To the Members
Your Directors are pleased to present the 29th Annual Report of the business andoperations of the Company together with the audited accounts for the year ended March 312016.
|1. Financial Results || || |
|The financial performance for the FY 15-16 is summarised here below: || || |
| || ||(Rs. in Lakh) |
|Particulars ||Year ended March 31 2016 ||Year ended March 31 2015 |
|Profit before Tax & Provisions ||27326.61 ||15169.98 |
|Less: Provision for Standard Assets ||1400.00 ||1200.00 |
|Provision for Doubtful Debts (Written Back) ||540.53 ||224.77 |
|Prior Period adjustments ||0.00 ||0.00 |
|Profit before Tax ||25386.08 ||13745.21 |
|Tax expenses: || || |
|(a) Provision for Tax - Current Year ||8000.00 ||4323.00 |
|(b) Deferred Taxation ||1675.56 ||797.91 |
|Profit after Tax ||15710.51 ||8624.30 |
|Balance brought forward from previous year ||309.30 ||521.72 |
| ||16019.81 ||9146.02 |
|Appropriations: || || |
|Transfer to Special Reserve u/s.36(1)(viii) of the Income Tax ||5500.00 ||2850.00 |
|Act 1961 || || |
|Transfer to General Reserve ||4000.00 ||2000.00 |
|Additional Reserve (u/s.29C of the NHB Act) ||3200.00 ||1800.00 |
|Proposed Dividend ||2663.08 ||1864.16 |
|Tax on Distributed Profits ||542.15 ||322.56 |
|Balance carried forward to balance sheet ||114.58 ||309.30 |
| ||16019.81 ||9146.02 |
2. Shareholders Wealth
|Particulars ||Year ended March 31 2016 ||Year ended March 31 2015 |
|Earnings Per Share (EPS) (H) ||59.02 ||41.45 |
|Dividend Rate ||100% ||70% |
|Market Price of shares (H) ||1154.40 ||607.40 |
|Market Capitalisation (H in Crore) ||3070.70 ||1615.68 |
3. Business performance Highlights
The main challenge during the year under review was to increase the revenue with afocus to increase the bottom line. This challenge was particularly pronounced by theeconomic slowdown high interest rates slow realty sector growth and sluggish apartmentoff-take.
During the year your Company continued to focus on retail housing and non-housing loansegment which constituted 99% of its total sanctions. Housing and other loans sanctionedamounted to H4418 Crore (previous year H3670 Crore) a growth of 20% over the previousyear and significantly higher than the industry average. The cumulative loan sanctionssince inception of your Company stood at H20911 Crore at the end of the FY 15-16.
Your Company recorded a growth of 17% in disbursements of housing loans and other loansthat was higher than the industry average. The cumulative loan disbursements frominception to the end of the FY 15-16 was H18291 Crore.
c. Loans outstanding (Loan Book)
The loan(s) outstanding at the end of the financial year 2015-16 was H10643 Crore(previous year H8231 Crore) registering a growth of 29%.
Your Company continues to give more thrust to increasing the share of high-yieldingnon-housing loans in the loan-mix. During the year the share of non-housing loan hasincreased from 11.00% (H905.80 Crore) to 11.86% (H1261.81 Crore).
d. Non-performing Asset (NpA)
In a slowing housing loan market one of the biggest challenges lay in addressingaccretion of non-performing assets. Your directors are pleased to report that even as theyear under review was challenging for the countrys non-banking finance sector theGross NPA of your Company as on March 31 2016 was H19.76 Crore (previous year H14.35Crore) possibly the lowest in the industry. The net NPA as on the date continued to beNil with the NPA Provision Coverage Ratio at 100%. The gross NPA percentage as on March31 2016 stood at 0.19% compared to 0.17% as on March 31 2015.
During the year under review your Company could make a cash recovery of H3.32 Crore(previous year H1.37 Crore) in respect of accounts which were Non Performing Assetsas on March 31 2015. Recovery in written-off accounts during FY 15-16 was H0.74 Crore(previous year H0.73 Crore).
Your Directors are happy to inform that during the year under review your Companyrecorded a Profit Before Tax (PBT) and Provisions of H273.27 Crore (previous year H151.70Crore) and Profit After Tax (PAT) of H157.11 Crore (previous year H86.24 Crore)registering a Year-on-Year increase of 80% and 82% respectively. During the year underreview your Company has made provisions for standard assets amounting to H14.00 Crore(previous year H12 Crore) and H19.04 Crore (previous year H9.69 Crore) towards theDeferred Tax Liability (DTL) on Special Reserve. While the Year-on-Year (YoY) growth was80.13% under Profit before Tax and Provisions the same was 82.17% under PAT with DTLcomponent and 104.25% without considering the DTL component.
Your Company has been paying dividends continuously.
Your directors have considered in detail about the dividend with specific reference tothe funds and the Capital Adequacy Requirements (CAR) for the projected business plans fornext year creation of Deferred Tax Liability and expected future business growth of yourCompany.
Considering the views expressed by the Members of your Company at the previous AnnualGeneral Meetings appreciating the confidence reposed by the members in your Company theBoard of Directors of your Company are happy to recommend a dividend of H10 per equityshare (100%) for the financial year ended March 31 2016 for all the shareholders (againstH7 per equity share (70%) recommended during the previous year). The tax on dividendsu/s.115-O of the Income Tax Act 1961 at about 20.36% (previous year 17.30%) is beingpaid to the Government by your Company.
4. Expansion of Branch Network
During the FY 15-16 3 new branches were opened by your Company in different Statesacross the country taking the total number of branches to 110 (previous year 107branches). Further your Company introduced the concept of Satellite Officesby which many branches in metropolitan/tier-II cities can source business from additionallocations (within 30 km radius) apart from providing doorstep service toexisting/potential customers with lower operating costs considering the smaller unit size.
