1. We have audited the accompanying Standalone Financial Statements of L&T Finance Limited (formerly known
as L&T Finance Holdings Limited) (the "Company"), which comprise the Standalone Balance Sheet as at
March 31, 2025, and the Standalone Statement of Profit and Loss (including Other Comprehensive Income),
and the Standalone Statement of Cash Flows and the Standalone Statement of Changes in Equity for the year
then ended, and notes to the Standalone Financial Statements, including a summary of material accounting
policies and other explanatory information (hereinafter referred to as "Standalone Financial Statements ").
2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid
financial statements give the information required by the Companies Act, 2013 (the "Act") in the manner
so required and give a true and fair view in conformity with the Indian Accounting Standards ("Ind AS")
prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015,
as amended, and other accounting principles generally accepted in India, of the state of affairs (financial
position) of the Company as at March 31, 2025, and its profit (financial performance including other
comprehensive income), and its cash flows and the changes in equity for the year ended on that date .
Basis for Opinion
3. 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 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
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
4. 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 year. 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.
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Key Audit Matter
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How the matter was addressed in our audit
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Allowance for Expected Credit Loss on Retail Loan Assets
[Refer to the Accounting Policies Note 1.7 Impairment, Note 1.9 Presentation of allowance for ECL in the
Balance Sheet, Note 06 & 47 to the Standalone Financial Statements]
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As at March 31, 2025, Retail loan assets aggregated
Rs. 91,642.36 crores (net of expected credit losses
of Rs. 3,536.75 crores), constituting 97.73% of
the Company's loan book. Significant judgement is
used in classifying these loan assets and applying
appropriate measurement principles. ECL on such
loans carried at amortised cost is a critical estimate
involving a greater level of management judgement.
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Our audit procedures were focused on assessing
the appropriateness of management's judgement
and estimates used in the impairment analysis that
included, but were not limited to, the following:
> Reviewed the Board Approved Policy and
procedures & associates design/controls and
expected credit loss memo concerning the
assessment of credit and other risks.
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Key Audit Matter
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How the matter was addressed in our audit
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As part of our risk assessment, we determined that
the ECL on such loan assets has a high degree of
estimation uncertainty, with a potential range of
reasonable outcomes for the standalone financial
statements. The significant assumptions that we
focused on in our audit included those with greater
levels of management judgement and for which
variations had the most significant impact on ECL.
The key areas where we identified greater levels of
management judgement and therefore increased
levels of audit focus in the Company's estimation
of ECLs are: Each borrower is classified into Stage
1, 2, 3 based on the objective criteria of Day Past
Due (DPD) status as of the reporting date and other
loss indicators, as applicable. Such classification
by borrower is done across all facilities provided
to the borrower, i.e. maximum of the DPDs from
among the different facilities ["Max DPD"] provided
to that borrower. Inherently, significant judgment
is involved in the use of models to estimate ECL
which includes determining Exposures at Default
("EAD"), Probabilities of Default ("PD") and Loss
Given Default ("LGD"). The PD and the LGD
are the key drivers of estimation complexity and
as a result are considered the most significant
judgments in the Company's modelling approach.
The modelling methodologies used to estimate
ECL are developed using historical experience. The
impact of the prevailing macroeconomic conditions
has also resulted in certain limitations in the
reliability of these methodologies to forecast the
extent and timing of future customer defaults or
potential credit risks and therefore in estimates of
ECL. In addition, modelling methodologies do not
necessarily incorporate all factors that are relevant
to estimating ECL, such as differentiating the impact
on industry sectors and economic conditions. These
limitations are attempted to be addressed with
management overlay, the measurement of which is
inherently judgmental and subject to a high level of
estimation uncertainty.
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> Obtained an understanding of the modelling
techniques adopted by the Company including
the key inputs and assumptions.
> Assessing the design, implementation and
operating effectiveness of key internal financial
controls including monitoring process of
overdue loans (including those which became
overdue after the reporting date), measurement
of provision, stage-wise classification of loans,
identification of NPA accounts, assessing the
reliability of management information.
> Evaluated the appropriateness of the Company's
determination of Significant Increase in
Credit Risk ("SICR") in accordance with the
applicable accounting standard and the basis for
classification of various exposures into various
stages.
> Testing key controls relating to selection and
implementation of material macro-economic
variables and the controls over the scenario
selection and application of probability weights
and computation of probability of default and
loss given default percentages.
> Reviewed the critical assumptions and input
data used in the estimation of expected credit
loss for specific key credit risk parameters, such
as the movement between stages, Exposure at
default (EAD), probability of default (PD) or loss
given default (LGD).
