Spandana Sphoorty Financial Limited
Report on the Audit of the Standalone Financial
Statements
Opinion
We have audited the standalone financial statements of Spandana Sphoorty Financial Limited (the “Company”) which comprise the standalone balance sheet as at 31 March 2026, and the standalone statement of profit and loss (including other comprehensive income), standalone statement of changes in equity and standalone statement of cash flows for the year then ended, and notes to the standalone 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 standalone 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 2026, and its loss 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 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 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 we have obtained is sufficient and appropriate to provide a basis for our opinion on the standalone financial statements.
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 of the current period. 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.
Impairment loss allowance on loans
Refer to the material accounting policies in “Note 3 (j) to the standalone financial statements”, “Note 7, 27 and Note 50 to the standalone financial statements: Impairment loss allowance on loans”
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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 loan portfolio constitutes a significant portion of its total assets. During the year ended 31 March 2026, the Company reported a substantial increase in credit losses, resulting in a net loss for the year.
The measurement of Expected Credit Losses (“ECL”) under Ind AS 109 involves significant management judgment,
Impairment loss allowance on loans of ' 132.01 crores as at 31 March 2026.
Allowance charged to statement of profit and loss: ' 620.06 crores for the year ended 31 March 2026 Under Ind AS 109, Financial Instruments, impairment loss allowance is determined using expected credit loss (“ECL”) model. Recognition and measurement of impairment loss allowance on loans involves significant judgement and estimates. The key areas where increased levels of audit focus in the Company's estimation of impairment loss allowance on loans are:
a) Data inputs - The application of ECL model requires several data inputs. This increases the risk of irrelevant data used to create assumptions in the model.
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In view of the significance of the matter, we applied the following key audit procedures in this area, among others to obtain sufficient audit evidence:
Testing of design and operating effectiveness of controls:
Performed end to end process walkthroughs to identify the key systems, applications and controls used in computation of impairment loss allowance on loans. Testing the relevant manual, general IT and application controls over key systems used in the impairment of loss allowance on loans.
Key aspects of our testing of the design, implementation and operating effectiveness involves the following:
a) Tested the key controls over the completeness and accuracy of the key inputs, data and assumptions into the Ind AS 109 impairment models.
b) Tested the key governance controls over evaluation, implementation and model monitoring.
c) Tested the key controls over the application of the staging criteria.
d) Tested the key controls relating to selection and implementation of key macro-economic variables and the controls over the scenario selection and application of probability weights.
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The key audit matter
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How the matter was addressed in our audit
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b) Model estimations - Inherently judgmental models are
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e) Tested the key controls operating over the information
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used to estimate impairment loss allowance on loans
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used in the computation of impairment loss allowance
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which involves determining Probabilities of Default (PD),
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on loans including system access, change management,
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Loss Given Default (LGD), and Exposures at Default
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program development and computer operations.
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(EAD). PD and LGD are the key drivers of estimation
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f) Tested management's controls over authorisation and
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complexity in ECL model and hence are considered the
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computation of post model adjustments and additional
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most significant judgmental aspect of the Company's
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provision and accelerated technical write off.
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modelling approach.
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g) Tested the Company's controls on compliance with Ind
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c) Economic scenario: Ind AS 109 requires the Company
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AS 109 disclosures related to impairment loss allowance
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to measure impairment loss allowance on loans in an
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on loans.
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unbiased forward-looking basis reflecting a range of
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Test of details:
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future economic scenarios. Significant judgement is applied in determining the economic scenarios used and
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Key aspects of our testing includes:
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the probability weights applied to them.
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a) Assessed the Company's rationale for determination of criteria for significant increase in credit risk.
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d) Post model adjustments / additional provision / technical
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write offs: Adjustments to the model-driven ECL results
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b) Tested sample over key inputs, data and assumptions
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as additional charge are recorded by the Company
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impacting ECL model to assess relevance of data,
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to address risks not captured by models for specific
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economic forecasts, weights, and model assumptions applied.
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exposures and accelerated technical write offs made
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on prudential basis. Significant judgement is involved in
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c) Tested computation of model driven impairment loss
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estimating additional charge.
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allowance on loans through re-performance on a sample basis.
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The underlying forecasts and assumptions used in the
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d) Assessed adequacy of disclosures included in the
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estimates of impairment loss allowance are subject to uncertainties which are often outside the control of the
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financial statements in respect of expected credit losses.
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Company.
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e) Assessed the Company's rationale for determination of criteria for accelerated technical write offs.
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Disclosure
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f) Tested details of post model adjustments/additional
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The disclosures regarding the Company's application of Ind
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provision as well as the accelerated technical write offs
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AS 109 are key to explaining the key estimates, judgements
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recorded.
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and inputs used in Impairment loss allowance on loans.
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Involvement of specialists
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Given the size of loan portfolio relative to the balance sheet
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and the impact of impairment loss allowance including write
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We involved financial risk modelling specialists for the following:
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off on the financial statements. we have considered this as a
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key audit matter.
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a) Evaluated the Company's Ind AS 109 impairment methodologies including PD, LGD and EAD methodologies and assumptions used in the ECL model .
b) Evaluated the relevance of inputs used in the model for computation of impairment loss allowance on loans.
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Information Technology systems and controls
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The key audit matter
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How the matter was addressed in our audit
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Information Technology (‘IT') systems and controls The Company's key financial reporting and loan accounting processes are highly dependent on on its IT system.