Your Company opened 20 new Satellite Offices across the country in FY 15-16 to take thetally of Satellite Offices from 10 to 30 as on March 31 2016. The total number ofbranches / satellite offices as on March 31 2016 stood at 140.
With this branch network your Company will enjoy a strong marketing and distributioncapabilities to scale its business and address the growing needs of a larger section ofcustomers.
The Registered Office and all the branches are provided with state-of-the art ambiancespacious premises and other facilities to enhance service quality and visibility in themarket.
For the year FY 16-17 your Company has envisaged opening branches/satellite offices in35 locations out of which 27 branches/satellite offices were opened on a single day viz.on April 21 2016 and another 3 branches in May 2016.
5. Technology Initiatives
All the branches of your Company and the Registered Office are linked through acore-banking platform (Integrated Business Suite) under the Application Service Provider(ASP) Model that enriched data management and strengthened service delivery. All the newbranches were opened on the Core Banking platform from day one. Your Company increased itsbandwidth to enhance operational speed across branches through the ASP vendor through anadditional connectivity provider (Tata and Reliance).
In order to improve operational efficiency your Company embarked on technologyinitiatives like the introduction of Online Application Module in the Companyswebsite to receive applications online mobile website customer portal in the website todraw account statements/certificates at customers end missed call facility toborrowers to inform them about outstanding balances in their loan accounts SMS alerts toremind borrowers of loan installments/new schemes. The Electronic Clearing System (ECS)facility for collection of installments covers almost 69.74% of the new accounts makingthe recovery process smooth and hassle-free.
Your Company has introduced online money transfer & E-info Book as amobile application to facilitate its borrowers to view their mini-statement ofaccount(s) product information branch location and last six entries in their accounts.
6. Customer-Friendly Initiatives
During the year your Company conducted studies for evaluating thesystems/procedures/processes/products of peer group players to examine the best practicesand implement/adopt those suitable to ensure simple and customer-friendly processes.Earnest efforts were made to reduce the turnaround time (TAT) in sanctioning anddisbursing loans at all levels.
Your Company continued to adopt transparent ethical equitable practices towards allcustomer segments. Your Companys website provided all the major information on theproducts and applicable charges. The Fair Practice Code (FPC) and Most Important Terms andConditions (MITC) reviewed at half-yearly intervals based on feedback fromcustomers/branches and as per NHB guidelines. Your Company received encouraging responseto its unique referral scheme wherein many existing customers benefited from the refundsof their processing fees upon referring new customers to the Company and on getting thesame disbursed.
As another customer-friendly initiative your Company has introduced on-line transferfacility to the borrower for making remittances to their respective loan accounts and anon-line customer feedback facility through which the customers can offer theirsuggestions complaints if any and feedback.
7. Financial Resources
a. Refinance from National Housing Bank (NHB)
During the year in all your Company has availed fresh refinance amounting to H630.64Crore (previous year H1345.90 Crore) under the NHB refinance scheme to housing financecompanies. The cumulative NHB borrowings as on March 31 2016 were H3535.05 Crore(previous year H3220.34 Crore) with the overall cost of borrowing (including the loansunder Rural Housing and Urban Housing Schemes) of 8.74% p.a. as on March 31 2016.
Borrowings from Banks
Your Company progressively reduced its dependence on bank borrowings (31% to 27% oftotal borrowings on YOY basis). During the year borrowings were diversified through acombination of short-term and long-term loans considering the asset liability managementposition to derive the maximum benefit of competitive interest rates. The lenders includedHUDCO State Bank of India Bank of Baroda HDFC Bank Oriental Bank of Commerce andFederal Bank apart from Canara Bank the principal bankers to the Company. The aggregatebank borrowings (term loans plus overdraft) at the end of the financial year stood atH2531.65 Crore (previous year H2307.12 Crore); The overall borrowings are always withinregulatory ceiling (16 times of audited net owned funds).
The overall cost of borrowings was 9.81% p.a. as on March 31 2016. During the yearthe long-term rating for term loans for your Company was [ICRA]AAA(pronounced ICRA triple A) by ICRA
Ltd. these ratings assumed to possess the highest degree of safety with regard to thetimely servicing of financial obligations.
While reaffirming the ratings by ICRA during February 2016 the outlook on thelong-term ratings has been revised from stable to negative.
(i) Secured Non-Convertible Debentures
In its continuing efforts to reduce fund costs your Company issued Secured RedeemableNon-Convertible Non-Cumulative Taxable Debentures (SRNCD) aggregating H1540 Crore(previous year H300 Crore) in different tranches through private placement with a couponrate range of 8.41% to 8.85%. The debentures were secured by way of a floating charge onthe assets i.e. loan receivables specifically earmarked for the purpose/mortgage of animmovable property in favour of the Debenture Trustees. Most investors in these debenturescomprised major insurance companies public sector banks corporates and investors ofrepute indicating their safety perception in your Companys fundamentals andprospects.
The tenure of debentures is range bound to two to three years. The interest on thesedebentures was serviced as and when it became due. The aggregate borrowings by way ofSecured NCDs as on March 31 2016 was H2090 Crore (previous year H550 Crore) while theoverall cost was 8.94% p.a.
The Debentures issued by your Company were rated by three rating agencies viz. CreditAnalysis & Research Ltd. (CARE) India Ratings and Research Pvt. Ltd. (FITCH) and ICRALtd.
The debentures were rated [CARE] AAA by CARE IND AAA by IndiaRatings and Research Pvt. Ltd (FITCH) and [ICRA] AAA by ICRA Limited. Whilereaffirming the ratings by ICRA during February 2016 the outlook on the long-term ratingshas been revised from stable to negative. These debentures were listed on the WholesaleDebt Market (WDM) segment of the National Stock Exchange of India Limited.
