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Products & Services    >   Company Profile   >   Directors Report
Housing Development Finance Corporation Ltd
Industry : Finance - Housing
BSE Code:500010NSE Symbol:HDFCP/E :38.52
ISIN Demat:INE001A01036Div & Yield %:1.04EPS :44.68
Book Value:248.2323787Market Cap (Rs.Cr):274500.92Face Value :2

TO THE MEMBERS

Your directors are pleased to present the fortieth annual report of your Corporation with the audited accounts for the year ended March 31, 2017.

FINANCIAL RESULTS
For the year ended March 31, 2017 For the year ended March 31, 2016
(Rs. in crore) (Rs. in crore)
Profit before Tax 10,726.64 10,108.10
Tax Expense (net of Deferred Tax 2,852.44 2,636.04
Liability (DTL) on Special Reserve)
Profit after Tax but before DTL on Special Reserve 7,874.20 7,472.06
DTL on Special Reserve 431.56 378.96
Profit after Tax 7,442.64 7,093.10
Appropriations have been made as under:
Special Reserve No. II 1,247.00 1,095.00
General Reserve - 2,385.12
Statutory Reserve (under Section 29C of the National Housing Bank Act, 1987) 245.00 325.00
Shelter Assistance Reserve 185.00 150.00
Interim Dividend (Rs. 3 per equity share of Rs. 2 each) & Tax on Interim Dividend 476.18 484.43
Tax on Dividend credit taken net of dividend pertaining to previous year paid during the year (6.26) (8.50)
Proposed Dividend (previous year) - 2,211.78
Additional Tax on Proposed Dividend (previous year) - 450.27
Surplus in the Statement of Profit & Loss 5,295.72 -
7,442.64 7,093.10

Dividend

In March 2017, your directors declared an interim dividend of Rs. 3 per equity share of Rs. 2 each which was the same as in the previous financial year. The interim dividend was paid in March 2017.

Your directors recommend payment of final dividend for the financial year ended March 31, 2017 of Rs. 15 per equity share of Rs. 2 each compared to Rs. 14 per equity share for the previous year. The final dividend for the year amounts to Rs. 2,383.01 crore and the tax on final dividend is Rs. 485.12 crore.

The total dividend for the year is Rs. 18 per equity share as against Rs. 17 per equity share for the previous year.

The dividend pay-out ratio for the year ended March 31, 2017 is 44.9%.

The dividend declared/recommended is in accordance with the principles and criteria as set out in the Dividend Distribution Policy which has been approved by the Board of Directors. The policy is placed on the Corporation's website.

In terms of the revised Accounting Standards, AS-4 'Contingencies and Events Occurring after the Balance Sheet Date' as notified by the Ministry of Corporate Affairs through amendments to the Companies (Accounting Standards) Rules, 2016, the Corporation has not appropriated the proposed final dividend (including tax) from the statement of profit and loss for the year ended March 31, 2017.

Increase in Authorised Share Capital

Pursuant to the receipt of approval of the members through a postal ballot in March 2017, the authorised share capital of the Corporation was increased from Rs. 340 crore comprising 170 crore equity shares of face value of Rs. 2 each to Rs. 350 crore, comprising 175 crore equity shares of face value of Rs. 2 each.

Management Discussion and Analysis Report, Report of the Directors on Corporate Governance and Business Responsibility Report

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) and directions issued by the National Housing Bank (NHB), the Management Discussion and Analysis Report and the Report of the Directors on Corporate Governance form part of this report.

In accordance with the Listing Regulations, the Business Responsibility Report (BRR) has been placed on the Corporation's website. Members who wish to receive a physical copy of the BRR are requested to write to the Corporation. The policy on Business Responsibility is also placed on the Corporation's website.

Lending Operations

The Corporation is a housing finance company registered with the National Housing Bank and is engaged in financing the purchase and construction of residential houses, real estate and certain other purposes, in India. All other activities of the Corporation revolve around the main business.

The Assets Under Management (AUM) as at March 31, 2017 was Rs. 3,38,478 crore as compared to Rs. 2,91,531 crore in the previous year.

On an AUM basis, the growth in the individual loan book was 16% and the non-individual loan book was 17%. The growth in the total loan book on an AUM basis was 16%.

During the year, the Corporation's loan book increased from Rs. 2,59,224 crore to Rs. 2,96,472 crore in March 2017, representing a growth of 14%. In addition, loans securitised and/ or assigned by the Corporation and outstanding as at March 31, 2017 amounted to Rs. 42,006 crore.

