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The Expected Credit Loss ('ECL’) is measured
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•
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Obtained the management’s rational for writing
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at 12- month ECL for Stage 1 loan assets and at
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off the loans during the current year and tested
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lifetime ECL for Stage 2 and Stage 3 loan assets.
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for appropriate management approvals in line with
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The management has calculated the PD and LGD
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approved write off policy.
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as follows:
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•
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Assessed the appropriateness and adequacy of
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• For new products launched from time to
time and where the Company does not have
sufficient historical data to estimate PD, the
Company has engaged external leading
credit bureau and accordingly PD rates have
been considered based on industry data
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the related presentation and disclosures of Note
32 “Financial Instruments - Fair values and Risk
management” disclosed in the accompanying
Standalone Financial Statements in accordance
with the applicable accounting standards and
related Reserve Bank of India ('RBI’) circulars.
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sourced from the aforesaid credit bureau.
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• For the remaining portfolio, the Company
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continues to use their existing internally
developed modelling techniques using
historical observable data and inputs to
estimate PD and LGD.
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Refer note 2(f) of material accounting policies,
Note 26 for the details of provision and Note
32(e) for credit risk disclosures
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Sr.
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Key Audit Matters
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How the Key Audit Matters was addressed in our
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No
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audit
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Considering the significance of the above
matter to the Financial Statements and since the
matter required significant attention to test the
calculation of ECL, we identified this as a key
audit matter for current year audit.
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2
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Information Technology (“IT”) systems and
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Key IT audit procedures performed included the
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controls impacting financial controls
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following, but not limited to:
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The Company key financial accounting and
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• For testing the IT general controls, application
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reporting processes are highly dependent
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controls and IT dependent manual controls, we
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on information systems including automated
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involved IT specialists as part of the audit. The
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controls in systems, such that there exists a risk
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team also assisted in testing the accuracy of the
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that gaps in the IT control environment could
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information produced by the Company IT systems.
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result in the financial accounting and reporting
records being misstated.
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• Obtained a comprehensive understanding
of IT applications landscape implemented
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Amongst its multiple IT systems, we scoped
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at the Company. It was followed by process
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in systems that are key for overall financial
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understanding, mapping of applications to the
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reporting.
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same and understanding financial risks posed by
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Appropriate IT general controls and application
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people-process and technology.
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controls are required to ensure that such IT
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• Key IT audit procedures includes testing design
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systems are able to process the data, as required,
completely, accurately and consistently for
reliable financial reporting.
We have identified 'IT systems and controls’ as
a key audit matter considering the high level of
automation, significant number of systems being
used by Management and the complexity of the
IT architecture and its impact on overall financial
reporting process and regulatory expectation on
automation.
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and operating effectiveness of key controls
operating over user access management (which
includes user access provisioning, de-provisioning,
access review, password configuration 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,
computer operations (which includes testing
of key controls pertaining to backup, Batch
processing (including interface testing), incident
management and data centre security), System
interface controls. This included testing that
requests for access to systems were appropriately
logged, reviewed, and authorized.
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• In addition to the above, the design and operating
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effectiveness 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
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alternate 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 STANDALONE
FINANCIAL STATEMENTS AND AUDITOR’S REPORT
THEREON
The Company’s Board of Directors is responsible
for the other information. The other information
comprises the Annual Report but does not include the
Standalone Financial Statements and our 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 Standalone 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 Standalone
Financial Statements, our responsibility is to read the
other information identified above when it becomes
available and, in doing so, consider whether the
other information is materially inconsistent with the
Standalone Financial Statements or our knowledge
obtained in the audit, or otherwise appears to be
materially misstated.
When we read the Annual Report, if we conclude
that there is a material misstatement therein, we
are required to communicate the matter to those
charged with governance under SA 720 'The Auditor’s
responsibilities Relating to Other Information’.
RESPONSIBILITIES OF MANAGEMENT AND BOARD
OF DIRECTORS FOR THE STANDALONE 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 Standalone 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 and RBI 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 Standalone
Financial Statement that give a true and fair view and
are free from material misstatement, whether due to
fraud or error.
In preparing the Standalone 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.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF
THE STANDALONE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance
about whether the standalone 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 Standalone Financial Statements.
As part of an audit in accordance with SAs, we exercise
professional judgment and maintain professional
skepticism throughout the audit. We also:
• I dentify and assess the risks of material
misstatement of the Standalone 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
Standalone Financial Statements in place and
the operating effectiveness of such controls.
• Evaluate the appropriateness of material
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 auditor’s report to the related disclosures
in the Standalone 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 Standalone Financial Statements,
including the disclosures, and whether the
Standalone Financial Statements represent the
underlying transactions and events in a manner
that achieves fair presentation.
We communicate with those charged with governance
of the Company 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
Standalone Financial Statements for the year ended
March 31, 2026 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 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 Standalone Financial
Statements.
(b) In our opinion, proper books of account
as required by law have been kept by the
Company so far as it appears from our
examination of those books, except for the
matters stated in the paragraph 2(h)(vi)
below on reporting under Rule 11(g).
(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.
(d) In our opinion, the aforesaid Standalone
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 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) The reservation relating to the maintenance
of accounts and other matters connected
therewith are as stated in paragraph 2(b)
above on reporting under Section 143(3)(b)
and paragraph 2(h)(vi) below on reporting
under Rule 11(g).
(g) With respect to the adequacy of the
internal financial controls with reference
to Standalone Financial Statements of the
Company and the operating effectiveness of
such controls, refer to our separate Report
in "Annexure B”.
(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 Standalone Financial
Statements - Refer Note 35 to the
Standalone 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. The Company does not have
any material foreseeable losses on
derivative contracts - Refer Note 35 to
the Standalone Financial Statements.
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, as disclosed in Note
42.2 (i) to the Standalone 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.
b. The Management has represented,
that, to the best of its knowledge
and belief, as disclosed in Note
42.2 (i) to the Standalone 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,
as on the date of this audit report,
that the Company shall, directly or
indirectly, lend or invest in other
person(s) or entity(ies) 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.
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) as provided
under (a) and (b) above, contain
any material mis-statement.
v. The Company has neither declared nor
paid any dividend during the year.
vi. Based on our examination which
included test checks, the Company has
used certain accounting software(s)
for maintaining its books of account
(including two accounting software
managed and maintained by a third
party software service provider) which
has a feature of recording audit trail
(edit log) facility, except that audit trail
feature was enabled at the database
level during the year in respect of
certain accounting software(s) to log
any direct data changes as explained
in Note 42.2 (k) to the Standalone
Financial Statements.
Further, where enabled, the audit trail
feature has been operated for all relevant
transactions recorded in the accounting
software. Also, during the course of our
audit and considering SOC report, we
did not come across any instance of
audit trail feature being tampered with
in respect of such accounting software.
Additionally, the audit trail of prior year
has been preserved by the Company
as per the statutory requirements for
record retention to the extent it was
enabled and recorded in respective
years.
3. In our opinion, according to information, explanations given to us, the remuneration paid by the Company
to its directors is within the limits laid prescribed under Section 197 read with Schedule V of the Act and the
rules thereunder.
For M S K A & Associates LLP
(Formerly known as M S K A & Associates)
Chartered Accountants
ICAI Firm Registration Number: 105047W/ W101187
Tushar Kurani
Partner
Sorrento, Italy Membership Number: 118580
May 27, 2026 UDIN: 26118580JTOGPE3071
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