Given the volume of transactions and reliance on automated controls, deficiencies in IT general controls (“ITGCs”) could impact the integrity of financial reporting.
We have identified ‘IT systems and controls' as a key audit matter considering the high level of automation, use of system generated reports in management controls and the complexity of the IT architecture. Further, it impacts on the overall financial reporting process and regulatory expectation on automation.
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In view of the significance of the matter, we applied the following key audit procedures in this area, among others to obtain sufficient audit evidence for scoped in applications by involving our IT specialist:
a) Evaluated and tested the design, implementation and
operating effectiveness of IT applications controls relevant to the accuracy of system computations, and the consistency of data transmission relating to significant accounts.
b) Evaluated and tested the design, implementation and
operating effectiveness of key General IT Controls. This includes controls on Access management, Change management and Computer Operations.
c) Tested the design and operating effectiveness of key controls over user access management. This includes 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.
d) Tested the design, implementation and operating effectiveness of the IT automated controls which are relevant to the accuracy of system computations impacting balances in significant accounts.
e) 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.
f) Tested the controls over computer operations including controls over backup of data, controls on operating system and database viz. authorized access, password management and changes.
In addition to the procedures described above, we extended our audit procedures, where necessary, to include testing of periodic reconciliations, assessment of manual approval controls and performance of additional substantive testing.
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Deferred tax assets
Refer to the accounting policies in Note 3 (e) to the standalone financial statements: Income taxes and Note 11 to the standalone financial statements: Deferred tax assets (net)
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The key audit matter
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How the matter was addressed in our audit
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Deferred tax assets (net) of ' 640.63 crores as at 31 March 2026
Under Ind AS 12 - Income taxes, the Company is required to reassess recognition of the deferred tax assets at each reporting date. The Company has deferred tax assets in respect of unused tax loss for the current and previous year and other deductible temporary differences.
The recognition of deferred tax assets involves significant judgement, particularly in assessing the availability of future taxable profits against which such assets can be utilised, as required by Ind AS 12 - Income Taxes. This assessment is based on management's projections of future profitability, which are inherently uncertain and sensitive to assumptions relating to business performance, credit quality and operating conditions. Accordingly, this was considered a key audit matter.
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In view of the significance of the matter, we applied the following
key audit procedures in this area, among others to obtain
sufficient audit evidence:
a) Evaluated management's assessment of the recoverability of deferred tax assets, including the basis for concluding that sufficient future taxable profits will be available.
b) Obtained management's forecasts of future taxable profits and assessed the reasonableness of key assumptions, including expected improvements in collections, asset quality and business performance.
c) Compared prior period forecasts with actual performance to evaluate the reliability of management's forecasting process.
d) Verified profitability projections from the Board approved business plan and tested the assumptions used in underlying sensitivity analysis.
e) Assessed the availability and timing of reversal of taxable temporary differences and the period over which tax losses can be utilised under applicable tax laws.
f) Performed sensitivity analyses on key assumptions to evaluate the potential impact on the recoverability of deferred tax asset
g) Evaluated the adequacy of the Company's disclosures on deferred tax.
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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 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 and take necessary actions, as applicable under the relevant laws and regulations.
Management's and Board of Directors' Responsibilities 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 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 standalone financial statements 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 is 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:
• Identify 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 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 standalone 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 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 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 of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order, 2020 (“the Order”) issued by the Central Government of India in terms of Section 143(11) of the Act, we give in the “Annexure A” a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
2 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 standalone balance sheet, the standalone statement of profit and loss (including other comprehensive income), the standalone statement of changes in equity and the standalone statement of cash flows 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 1 April 2026 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2026 from being appointed as a director in terms of Section 164(2) of the Act.
f. The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the paragraph 2A(b) above on reporting under Section 143(3) (b) of the Act and 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 has disclosed the impact of pending litigations as at 31 March 2026 on its financial position in its standalone financial statements - Refer Note 35 to the standalone financial statements.
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 54(l) to the standalone financial statements.
c. There were no amounts which were 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 their knowledge and belief, as disclosed in the Note 45 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.
(ii) The management has represented that, to the best of their knowledge and belief, as disclosed in the Note 46 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, 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 performed, 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 Company has neither declared nor paid any dividend during the year.
f. Based on our examination which included test checks, the Company has used accounting softwares for maintaining its books of accounts, which have a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the respective softwares except that the feature of recording of audit trail (edit log) facility was not enabled at the database level for certain users.
The Company has used an accounting software relating to payroll, which is operated by a third-party software service provider, for maintaining its books of account. Based on the independent auditor's report in relation to controls at a service organisation, the audit trail (edit log) facility on database was implemented from 3 April 2025 onwards. Also, in the absence of the independent auditor's report in relation to controls at a service organisation for the period from 1 January 2026 to 31 March 2026, we are unable to comment whether audit trail (edit log) facility of the said software was enabled and operated throughout the period for all relevant transactions recorded in the software.
Further, where audit trail (edit log) facility was enabled and operated throughout the year
for the respective accounting softwares, we did not come across any instance of the audit trail feature being tampered with.
Additionally, the audit trail (edit log) facility, wherever enabled has been preserved by the Company as per the statutory requirements for record retention.
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
Kapil Goenka
Partner
Place: Hyderabad Membership No.: 118189
Date: 05 May 2026 ICAI UDIN:26118189AWSZRG9042
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