TO THE MEMBERS OF PNB HOUSING FINANCE LIMITED Basis for Opinion
Report on the audit of Standalone Financial Statements
Opinion
We have audited the accompanying Standalone financial statements of PNB Housing Finance Limited ("the Company"), which comprise the Standalone Balance Sheet as at 31st March 2025, 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 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").
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 the Companies (Indian Accounting Standards) Rules, 2015, as amended ("Ind AS"), the relevant circulars, guidelines and directions issued by the Reserve Bank of India (RBI)
/ National Housing Bank (NHB) from time to time (RBI / NHB Guidelines) and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March 2025, its standalone profit (including other comprehensive income), changes in equity and its cash flows for the year ended on that date.
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 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 ('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 ICAI's 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 judgement, were of most significance in our audit of the Standalone financial statements for the financial year ended 31st March 2025. 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’ Key Audit Matter No.
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Auditor's Response
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1. Assessment of impairment loss allowance of expected Losses (ECL) on loans
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Audit Approach
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The Company has reported total gross loans of H75,886.93 crore and H1,119.36 crore of allowance for expected credit loss as on 31st March 2025 (Refer Note 6).
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Our Audit approach to assess the allowance for Expected credit loss on loan assets included a combination of Controls and Substantive procedures as below:
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The allowance for ECL on loan assets is a significant area of judgement and estimation in the Company's standalone financial statements.
The determination of ECL under Ind AS 109 - Financial Instruments - involves the application of complex models and key assumptions, and requires significant management judgement.
The Key aspects of ECL estimation include:
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Understanding and evaluating the internal control environment
» Testing key controls over the completeness and accuracy of data and assumptions used in the ECL model.
» Assessing controls over the staging of loans, including the identification of significant increase in credit risk and default events.
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» The application of the ECL model, which requires extensive and accurate data inputs
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» Evaluating controls around model validation, governance, and approval processes.
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» The use of judgemental models to estimate Probability of
Default (PD), Loss Given Default (LGD), and Exposure at Default (EAD). PD and LGD, being the primary drivers of ECL estimates, are considered to be the most complex and judgemental areas of the Company's modelling approach.
» The staging of loan assets based on qualitative and quantitative factors to assess significant increases in credit risk.
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In addition to the above, we have performed the following procedures:
» Obtaining an understanding of the methodology used by the Company for ECL computation and evaluating its compliance with the requirements of Ind AS 109.
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Sr.
No.
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Key Audit Matter
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Auditor's Response
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» The incorporation of forward-looking information,
including macroeconomic forecasts and scenario-based modelling, requires management to apply significant judgement in selecting scenarios and determining their probability weightings.
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Evaluation of the design and implementation of the model used by management for computing Expected Credit Loss (ECL) by assessing whether the programme logic aligns with the approved ECL methodology, including key assumptions.
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Given the high degree of estimation uncertainty, reliance on judgement, and the material impact of the ECL allowance on the standalone financial statements, this area has been identified as a key audit matter.
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Assessing the reasonableness of key assumptions such as Probability of Default (PD), Loss Given Default (LGD), and Exposure at Default (EAD).
Evaluating the appropriateness of the loan staging criteria and verifying staging for selected loan samples, including review of qualitative and quantitative triggers used by management.
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Reperformance of the model calculations on a test basis, for testing the key inputs, assumptions, and validating the mathematical accuracy of the ECL.
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Testing management controls over authorisation of management overlays, if any.
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Assessing the incorporation of forward-looking information, including the evaluation of macroeconomic variables, scenario selection and weighting, and the overall reasonableness of the impact on ECL.
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Our procedures also included evaluating the adequacy of related disclosures in the standalone financial statements in accordance with the requirements of Ind AS 107 and Ind AS 109.
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2.
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Information Technology (IT) systems and controls over financial reporting
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Audit Approach
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» The Company's financial reporting processes are highly
dependent on its Enterprise Resource Planning (ERP) system, which interfaces with other operational systems that process key transactions related to loans, deposits, and borrowings. A significant portion of the Company's financial accounting and reporting is automated and relies on the effective functioning of these IT systems and controls
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Our key audit procedures in this area included, but were not limited to, the following:
» Obtain an understanding of the Company's information processing environment, including the IT General Controls (ITGCs) and automated application controls related to systems, databases, and operating platforms relevant to financial reporting.
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» Given the complexity of the IT environment and the pervasive use of technology in processing and recording financial information, the integrity of financial data is highly reliant on the effectiveness of general IT controls (GITCs) and application-level controls.
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Obtained an understanding of significant changes made to key IT applications and systems during the audit period that could impact financial accounting and reporting processes.
Performed the following procedures:
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» If there are deficiencies in the IT control environment, there is a risk that errors or unauthorised changes could occur and not be detected, potentially leading to material misstatements in the standalone financial statements.
Accordingly, due to the critical role of IT systems in financial reporting and the associated risk of material misstatement arising from IT control failures, the assessment of the design and operating effectiveness of general IT controls and relevant application controls has been identified as a key audit matter.