Further details of lending operations are provided in the Management Discussion and Analysis Report.

Market Borrowings

The Corporation is in compliance with the provisions of the Housing Finance Companies Issuance of NonConvertible Debentures on private placement basis (NHB) Directions,

2014 and has been regular in making payments of principal and interest on the non-convertible debentures. Details of borrowings are provided in the Management Discussion and Analysis Report.

Deposits

Deposits outstanding as at March 31, 2017 amounted to Rs. 86,574 crore. There has been no default in repayment of deposits or payment of interest during the year. All the deposits accepted by the Corporation are in compliance with the requirements of Chapter V of the Companies Act, 2013.

As of March 31, 2017, public deposits amounting to Rs. 770 crore had not been claimed by 57,783 depositors. Since then, 9,034 depositors have claimed or renewed deposits of Rs. 167 crore. Depositors were intimated regarding the maturity of deposits with a request to either renew or claim their deposits. Where the deposit remains unclaimed, reminder letters are sent to depositors periodically and follow up action is initiated through the concerned agent or branch.

Deposits remaining unclaimed for a period of seven years from the date they became due for payment have to be transferred to the Investor Education and Protection Fund (IEPF) established by the central government. The concerned depositor can claim the deposit from the I EPF. During the year, an amount of Rs. 1.09 crore was transferred to the IEPF.

Capital Adequacy Ratio

The Corporation's capital adequacy ratio (CAR) stood at 14.5%, of which Tier I capital was 11.8% and Tier II capital was 2.7%. Deferred tax liability on Special Reserve and the investment in HDFC Bank has been considered as a deduction in the computation of Tier I capital. Further, the proposed final dividend and tax thereon for the year ended March 31, 2017 has been reckoned in determining the net owned funds in the computation of the capital adequacy ratio.

As per regulatory norms, the minimum requirement for the capital adequacy ratio and Tier I capital is 12% and 6% respectively.

Regulatory Guidelines

The Corporation has complied with the Housing Finance Companies (NHB) Directions, 2010 and other directions prescribed by NHB regarding deposit acceptance, accounting standards, prudential norms for asset classification, income recognition, provisioning, capital adequacy, credit rating, corporate governance, concentration of investments and capital market exposure norms.

Corporate Social Responsibility (CSR)

The Corporation contributed directly and through H T Parekh Foundation to identified social sectors in urban and rural areas in sectors such as education, water & sanitation, skilling & livelihoods, healthcare, community development, differently abled persons, child welfare and environmental sustainability.

Further details on the prescribed CSR spend under Section 135 of the Companies Act, 2013 and the amount committed and disbursed during the year under review are provided in the Annual Report on CSR activities annexed to this report.

Subsidiary Companies

In accordance with the provisions of Section 136 of the Companies Act, 2013, the annual report of the Corporation, the annual financial statements and the related documents of the Corporation's subsidiary companies are placed on the website of the Corporation, www. hdfc.com.

Shareholders may download the annual financial statements and detailed information on subsidiary companies from the Corporation's website or may write to the Corporation for the same. Further, the documents shall be available for inspection by the shareholders at the registered office of the Corporation.

During the year, HDFC ERGO General Insurance Company Limited (HDFC ERGO) acquired L&T General Insurance Company Limited (L&T General) whereby it became a 100% subsidiary of HDFC ERGO. L&T General has been renamed HDFC General Insurance Limited.

The Board of Directors of the Corporation at the meeting held on July 27, 2016, approved the scheme of amalgamation of five of its wholly- owned subsidiaries, Windermere Properties Private Limited, Haddock Properties Private Limited, Grandeur Properties Private Limited, Winchester Properties Private Limited and Pentagram Properties Private Limited with itself. The applications for the proposed merger have been filed with the National Company Law Tribunal, Mumbai bench and the order on the same is awaited.

The Corporation has not made any loans or advances in the nature of loans to any of its subsidiary or associate company or companies in which its directors are deemed to be interested, other than in the ordinary course of business.

The Corporation has obtained a certificate from its statutory auditors that it is in compliance with the provisions of Foreign Exchange Management Act, 1999 with respect to downstream investments made in/by its subsidiaries and in other companies during the year under review.

A review of the key subsidiary and associate companies of the Corporation form part of the Management Discussion and Analysis Report which forms part of this report.

Particulars of Employees

HDFC had 2,305 employees as of March 31, 2017. During the year, 7 employees employed throughout the year were in receipt of remuneration of Rs. 1.02 crore or more per annum and 1 employee employed for part of the year was in receipt of remuneration of Rs. 8.5 lac or more per month.