Your Company plans to raise Non-Convertible Debentures up to a maximum H3000 Crore(last year H2500 Crore as permitted by AGM) in a year subject to cost benefit and assetliability management requirements.
(ii) Unsecured Non-Convertible Debentures
During the previous year your Company had issued 8.94% Unsecured Non-ConvertibleDebentures in the nature of Tier II Bonds aggregating H100 Crore for a tenure of 10 years.These debentures are subordinated to present and future "senior indebtedness" ofthe Company and qualify as Tier II Capital under the National Housing Bank (NHB)guidelines for assessing Capital Adequacies Requirements. These Tier II Bonds were ratedIND AAA" long-term rating by India Rating & Research Pvt Limited
(FITCH) [CARE] AAA by Credit Analysis & Research Ltd. (CARE) and[ICRA] AAA by ICRA Ltd. While reaffirming the ratings by ICRA during February2016 the outlook on the long-term ratings has been revised from stable to negative. YourCompany has serviced the interest on the above debentures on the due date.
c. Commercial paper
Your Company started mobilising funds through commercial paper (CP) since July 2014.The outstanding at the end of the March 2016 was H1000 Crore. The effective cost of fundswas 7.30% p.a. The CP issue by your Company was rated at the maximum [ICRA] A1+ rating byICRA Ltd. indicating "Instruments with this rating are considered to have verystrong degree of safety regarding timely payment of financial obligations."
During the year your Company accepted deposits of H67.66 Crore (Previous year H113.62Crore) The outstanding balance of deposits (including interest accrued but not due) as ofMarch 31 2016 was H220.97 Crore (previous year H222.06 Crore). The rate of interest onpublic deposits ranged from 7% to 9.25% while the overall cost of deposits was 9.47% p.a.as on March 31 2016.
As on March 31 2016 a sum of H17.06 Crore relating to 1106 accounts (H14.50 Crore ason March 31 2015 relating to 1154 accounts) remained unclaimed/overdue. Of this amounta sum of 2.20 Crore relating to 239 accounts (previous year H6.67 Crore relating to 271accounts) was claimed and renewed/settled as of May 18 2016. The depositors whosedeposits matured were intimated with a request to either renew or claim their deposits(followed by subsequent reminders). Your company has not defaulted in repayment ofdeposits or interest during the year. The Company has complied with the requirements underChapter V of the Companies Act 2013 to the extent applicable.
During the year the deposit schemes of your Company are rated MAAA"(pronounced as M Triple A) against MAA+ (pronounced M double A plus) duringthe previous year by ICRA Ltd. indicating "highest credit-quality and that the rateddeposit programme carried the lowest credit risk". While reaffirming the ratings byICRA during February 2016 the outlook on the long-term ratings has been revised fromstable to negative. The reason for revision in outlook for the ratings as stated by ICRAwas due to revision in outlook for long-term debt programme of sponsor bank.
Your Company being a housing finance company registered with National Housing Bank(NHB) has complied with the Directions/ Guidelines issued by the NHB with regard todeposit acceptance and renewal. Your Company is exempted from the applicability of theCompanies (Acceptance of Deposits) Rules 2014
e. Mortgage-backed securities
Your Company did not opt for any securitisation during the year under review or duringthe previous year. There were no securitised assets outstanding as on March 31 2016.
8. Compliance with Directions/Guidelines of National Housing Bank (NHB) and otherstatutes
Your Company adhered to the prudential guidelines for non-performing assets (NPAs) asper the National Housing Bank (NHB) Directions 2010 as amended from time to time. YourCompany complied with the guidelines and directions issued by NHB on withdrawal ofpre-closure charges for all loans. The Guidelines/ norms for asset classification ofcredit/investments credit rating acceptance of deposits Fair Practices Code (FPC) MostImportant Terms and Conditions (MITC) Customer Complaints Redressal Mechanism Know YourCustomer (KYC) Anti-Money Laundering (AML) Guidelines Asset Liability ManagementCapital Adequacy Ratio (CAR) norms Customer Redressal Mechanism and other relatedinstructions issued by the National Housing Bank (NHB) were implemented in letter andspirit with an explicit notification on the website of your Company.
As per the National Housing Bank Circulars NHB.HFC.DIR.4/ CMD/2012 dated January 192012 and NHB.HFC.DIR.9/ CMD/2013 dated September 6 2013 in addition to the provision fornon-performing assets your Company has made a general provision @:
(i) 1% of Standard Assets in respect of Commercial Real Estates other than ResidentialHousing (ii) 0.75% of Standard Assets in respect of Commercial Real Estate Residential Housing and (iii) 0.40% of the total outstanding amount of loans which areStandard Assets other than (i) and (ii) above. Loans to individuals for third dwellingunits onwards are treated as Commercial Real Estate (CRE) exposure. A provision of H14Crore was made in the books as on March 31 2016 and the cumulative provision in thatregard stood at H52 Crore as on the above date. The recognition of income and provisionfor all assets was made in the books as per the Guidelines on Prudential Norms applicableas of March 31 2016.
Your Company carved out H19.04 Crore from current year P&L and H18.50 Crore fromGeneral Reserves towards DTL as per NHB guidelines NHB(ND)/DRS/Pol.62/2014 dated May 272014 and NHB(ND)/DRS/Pol.65/2014 dated August 22 2014 and ensured full compliance ofregulatory guidelines. Amount which is proposed to be transferred to reserves is given indetail in Note no. 3 of Notes forming part of the financial statements Your Company hascomplied with the Accounting Standards issued by the ICAI New Delhi and other relatedstatutory Guidelines/Directions as applicable to the Company from time to time.