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i. Tested IT General Controls related to User access management (including controls over privileged access, including provisioning, de-provisioning, and access review, change management processes for application and infrastructure changes, segregation of duties around programme development, back up management and disaster recovery and audit trail relating to key financial accounting and reporting processes.
ii. Evaluated the Company's periodic access rights reviews, including inspection of approvals for system access changes and role assignments.
iii. Tested key automated and business logic for key controls relevant to the audit; including testing of compensating controls or performed alternate procedures to assess whether there were any unaddressed IT risks that would materially impact control or completeness or accuracy of the Financial Statements.
iv. We have relied on IS and other technology audits conducted during the year.
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Information other than the Standalone financial statements and Auditors report thereon
The Company's Management and 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 auditor's report thereon. The other information 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 do 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 during the course of our audit, or otherwise appears to be materially misstated.
When we read the other information, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance as required under SA 720 'The Auditor's responsibilities Relating to Other Information'.
Responsibilities of Management and Those Charged with Governance for the Standalone financial statements
The Company's Management and the Board of Directors is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation and presentation of these Standalone financial statements that give a true and fair view of the financial position, financial performance, including other comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including Ind AS prescribed under Section 133 of the Act read with the Companies (Indian Accounting Standard) Rules 2015, and other accounting principles generally accepted in India and the applicable RBI/NHB guidelines.
This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making 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 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, Management and the 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 Board of Director's either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Management and the Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of 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 judgement and maintain professional scepticism 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 financial controls 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 based on our audit;
» Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management and Board of Directors;
» Conclude on the appropriateness of Management and Board of 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;
Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the Standalone financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the Standalone financial statements.
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 financial 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 Standalone financial statements of the financial year ended 31st March 2025 and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosures about the matters 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
The standalone financial statements include the figures for the previous year ended 31st March 2024, which were audited by predecessor auditors who expressed an unmodified opinion as relevant on those Standalone financial statements vide their report dated 29th April 2024.
Our opinion on the standalone financial statements is not modified in respect of this matter.
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 the “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, based on our
audit, we report to the extent applicable 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 accompanying 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 paragraph 2(h)(vi) below on reporting under rule 11(g) of the companies(Audit and Auditors) Rules 2014 (as amended) ("the Rules'').
(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 of Cash Flows dealt with by this Report are in agreement with the relevant books of account;
(d) In our opinion, the aforesaid Standalone financial statements comply with the Ind AS prescribed under Section 133 of the Act, read with the relevant rules issued thereunder;
(e) On the basis of the written representations received from the directors as on 31st March 2025 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2025 from being appointed as a director in terms of Section 164(2) of the Act;
(f) With respect to the adequacy of the internal financial controls with reference to the 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 the Standalone Financial statements;
(g) With respect to the other matters to be included in the Auditor's Report in accordance with the requirements of Section 197(16) of the Act,
as amended:
In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with
requisite approvals mandated by the provisions of Section 197 read with Schedule V of the Act; and
(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 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 31st March 2025, on its financial position in its Standalone financial statements - Refer Note 40 to the Standalone financial statements.
ii. The Company has recognised 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 15 to the Standalone financial statements;
iii. The Company was regular in depositing the amounts required to be transferred to the Investor Education and Protection Fund except for the instances as reported in the Note 44.4 to the Standalone financial statements;
iv. (a) The Management has represented
that, to the best of its knowledge and belief, as disclosed in Note 48 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, whether, 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
48 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, 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; and
(c) Based on such audit procedures
performed 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 (a) and (b) above, contain any material misstatement.
v. The Company has not paid any dividend during the year. Further, as stated in note 24.9 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. Such dividend proposed is in accordance with Section 123 of the Act, as applicable.
vi. Based on our examination, which included test checks, the Company has used various accounting software for maintaining books of account which has feature of recording audit trail (edit log) facility and has been operated throughout the year for all relevant transactions recorded in the respective software, except that:
(a) At database level audit trail was not enabled in three software for the entire year and was enabled for part of the year in three software.
(b) In one accounting software which is hosted on third party service provider location independent service auditor's report made available to us does not contain any reporting reference with
regards to audit trail feature at the database level to log any direct data changes. Hence, we are unable to comment whether database level audit trail was enabled or not in respect of such software.
Further, other than as mentioned above, during the course of our examination, we did not come across any instance of audit trail feature being tampered with.
(c) The Audit trail wherever available has been maintained by the Company as per the statutory
requirements for records retention as per Proviso to Rule 3 (1) of the Companies (Accounts Rules) 2014.
For M M Nissim & Co LLP For C N K & Associates LLP
Chartered Accountants Chartered Accountants
Firm Registration No. 107122W/W100672 Firm Registration No. 101961W/W-100036
Navin Kumar Jain Hiren Shah
Partner Partner
Membership No. 090847 Membership No. 100052
UDIN: 25090847BMIJGO7599 UDIN: 25100052BMHUNQ4523
Place: Gurugram Place: Gurugram
Date: 28th April 2025 Date: 28th April 2025
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