In accordance with the provisions of Rule 5.2 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and particulars of the top ten employees in terms of remuneration drawn and of the aforesaid employees are set out in the annex to the Directors' Report. In terms of the provisions of Section 136(1) of the Companies Act, 2013 read with the rule, the Directors' Report is being sent to all shareholders of the Corporation excluding the annex. Any shareholder interested in obtaining a copy of the annex may write to the Corporation.

Further disclosures on managerial remuneration are annexed to this report.

Prevention, Prohibition and Redressal of Sexual Harassment of Women at the Workplace

The Corporation has a policy on prevention, prohibition and redressal of sexual harassment at the workplace. Members of the Internal Complaints Committee constituted by the Corporation are responsible for reporting and conducting inquiries pertaining to such complaints. The Corporation on a regular basis continues to sensitise all employees on prevention of sexual harassment at the workplace through workshops, group meetings and awareness programmes. During the year, no complaints were received by the committee.

Particulars of Loans, Guarantees or Investments

Since the Corporation is a housing finance company, the disclosures regarding particulars of the loans given, guarantees given and security provided is exempt under the provisions of Section 186(11) of the Companies Act, 2013.

As regards investments made by the Corporation, the details of the same are provided under notes 13 and 17 in the financial statements of the Corporation for the year ended March 31, 2017.

Particulars of Contracts or Arrangements with Related Parties

The particulars of contracts or arrangements with related parties as prescribed in Form No. AOC-2 of the Companies (Accounts) Rules, 2014, is annexed to this report. Details of related party transactions are given in the notes to the financial statements.

The Related Party Transactions policy of the Corporation ensures proper approval and reporting of the concerned transactions between the Corporation and related parties. The policy on Related Party Transactions is placed on the Corporation's website.

Particulars Regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

The particulars regarding foreign exchange earnings and expenditure appear under notes 26.1 and 26.3 in the financial statements. Since HDFC does not own any manufacturing facility, the other particulars relating to conservation of energy and technology absorption as stipulated in the Companies (Accounts) Rules, 2014, are not applicable.

Employees Stock Option Scheme (ESOS)

Presently, stock options granted to the employees operate under the following schemes; ESOS-07, ESOS- 08, ESOS-11 and ESOS-14. There has been no material variation in the terms of the options granted under any of these schemes and all the schemes are in compliance with the SEBI (Share Based Employee Benefits) Regulations, 2014. The disclosures as required under the regulations have been placed on the website of the Corporation.

During the year, the members of the Corporation approved the issuance of 4,98,51,524 stock options representing 4,98,51,524 equity shares of Rs. 2 each under ESOS-17 through a postal ballot. However, during the year, no options were granted under ESOS-17.

Unclaimed Dividend and Unclaimed Shares

As at March 31, 2017, dividend amounting to Rs. 24.74 crore had not been claimed by shareholders of the Corporation. The Corporation takes various initiatives to reduce the quantum of unclaimed dividend and has been periodically intimating the concerned shareholders, requesting them to encash their dividend before it becomes due for transfer to the Investor Education and Protection Fund (IEPF).

Unclaimed dividend amounting to Rs. 1.07 crore for FY 2008-09 was transferred to the IEPF on September 22, 2016. In terms of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 as amended, the Corporation will be transferring the corresponding shares to IEPF, where the dividends for the last seven consecutive years have not been claimed by the concerned shareholders.

Further, the unclaimed dividend in respect of FY 2009-10 must be claimed by shareholders on or before August 20, 2017, failing which the Corporation will be transferring the unclaimed dividend and the corresponding shares to the IEPF within a period of 30 days from the said date. The concerned shareholders, however, may claim the dividend and shares from IEPF, the procedure for which is detailed in the Shareholders' Information section.

Directors

In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Corporation, Ms. Renu Sud Karnad and Mr. V. Srinivasa Rangan are liable to retire by rotation at the ensuing Annual General Meeting (AGM). They are eligible for re-appointment.

The necessary resolutions for the re-appointment of Ms. Renu Sud Karnad and Mr. V. Srinivasa Rangan and their detailed profiles have been included in the notice convening the ensuing AGM.

All the directors of the Corporation have confirmed that they satisfy the fit and proper criteria as prescribed under the applicable regulations and that they are not disqualified from being appointed as directors in terms of Section 164(2) of the Companies Act, 2013.

Dr. S. A. Dave is the Corporation's nominee director on the board of HDFC Life. This is in accordance with the Listing Regulations which requires the Corporation to nominate at least one of its independent directors on the board of HDFC Life, which is a material unlisted Indian subsidiary company of the Corporation.