Compliance of all Regulatory guidelines of NHB/other statutes are periodically reviewedat Audit Committee/Board.
9. Compliance under the Companies Act 2013
The Companies Act 2013 with Rules were notified with effect from April 01 2014 withsubstantial changes in the requirement of law. Your Company has complied with therequirements of the above Act as applicable during FY 15-16. In accordance with Sec 134(3) (a) of the said Act an extract of the Annual Return in the prescribed format isappended as Annexure 4 to this Report.
10. Capital Adequacy
The Capital Adequacy Ratio (CAR) of Your Company as at March 31 2016 was 20.69%(previous year 18.39%) well above the Regulatory benchmark of 12% prescribed by theNational Housing Bank (NHB). The increase in CAR was mainly due to downward revision ofrisk weightages by the National Housing Bank during October 2015 as per directions ofNHB/HFC/DIR17/ MD&CEO/2015/dt-October 9 2015.
Depreciation was calculated on the Written Down Value Method as per the useful life inthe manner prescribed in Schedule II to the Companies Act 2013. The Company reworked theuseful life on various Fixed Assets as prescribed in Part C of Schedule II of theCompanies Act 2013 in FY 14-15. In respect of those assets whose remaining useful life ason April 01 2014 was Nil the same was adjusted to the General Reserve in FY 14-15 asprescribed under 7(b) to the notes of the said Schedule II of the Companies Act 2013.Your Company followed the similar method for FY 15-16 also.
12. Deferred Tax Liability (DTL)
Vide Circular NHB (ND)/DRS/Pol.62/2014 dated May 27 2014 the National Housing Bank(NHB) directed Housing Finance Companies (HFCs) to provide for deferred tax liability withrespect to the balance in the Special Reserve created under Section 36(1) (viii) of theIncome Tax Act 1961 as on March 31 2014 and permitted to adjust the same from retainedearnings. Further vide Circular NHB(ND)/DRS/Pol.65/2014 dated August 22 2014 NHBpermitted HFCs to adjust the Deferred Tax Liability in a phased manner over three years inthe ratio of 25:25:50 starting from FY 14-15. Accordingly your Company has to adjust theDTL of H7399.96 Lakh in three years. During the current year your Company has transferredH1850.00 Lakh (Previous H1850.00 Lakh) from the General Reserve to DTL on the SpecialReserve outstanding as on March 31 2014.
Further Deferred Tax Liability (net) of H1675.56 Lakh (previous year H797.91 Lakh)was charged to the Statement of Profit & Loss on account of various components ofasset & liabilities including Special Reserve appropriated during the current year.
Further Deferred Tax Liability of H19.04 Crore (previous year H9.69 Crore) was chargedto the Statement of Profit & Loss because of Special Reserve appropriated during thecurrent year.
13. Recovery Action under Securitisation & Reconstruction of Financial Assets andEnforcement of Security Interest Act 2002 (Sarfaesi Act)
During the year your Company initiated action against 73 defaulting borrowers underthe Securitisation and Reconstruction of Financial Assets and Enforcement of SecurityInterest ("SARFAESI") Act 2002 and recovered H2.66 Crore (previous year H2.79Crore) from borrowers of Non-Performing accounts. By way of seized assets your Companyhas recovered H1.09 Crore (previous year - H0.82 Crore). During the year Companyrecovered H0.74 Lakh in written off accounts (previous year H0.37 Lakh). During the yearyour Company negotiated one-time settlement (OTS) with eligible NPA borrowers as per itsrecovery policy and recovered H206.65 Lakh (previous year H231.60 Lakh).
14. Listing of Securities
The equity shares of the Company are continued to be listed on the BSE Limited (BSE)Mumbai and the National Stock Exchange of India Ltd. (NSE) Mumbai. The listing feepayable to these Stock Exchanges were paid before the due dates.
The Securities & Exchange Board of India vide its letter dated December 26 2014bearing No. WTM/ RKA/MRD/165/2014 granted an exit to the Bengaluru Stock Exchange Ltd.(BgSE). Bengaluru.
Listing Agreement: The Securities Exchange Board of India (SEBI) has notified the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 on September 2 2015with the aim to consolidate and streamline the provisions of Listing Agreements fordifferent segments of capital to ensure better enforceability. The Regulations wereeffective from December 1 2015.
Accordingly as per the requirements your Company entered into Listing Agreements withthe National Stock Exchange of India Ltd and BSE Limited within the prescribed period.
Shri K.S. Sathyaprakash FCS continued to be the Compliance Officer of the Companyduring the FY 15-16. The Board of Directors have authorised the Company Secretary and theChief Financial Officer severally for reporting disclosure of material events if anyin terms of Regulation 30 of the said Regulations.
15. Human Resources Development
The total number of employees of your Company was 553 (395 regular and 158 on contract)as on March 31 2016 as against 491 (318 regular and 173 on contract) as at the end of theprevious year.Your Company adopted the policy of recruiting local people in the respectivebranch locations to improve functional efficiency of the branches. Attrition rate stood atabout 2% for regular employees which is far below the industry level.
To prepare employees in addressing the latest changes/ developments in the housingfinance area and related subjects some employees were deputed for training programmes/seminars on topics of relevance to housing finance organised by the National Housing Bankand other reputed institutions. During the year training in credit informationtechnology human relations finance taxation marketing fraud prevention and othertopics of importance were imparted to employees and executives. Your Company has put inplace a series of HR measures including timely/continuous promotions proper placementsimplementing appropriate employee recognition schemes rewards for good work at Boardlevel promising career path etc. Besides eligible branches/branch employees wererewarded with unique cash incentives for reducing SMAs and NPAs.
Industrial relations in your Company continued to be cordial during the year.