> Involved Information system resource to obtain
comfort over data integrity and process of
report generation through interface of various
information systems.
> Tested controls placed over key inputs, data and
assumptions impacting ECL calculations to assess
the completeness, accuracy and relevance of
data and reasonableness of economic forecasts,
weights, and model assumptions applied as
detailed below:
• Verified the completeness and accuracy of
the Exposure at Default ("EAD") and the
classification thereof into stages consistent
with the definitions applied in accordance with
the policy approved by the Board of Directors.
• Checked the appropriateness of information
used in the estimation of the Probability of
Default ("PD") and Loss given Default ("LGD")
for the different stages depending on the
nature of the portfolio reconciled the total
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Key Audit Matter
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How the matter was addressed in our audit
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retail considered for ECL assessment with the
books of accounts to ensure the completeness.
• Performed test of details over model
calculations testing through re-performance,
where possible.
• Tested appropriateness of staging of
borrowers based on DPD and other loss
indicators.
• Tested the factual accuracy of information
such as period of default and other related
information used in estimating the PD.
• Evaluated the reasonableness of applicable
assumptions included in LGD computation.
• Evaluated the methodology used to
determine macroeconomic overlays and
adjustments to the output of the ECL model.
> Assessed whether the disclosures on key
judgements, assumptions and quantitative data
with respect to impairment of loans (including
restructuring related disclosures) in the
Standalone Financial Statements are appropriate
and sufficient.
> Verified the manner of preparation of
information w.r.t. to provisions and disclosures
in the Standalone Financial Statements.
> Obtained written representations from
management and those charged with
governance on whether they believe significant
assumptions used in calculation of expected
credit losses are reasonable.
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Information Technology (“IT”) Systems and Controls
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The Company has a complex IT architecture to
support its day-to-day business operations. High
volume of transactions are processed and recorded
on single or multiple applications. The reliability and
security of IT systems plays a key role in the business
operations of the Company. Since large volume
of transactions are processed daily, IT controls are
required to ensure that applications process data
as expected and that changes are made in an
appropriate manner. Appropriate IT general controls
and application controls are required to ensure that
such IT 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 because
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Our Audit procedures included the following, but
not limited to:
Involved IT specialists as part of the audit for the
purpose of testing the IT general controls and
application controls (automated and semi automated
controls) to determine the accuracy of the information
produced by the Company's IT systems.
With respect to the "In-scope IT systems" identified
as relevant to the audit of the financial statements
and financial reporting process of the Company,
we have evaluated and tested relevant IT general
controls.
On such "In-scope IT systems" we have performed
the following procedures:
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Key Audit Matter
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How the matter was addressed in our audit
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of the high-level of automation, significant number
of systems being used by the management and the
complexity of the IT architecture and its impact on
the financial reporting system.
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Obtained an understanding of IT applications
landscape implemented by the Company, including
an understanding of the process, mapping of
applications and understanding financial risks posed
by people, process and technology.
Tested design and operating effectiveness of key
controls over user access management (including
user access provisioning, de-provisioning, user
access review, password configuration review and
privilege access), change management (including
compliance of change release in production
environment to the defined procedures), program
development (including review of data migration
activity), computer operations (including testing of
key controls pertaining to, backup, batch processing,
incident management and data centre security. Also
tested entity level controls pertaining to IT policy and
procedure and business continuity plan assessment.
Tested the design and operating effectiveness of
certain automated controls that were considered
as key internal controls over the financial reporting
system.
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Other information
5. The Company's Board of Directors is responsible for the other information. The other information comprises
the information included in the Company's annual report but does not include the Standalone Financial
Statements and our auditors' report thereon. The Other Information is expected to be made available to us
after the date of this auditor's report.
6. Our opinion on the Standalone Financial Statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
7. In connection with our audit of the 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. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact.
8. 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 appropriate action as applicable
under the relevant laws and regulations.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial
Statements
9. The accompanying Standalone Financial Statements have been approved by the Company's Board of Directors.
The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Act, with
respect to the preparation of these Standalone Financial Statements that give a true and fair view of the
financial position, financial performance including other comprehensive income, cash flows and changes in
equity of the Company in accordance with the accounting principles generally accepted in India, including
the 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 of the appropriate accounting
software for ensuring compliance with applicable laws and regulations including those related to retention
of audit logs; selection and application of appropriate accounting policies; making judgements 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 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.
10. In preparing the Standalone Financial Statements, the Board of Directors is responsible for assessing the
Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the
Company or to cease operations, or has no realistic alternative but to do so.