The details on the number of board/ committee meetings held are provided in the Report of the Directors on Corporate Governance, which forms part of this report.

Auditors

Messrs Deloitte Haskins & Sells LLP, Chartered Accountants, (firm registration number 117366W/ W-100018 with the Institute of Chartered Accountants of India) have been the statutory auditors of the Corporation and will complete their term at the conclusion of the ensuing Annual General Meeting. Due to the mandatory rotation of statutory auditors in accordance with the provisions of Section 139 of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014, Messrs Deloitte Haskins & Sells LLP are not eligible for re-appointment.

The board placed on record their appreciation for the professional services rendered by Messrs Deloitte Haskins & Sells LLP during their association with the Corporation as its auditors.

Pursuant to the recommendation of the Audit Committee of Directors, the board proposes to appoint Messrs B S R & Co. LLP, Chartered Accountants (firm registration number 101248W/W- 100022) as the statutory auditors of the Corporation for a term of 5 consecutive years and to hold office from the conclusion of the 40th AGM until the conclusion of the 45th AGM.

Messrs B S R & Co. LLP have consented to the appointment and have issued a certificate to the effect that the appointment, if made, shall be in accordance with the conditions as prescribed in Section 139 of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014. They have confirmed that they meet the criteria for independence, eligibility and qualification as prescribed in Section 141 of the Companies Act, 2013.

The appointment will be subject to ratification by the members of the Corporation at every AGM.

The Auditors' Report annexed to the financial statement for the year under review does not contain any qualifications.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Corporation has appointed Messrs Vinod Kothari & Company, practising company secretaries to undertake the secretarial audit of the Corporation. The Secretarial Audit Report is annexed to this report and does not contain any qualifications.

Significant and Material Orders Passed by Regulators

During the year, no significant or material orders were passed by any regulators against the Corporation other than that disclosed separately in the notes to the financial statements and in the Report of the Directors on Corporate Governance.

Directors' Responsibility Statement

In accordance with the provisions of Section 134(3)(c) of the Companies Act, 2013 and based on the information provided by the management, your directors state that:

a) In the preparation of annual accounts, the applicable accounting standards have been followed;

b) Accounting policies selected have been applied consistently. Reasonable and prudent judgements and estimates have been made so as to give a true and fair view of the state of affairs of the Corporation as at the end of March 31, 2017 and of the profit of the Corporation for the year ended on that date;

c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Corporation and for preventing and detecting frauds and other irregularities;

d) The annual accounts of the Corporation have been prepared on a going concern basis;

e) Internal financial controls have been laid down to be followed by the Corporation and such internal financial controls are adequate and operating effectively; and

f) Systems to ensure compliance with the provisions of all applicable laws are in place and were adequate and operating effectively.

Internal Financial Control

The Corporation has put in place adequate policies and procedures to ensure that the system of internal financial control is commensurate with the size and nature of the Corporation's business. These systems provide a reasonable assurance in respect of providing financial and operational information, complying with applicable statutes, safeguarding of assets of the Corporation, prevention and detection of frauds, accuracy and completeness of accounting records and ensuring compliance with corporate policies.

Extract of Annual Return - Form No. MGT-9

The details forming part of the extract of the Annual Return in Form No. MGT-9 is annexed to this report.

Material changes and commitment, if any, affecting the financial position of the Corporation from the financial year end till the date of this report

There are no material changes and commitments affecting the financial position of the Corporation which have occurred after March 31, 2017 till the date of this report.

Acknowledgements

It is with a great sense of pride that your directors present the 40th Annual Report of your Corporation. The Corporation is the pioneer of retail housing finance in India and has cumulatively financed over 5.8 million units. During all these years, the Corporation is grateful for the support and goodwill it received. The current thrust on affordable housing by the government bodes well to increase home ownership in India.

The directors place on record their gratitude for the support of various regulatory authorities including National Housing Bank, Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India, Ministry of Housing and Urban Poverty Alleviation, Ministry of Corporate Affairs, Registrar of Companies, Financial Intelligence Unit (India), Foreign Investment Promotion Board, the stock exchanges and the depositories.

The Corporation acknowledges the role of all its key stakeholders - shareholders, borrowers, channel partners, depositors, deposit agents and lenders for their continued support to the Corporation.

Your directors place on record their appreciation for the hard work and dedication of all the employees of the Corporation.

On behalf of the Board of Directors

MUMBAI DEEPAK S. PAREKH
May 4, 2017 Chairman

   

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