Particulars of Employees:
During FY 15-16 your Company had not employed anyone with a remuneration of H60 Lakhor more per annum nor had employed for a part of the year with a remuneration of H5 Lakhor more. The ratio of remuneration of each Director to the median of employeesremuneration and such other details as required under Sec 197(12) of the Companies Act2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 are furnished below:
i. The ratio of the remuneration of Managing Director to the median remuneration of theemployees (regular employees) of the Company for the FY 15-16 was 5.58 : 1 (Non-executivedirectors and Independent Directors are eligible for sitting fee only)
ii. The percentage increase in remuneration in the financial year for Managing directorwas 28.00% (the remuneration of Managing Director is as per the Service Regulations ofCanara Bank in terms of the resolution passed by the members at the General Meeting forappointment in the Company).
The Chief Financial Officer and the Company Secretary are employees of the Company andthe percentage increase in their remuneration was 21% and 23% respectively.
iii. The percentage increase in the median remuneration of employees in the financialyear: 26.56%
iv. The number of permanent employees on the rolls of the Company: 395
v. The explanation on the relationship between average increase in remuneration andCompanys performance:
The increase in remuneration of the employees is as per the HR Policy of the Companyand not in relation to the performance of the Company. The variable Component of thesalary of the employees is linked to the performance of the employee in terms of his/herkey responsibility area.
vi. Comparison of the remuneration of the Key Managerial Personnel against theperformance of the Company: For the FY 15-16 the total remuneration paid to the KMPs wereapprox. 0.34% of the net profit for the year.
vii. The Market capitalisation of the Company has increased from H1615.68 Crore as ofMarch 31 2015 to H3070.57 Crore as of March 31 2016. Over the same period the price toearnings ratio moved from 18.73% to 19.56%. The Companys stock price as at March 312016 has increased to H1154.35 (NSE) from H607.40 (NSE) as at March 31 2015.
viii. Average percentile increase already made in the salaries of employees other thanthe managerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justification thereof and point out if thereare any exceptional circumstances for increase in the managerial remuneration:
Average % increase in remuneration of the employees was around 15% whereas that ofManagerial remuneration was around 26%.
ix. Comparison of the each remuneration of the Key Managerial Personnel against theperformance of the Company: % increase Y0Y in the net profit of the Company was around 45%and that of the KMPs were as per para (ii) of the above.
x. The key parameters for any variable component of remuneration availed by thedirectors and the ratio of the remuneration of the highest paid director to that of theemployees who are not directors but receive remuneration in excess of the highest paiddirector during the financial year: Not Applicable
xi. The Company affirms remuneration is as per the Remuneration Policy of the Company.
During the year the Company has not engaged any employee drawing remuneration exceedingthe limit specified under section 197(12) read with Rule 5(2) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014.
The Company has a Policy on "Prevention of Sexual Harassment of Women atWorkplace" and matters connected therewith or incidental thereto covering all theaspects as contained under the "The Sexual Harassment of Women at Workplace(Prohibition Prevention and Redressal) Act 2013". During FY 15-16 no cases ofsexual harassment were reported. The Company has laid down a Code of Conduct forPrevention of Insider Trading in accordance with the requirements under the Securitiesand Exchange Board of India (Prevention of Insider Trading) Regulations 2015 andCompanies Act 2013 with a view to regulate trading in Securities of the Company by itsdirectors designated persons and employees. The same is made available on the website ofthe Company.
16. Transfer of unclaimed and unpaid Dividend/ Deposit Amounts to the InvestorEducation and protection Fund (IEpF)
In terms of (section 125 of the Companies Act 2013 yet to be notified) the amounts(dividend deposits etc. with interest) that remained unclaimed and unpaid for more than7 years from the date they first became due for payment should be transferred to IEPF.
As an investor-friendly measure your Company has been intimating the respectiveshareholders/depositors/investors to encash their dividend warrant/renew matured depositsor lodge their claim for payment of due if any from time to time and claims made aresettled. As per the statutory requirements unclaimed deposits/ other dues for theprevious seven years as of the date of the Annual General Meeting are made available onthe website of MCA-IEPF as well as on the Companys website.
In order to receive prompt payment of dividend the members/ investors are requested todemat the shares held in physical mode register bank account particulars opt for ECSfacility register nomination and intimate change of address if any to theCompany/Depository Participants promptly. a. unclaimed dividends
As at March 31 2016 dividends aggregating to H98.34 Lakh (previous year H83.63 Lakh)relating to dividends declared for the years FY 08-09 to FY 14-15 (of which H25.57 Lakhrelated to dividend for the year 2015) had not been claimed by shareholders. As aninvestor friendly measure your Company has intimated shareholders to lodge their claimsand related particulars were provided in the annual reports each year as well as on thewebsite of your Company.
The dividend pertaining to 2007-08 which remained unclaimed/unpaid amounting to H7.43Lakh (in respect of 1873 shareholders) was transferred to IEPF in October 2015 afterthe settlement of claims by members received in response to the individual reminderletters sent by your Company to the respective members. The dividend pertaining to 2008-09remaining unclaimed and unpaid amounting to H5.49 Lakh (in respect of 1880 shareholders)as on March 31 2016 would be transferred to IEPF during August 2015 after settlement ofthe claims received up to the date of completion of seven years. b. unclaimed deposits
As required under Section 125 of the Companies Act 2013 (corresponding Section 205C ofthe Companies Act 1956) the unclaimed and unpaid deposits together with interest for theyear 2007-08 amounting to H3.62 Lakh (previous year H19.43 Lakh) that remained unclaimedand unpaid for a period of 7 years were transferred to IEPF during the year under review.