11. Those Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditors' Responsibilities for the Audit of the Standalone Financial Statements:
12. 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.
13. As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
(i) 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.
(ii) 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 system with
reference to Standalone Financial Statements in place and the operating effectiveness of such controls.
(iii) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
(iv) Conclude on the appropriateness of management's use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw attention in our auditor's report to the related
disclosures in the 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.
(v) 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.
14. We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
15. We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
16. From the matters communicated with those charged with governance, we determine those matters that were
of most significance in the audit of the Standalone Financial Statements of the current year and are therefore
the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
17. As required by the Companies (Auditor's Report) Order, 2020 ("the Order"), issued by the Central Government
of India in terms of sub section (11) of section 143 of the Act, we give in "Annexure A" a statement on the
matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
18. As required by Section 143(3) of the Act, we report that:
(i) 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.
(ii) 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.
(iii) The Standalone Balance Sheet, the Standalone Statement of Profit and Loss (including Other Comprehensive
Income), the Statement of Cash Flows and Statement of Changes in Equity dealt with by this Report are
in agreement with the books of account.
(iv) In our opinion, the aforesaid Standalone Financial Statements comply with the Ind AS specified under
Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended.
(v) On the basis of written representations received from the directors as on March 31,2025 taken on record
by the board of directors, none of the directors is disqualified as on March 31,2025 from being appointed
as a director in terms of Section 164(2) of the Act.
(vi) 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". Our report expresses an unmodified opinion on the adequacy and operating effectiveness
of the Company's internal financial controls with reference to Standalone Financial Statements.
(vii) 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.
19. 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, as amended, 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 as on March 31, 2025 on its financial
position in its Standalone Financial Statements - Refer Note 37 to the Standalone Financial Statements.
(ii) The Company did not have any long-term contracts including derivative contracts for which there were
any material foreseeable losses.
(iii) There has been no delay in transferring amounts, required to be transferred, to the Investor Education
and Protection Fund by the Company.
(iv) The management has represented, to the best of its knowledge and belief, that no funds have been
advanced or loaned or invested (either from borrowed funds or securities premium or any other sources
or kind of funds) by the Company to or in any persons or entities, including foreign entities ('the
intermediaries'), with the understanding, whether recorded in writing or otherwise, that the intermediary
shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner
whatsoever by or on behalf of the Company ('the Ultimate Beneficiaries') or provide any guarantee,
security or the like on behalf the Ultimate Beneficiaries.
(v) The management has represented, to the best of its knowledge and belief, that no funds have been
received by the Company from any persons or entities, including foreign entities ('the Funding Parties'),
with the understanding, whether recorded in writing or otherwise, that the Company shall, whether
directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or
on behalf of the Funding Party ('Ultimate Beneficiaries') or provide any guarantee, security or the like on
behalf of the Ultimate Beneficiaries.
(vi) Based on such audit procedures performed as considered reasonable and appropriate in the circumstances,
nothing has come to our attention that causes us to believe that the representations under para 19(iv) and
19(v) contain any material misstatement.
(vii) In our opinion and according to the information and explanations given to us, the final dividend proposed
in the previous year, declared and paid by the Company during the year is in accordance with section 123
of the Act, as applicable.
As stated in Note 19 to the Standalone 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 amount of dividend proposed is in accordance with Section 123 of the Act,
as applicable.
(viii) Based on our examination, which included test checks, the Company has used accounting softwares for
maintaining its books of account, which has a feature of recording audit trail (edit log) facility and that
has operated throughout the year for all relevant transactions recorded in these software.
However, audit trail (edit logs) for direct changes made at the database level, if any, were not enabled. The
Company has informed us that an alternate tool is being used to monitor such database-level changes,
however the log of same is not preserved in accordance with statutory requirements for record retention.
Further, during the course of our audit we did not come across any instance of audit trail feature being
tampered with, where such functionality was enabled and logs were maintained. Additionally, except for
the database-level changes as mentioned above, the audit trail has been preserved by the Company as
per the statutory requirements for record retention.
For Brahmayya & Co., For T R Chadha & Co LLP
Chartered Accountants Chartered Accountants
ICAI Firm Registration No. 000515S ICAI Firm Registration No. 006711N/N500028
P.S. Kumar Vikas Kumar
Partner Partner
Membership No. 015590 Membership No. 075363
UDIN: 25015590BMMJNQ1870 UDIN: 25075363BMOIUQ6022
Place: Mumbai Place: Mumbai
Date: April 25, 2025 Date: April 25, 2025
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