17. particulars regarding conservation of energy technology absorption and foreignexchange earnings and expenditure Since your Company is a housing finance Company and doesnot own any manufacturing facility the requirement relating to providing the particularsrelating to conservation of energy and technology absorption as per Sec 134 (3) (m) of theCompanies Act 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 are notapplicable.
Your Directors are pleased to inform that Solar Power systems and power saving lampshave been installed in 13 branches so far as a measure for conservation of energy. YourCompany has installed Solar-UPS in some of its branches. Certain branches of your Companyhave been using solar power energy LED lamps etc.
As a part of Save Green efforts and leverage of technology a lot of paper work atbranches and the Registered office has been reduced by suitable leveraging of technology(also refer para 5).
During the year your Company did not earn any income or incur any expenditure inforeign currency/exchange other than payment of Dividend to NRIs on repatriation basis toan extent of H12 Lakh through authorised dealers.
18. Directors & Key Managerial personnel
Appointments / Re-appointments:
The Board of Directors made the following appointments / reappointments based on therecommendations of the Nomination and Remuneration Committee : (1) Shri C. IlangoManaging Director (General Manager Canara Bank) was re-appointed as the Managing Directorwith effect from April 28 2016 (2) Shri Sarada Kumar Hota Dy. General Manager CanaraBank was appointed as Additional Director and Whole-time Director with effect from April28 2016 (3) Smt. Bharati Rao Former Dy. Managing Director of State Bank of India wasappointed as Additional Director
(Independent Director) with effect from April 28 2016 (4) Shri Sarada Kumar HotaWhole-time Director of the Company has been appointed as the Managing Director with effectfrom May 19 2016 consequent to repatriation of Shri C.Ilango Managing Directorto Canara Bank. The directors had filed their consent(s) and declarations that they arenot disqualified to become directors in terms of the provisions of Companies Act 2013 andrelated Rules. The directors have intimated to the Company that they are not holding anyshares or taken any loan(s) from the Company.
The particulars of directors including their profile are provided in the Report ofDirectors on Corporate Governance forming part of this Annual Report. Further the agendarelating to appointments / re-appointments of Directors are provided in the Notice of the29th Annual General Meeting of the Company seeking approval and/or ratification from themembers. The particulars relating to the Directors and all other relevant information areprovided in the explanatory statement forming part of the said Notice for the informationof members.
The Board of Directors appointed Smt. Veena G Kamath ACS as the Company Secretarywith effect from April 1 2015. Further the Board of Directors appointed the said CompanySecretary as the Compliance Officer with effect from May 2 2016. Shri K.S. SathyaprakashFCS Dy. General Manager and the former Company Secretary of the Company continued to bethe Compliance Officer till May 1 2016.
Retirement by rotation:
In terms of Section 152 and all other applicable provisions of the Companies Act 2013and the Articles of Association of the Company Shri S.A. Kadur Director retires byrotation at the ensuing Annual General Meeting and being eligible offers himself forre-appointment. The particulars relating to Shri S.A. Kadur Director are provided in theReport of the Directors on Corporate Governance. Your Directors recommend there-appointment of Shri S.A. Kadur as a Director.
The agenda relating to re-appointment of Shri S.A. Kadur Director forms part of thenotice convening the ensuing Annual General Meeting and all other relevant information asper SEBI Regulations are provided in the explanatory statement.
Shri C. Ilango Managing Director of the Company submitted his resignation with effectfrom May 18 2016 (after office hours) consequent to his repatriation to Canara Bank asnecessary permission was not accorded by the competent authority for extension of tenurebeyond 5 years. The Board places on record its appreciation for the services rendered byShri C. Ilango during his tenure of five years with the Company.
Smt. Bharati Rao Additional Director resigned from the Board of the Company witheffect from May 18 2016 due to personal reasons.
19. Meetings of the Board
During the year six meetings of the Board of Directors were held and the relateddetails including that of various committees constituted by the Board are made availablein the Report of Directors on Corporate Governance forming part of the annual reportplaced before the members.
Committees of the Board
Currently the Board had six Committees viz. the Audit Committee the Nomination andRemuneration Committee the Corporate Social Responsibility Committee the StakeholdersRelationship Committee the Risk Management Committee and the Management Committee. Adetailed note on the composition of the Board and its Committees and other relatedparticulars are provided in the Report of Directors on Corporate Governance forming partof this Annual Report
20. Directors Responsibility Statement
In accordance with the provisions of Section 134(3)(c) read with Section 134(5) of theCompanies Act 2013 and based on the information provided by the Management the Board ofDirectors report that: a) In the preparation of annual accounts the applicable AccountingStandards have been followed along with proper explanation relating to materialdepartures if any; b) the Directors have selected such accounting policies and appliedthem consistently and made judgements and estimates that are reasonable and prudent so asto give a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit and loss of the Company for that period; c) the Directorshave taken proper and sufficient care for the maintenance of adequate accounting recordsin accordance with the provisions of this Act for safeguarding the assets of the Companyand for preventing and detecting fraud and other irregularities; d) the Directors haveprepared the annual accounts on a going concern basis; e) the Directors in the case of alisted Company have laid down internal financial controls to be followed by the Companyand that such internal financial controls are adequate and were operating effectively andf) the Directors have devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
The Independent Directors have given declarations to the Company in terms of withSection 149(7) of the Companies Act 2013 that they meet the criteria of independence asprovided in sub-section(6) of Section 149.
Code of Conduct
In terms of Regulation 26(3) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 all the members of the Board and Senior ManagementPersonnel have affirmed compliance with the Code of Conduct of Board of Directors andSenior Management for the FY15-16. As required under Schedule V (D) of the said Regulationsa declaration signed by the Managing Director & Chief Executive Officer of the Companystating that the members of the Board and the Senior Management Personnel have affirmedcompliance of their respective Codes of Conduct is enclosed to this Report as Annexure 2.
21. Nomination and Remuneration Committee (NRC)
Your Company constituted a Nomination and Remuneration Committee (NRC) of the Board interms of Section 134(3)(e) of the Act and Regulation 19 of the SEBI (Listing Obligations& Disclosure Requirements) Regulations 2015 consisting of 3 Directors. This Committeeidentifies persons who are qualified to become Directors of the Company. The appointmentrenewal reappointment re-categorisation and/or removal of the Directors so identifiedincluding extension or continuation of the term of appointment will be recommended by theNRC to the Board. This Committee has also laid down the criteria to identify persons whomay be appointed to the senior management of the Company. The NRC has formulated thecriteria for determining qualifications positive attributes and independence of aDirector carrying out evaluation of every Directors performance. The NRC Policy ofthe Company covering all the above aspects is made available on the official website ofthe Company viz: http://www.canfinhomes. com/Aboutus/Board of Director (path).
22. Corporate Social Responsibility (CSR) policy
The CSR Rules made effective from April 1 2014 are intended to promote socio-economicdevelopment in rural areas improve education eradicate hunger promote gender equalityetc. The Rules include a mandate for business entities to spend a minimum of 2% of theiraverage net profit of the preceding 3 years on CSR initiatives. Your Company constituted aCorporate Social Responsibility (CSR) Committee of the Board as prescribed under Section135 of the Act and has put the CSR policy in place. The total amount to be spent under theCSR initiatives for FY 15-16 was H372 Lakh (previous year H162 Lakh) out of whichprojects sanctioned under
CSR activities was H303 Lakh out of which an amount of H109 Lakh was spent (previousyear H3.10 Lakh) during the year. The unspent amount of H263.28 Lakh for FY 15-16(previous year H158.90 Lakh) is carried forward as per provisions of Companies Actwith the aim to go in for granular details/ appropriate projects before spending in FY16-17. The Annual Report on CSR activities including brief contents are provided as anAnnexure 6 to this report.
23. Risk Management policy
Your Company has constituted a Risk Management Committee with two directors and seniorexecutive of the Company. In terms of Section 134 (3) (n) of the Act your directors wishto state that your Company has drawn and implemented a risk management policy includingidentification therein of elements of risks if any which in the opinion may threaten theexistence of your Company. The above policy is being reviewed/re-visited once a year or atsuch other intervals as deemed necessary for modifications and revisions if any.
24. Audit and Internal Control
Your Company strengthened the adequacy of the existing internal control systems forloan reviews at periodical intervals and measures for minimising operational riskscommensurate with the nature of its business and the size of operations. Further yourCompany has established clear delegation of authorities and standard operating proceduresfor all parts of the business/ functions. Your Company has further strengthened OffsiteTransaction Monitoring System (OTMS) to track transactions/ early-warning signals acrossall branches by introducing new monitoring tools.
The National Housing Bank conducts inspection of your Company on an annual basis.During the year the NHB conducted credit inspection of your Company in September 2015 forthe position as at March 2015. The compliance on the observations was submitted within theprescribed time to the NHB which was reviewed by the Audit Committee and the Board.
All the branches are subjected to quarterly/half yearly audit by external auditors whoconduct audit and submit their reports. Your Company has also put in place a well- definedpolicy on Risk Based Internal Audit (RBIA) and as per the said policy all the 110 branchesthat became due for audit were audited in FY 15-16. Apart from the RBIA Auditconsidering the volume of the business branches are also subjected to quarterly/ halfyearly internal audit by empanelled audit firms. The Audit Committee reviewed the auditreports/remarks/ observations and replies/ compliances including the compliance with KYCnorms.
25. Secretarial Audit
The Secretarial Audit for FY 15-16 was conducted as required U/s.204 of the CompaniesAct 2013 by S. Kedarnath and Associates a firm of Company Secretaries in Practice. Interms of Section 204(3) of the Act your Directors are pleased to inform that there was noqualification or observation or other remarks made by the said Company Secretaries intheir Secretarial Audit Report. The Secretarial Audit Report issued by the PractisingCompany Secretaries is enclosed to the report of Directors in terms of Section 134(3) (f)read with Section 204(1) of the Act.
Loans Guarantees or Investments:
There are no particulars of loans guarantees or investments made during the year interms of Section 186(1) and 186(2) of the Act requiring disclosure to be made in thereport of Directors as required under Section 134(3)(g) of the Act. In terms of Section186(11)(a) the requirement relating to the disclosure is not applicable to a loan madeguarantee given or security provided by a housing finance company.
Related Party Transactions:
The particulars of contracts or arrangements with the Related Partiesreferred to in sub-section (1) of Section 188 of the Act are furnished in Note No.30 ofthe Notes forming part of the financial statements for FY 15-16 forming a part of theannual report. The particulars of Related Party Transaction as required u/s sec 134(3)(p)and 134(3)(n) in the prescribed format is attached to this Report as Annexure 5.
M/s K.P. Rao & Co. Chartered Accountants Bengaluru Statutory Auditors of yourCompany (Firm Registration No.003135S) appointed by the members at the 28th Annual GeneralMeeting (AGM) of your Company held on July 08 2015 and other 42 firms of branchauditors who were appointed by the Board based on the approval of the members atthe above AGM to hold office from the conclusion of the said meeting untilthe conclusion of the ensuing AGM of your Company would retire at the ensuing AGM and areeligible for re-appointment.
Your Company has obtained the consent and a certificate from the statutoryauditors under section 139 of the Companies Act 2013 to the effect that theirre-appointment if made would be in accordance with the conditions as may be prescribed.The statutory auditors have also confirmed that they hold a valid certificateissued by the Peer Review Board of The Institute of Chartered Accountants ofIndia.
Your Directors recommend the appointment/re-appointment of M/s. K.P.Rao & CoChartered Accountants as the Statutory Auditors. The resolutions seeking approvalof the members for appointment of Statutory Auditors and fixation of their remunerationand authorisation to the Board of Directors for appointment of Branch Auditors andfixation of their remuneration are included in the notice convening the ensuingAnnual General Meeting. The above said appointment attracts the provisions of Section 139142 143 and all other applicable provisions if any of the Companies Act 2013and Rules.
Statutory Auditors Report:
In terms of Section 134(4) and 134(3)(ca) of the Act your Directors are pleasedto inform that as in the previous years there is no qualification reservation oradverse remark or disclaimer made by the statutory auditors of the Company in their auditreport for the financial year FY 15-16.
The Board has adopted policies and procedures for ensuring the orderly and efficientconduct of its Business adherence to its polices safeguarding its assets prevention anddetection of frauds/errors accuracy and completeness of the accounting records and timelypreparation of reliable financial disclosures. M/s K P Rao & Co the StatutoryAuditors of the Company have audited the Internal Financial Controls over the FinancialReporting of the Company and submitted a Report which forms part of the AuditorsReport placed before the members together with the Financial Statements for FY 15-16.
Your Directors wish to inform that there are no material changes and commitments otherthan what is reported in the financial statements affecting the financial position ofyour Company which occurred between the end of the financial year of your Company to whichthe financial statements relate and the date of this report. Your Director also wish toinform that there were no significant and material orders passed by theRegulations/Courts/ Tribunals impacting the going concern status and Companies operationsin future.
27. Management Discussion and Analysis Report
In terms of Regulation 34(2) of the SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015 the Management Discussion and Analysis Report forms partof this annual report.
28. Corporate Governance
As required under the Companies Act 2013 and Regulation 34 read with Schedule V of theSEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 theReport of Directors on Corporate Governance for the year FY 15-16 is placed inthis annual report. The said Report covers in detail the Corporate Governance Philosophyof the Company Board Diversity Directors appointment and remuneration declaration byIndependent Directors Board evaluation familiarisation programme etc.
Business Responsibility Report:
The SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 mandatesinclusion of Business Responsibility Report (BRR) in the prescribed format as a part ofthe Annual Report for top 500 listed entities based on the market capitalisation incompliance with the said Regulations the BRR is provided as a part of this Report.
In terms of Regulation 17(10) of the SEBI (Listing Obligations & DisclosureRequirement) Regulations 2015 your Company has put in place the Board andDirectors Evaluation Policy laying down a framework for evaluation of theBoard its Committees and of the individual directors with defined attributes forevaluation. The results of the evaluation exercise will be shared with the Board insubsequent Board Meeting(s) including listing of the identified strengths areas ofimprovement and actions to be taken if any.
29. Save Green Efforts
In recognition and support to the green initiative taken by the Ministry of CorporateAffairs (MCA) Government of India your Company is sending AGM notices annual reportscorrespondence with the stakeholders etc. to the respective e-mail IDs of stakeholders. Asa step towards paperless banking initiatives taken by your Company include ECS facilityfor repayment of loans streamlining the systems and procedures for reporting by thebranches and at the Registered Office through Integrated Business Suite (IBS) networkingof branches with the Registered Office harnessing solar energy for lighting and computeroperations in three new branches (13 in all) and the like. The usage of the paper isminimised.
As in the previous years we are publishing only the statutory disclosures in the printversion of the Annual Report. Electronic copies of the Annual Report and Annual GeneralMeeting Notices are being sent to all members whose e-mail address are registered with theCompany/Depository participants. For members who have not registered their e-mail addressphysical copies are sent in the permitted mode.
30. Outlook for 2016-17
The RBI and the Government continued the policy of managing inflation promotinginvestment through employment generation and improving infrastructure. The real estateindustry (including housing) is expected to strengthen in the current year across thecountry; credit offtake is likely to improve. Reduction of interest rates are expected andthe consequent impact on spreads are expected to sustain .
Your Company drew out a challenging business plan for FY 16-17 with target loan booksize of H13500 Crore by March17. Your Company would continue to focus on lending toindividual segments preferably the salary class increasing the Non Housing
Loan ratio further improve asset quality reducing cost of funds further increasingoperations and profits.
Your Company has drawn a vision document upto the year 2020 with an aim to reach aloan book size of H35000 Crore by March 2020. Your Company expects to sustain performancegrowth during 2016-17.
However given the indications about the likely changes in the cost of funds andexpectations of borrowers for availing loans at lesser rates etc. margins are expectedto remain under pressure.
Your Directors would like to thank Canara Bank for consistent support. Your Directorswould like to acknowledge the role of all its stakeholders viz. shareholders debentureholders CP holders depositors bankers lenders borrowers merchant bankers DebentureTrustees and all others for their continued support to your Company and the confidence andfaith that they have always reposed in your Company.
Your Directors acknowledge and appreciate the guidance and support extended by all theRegulatory authorities including National Housing Bank (NHB) Securities Exchange Board of
India (SEBI) Ministry of Corporate Affairs (MCA) Registrar of Companies Karnatakathe Stock Exchanges and the NSDL and CDSL.
Your Directors thank the Rating Agencies ICRA CARE India Ratings & Research Ltd.(FITCH) the Registrars Share Transfer Agents of your Company Government(s)local/statutory authorities and all others for their whole-hearted support during theyear and look forward to their continued support in the years ahead.
Your Directors value the professionalism of all the employees who have worked in achallenging environment and whose efforts have stood the Company in good stead and takenit to present level.
| ||For and on behalf of the Board of Directors |
| ||Sd/- |
|Place: Bengaluru ||K.N. Prithviraj |
|Date: May 18 2016 ||Chairman |