To the Members
Your Directors are pleased to present the 30th Annual Report of the business andoperations of the Company together with the audited accounts for the year ended March 312017.
1. Financial Results
The financial performance for the FY16-17 is summarised here below:
| || ||(Rs in Lakh) |
|Particulars ||Year ended March 31 2017 ||Year ended March 31 2016 |
|Profit before Tax & Provisions ||38838.06 ||27326.61 |
|Less: Provision for Standard Assets ||1065.00 ||1400.00 |
|Provision for Doubtful Debts (Written Back) ||815.38 ||540.53 |
|Prior Period adjustments ||-58.85 ||0.00 |
|Profit before Tax ||37016.53 ||25386.08 |
|Tax expenses: || || |
|(a) Provision for Tax - Current Year ||11513.00 ||8000.00 |
|(b) Deferred Taxation ||1977.65 ||1675.56 |
|Profit after Tax ||23525.88 ||15710.51 |
|Balance brought forward from previous year ||114.58 ||309.30 |
| ||23640.46 ||16019.81 |
|Appropriations: || || |
|Transfer to Special Reserve u/s.36(1)(viii) of the Income Tax Act 1961 ||6400.00 ||5500.00 |
|Transfer to General Reserve ||9200.00 ||4000.00 |
|Additional Reserve (u/s.29C of the NHB Act) ||4800.00 ||3200.00 |
|Proposed Dividend ||- ||2663.08 |
|Tax on Distributed Profits ||- ||542.15 |
|Balance carried forward to balance sheet ||3240.46 ||114.58 |
| ||23640.46 ||16019.81 |
2. Shareholders Wealth
|Particulars ||Year ended March 31 2017 ||Year ended March 31 2016 |
|Earnings Per Share (EPS) (H) ||88.38 ||59.02 |
|Dividend Rate ||100% ||100% |
|Market Price of shares (H) ||2121.45 ||1154.40 |
|Market Capitalisation (H in Crore) ||5643.06 ||3070.70 |
3. Business Performance Highlights a. Sanctions
During the year the company has sanctioned loans amounting to H5451 Crore as comparedto H4418 Crore in the previous year recording a growth of 23%. Despite slowdown in realestate market in some parts of the country stiff competition from Banks & HFCs thebusiness performance of the company continued to be encouraging during 2016-17.
During the year your Company continued to focus on retail (housing and non-housing)loan segment which constituted 99% of its total sanctions. 88% of fresh loan approvalsduring the year were for housing and 12% were for non-housing loans. The cumulative loansanctions since inception of your Company stood at H 26362 Crore at the end of theFY16-17. Average ticket size of incremental housing loans and non-housing loans are H18Lakh and H10 Lakh respectively.
During the year the company has disbursed loans amounting to H 4792 Crore as comparedto H 3923 Crore in the previous year recording a growth of 22%. The cumulative loandisbursements from inception to the end of the FY16-17 was H23083 Crore.
c. Loans outstanding (Loan Book)
The total loan outstanding as at March 31 2017 were H 13313 Crore recording agrowth of 25% over last year (previous year H10643 Crore).
Your Company continues to grow in the high-yielding non-housing loan segment. Duringthe year non-housing loan portfolio has increased from H1262 Crore to H 1529 Croreindicating a growth rate of 21% which constitutes 11.86% of total portfolio.
d. Non-Performing Asset (NPA)
Your directors are pleased to report that the Gross NPA of your Company as on March 312017 was contained at H27.91 Crore (previous year H19.76 Crore). The net NPA as on thedate continued to be Nil with the NPA Provision Coverage Ratio at 100% for the 8th yearin succession. The gross NPA percentage as on March 31 2017 stood at 0.21% compared to0.19% as on March 31 2016 one of the lowest in the industry.
During the year under review your Company could make a cash recovery of H4.08 Crore(previous year H 3.32 Crore) in respect of accounts which were Non Performing Assets as onMarch 31 2016. Recovery in written-off accounts during FY16-17 was H0.37 Crore.
Your Directors are happy to inform that during the year under review your Companyrecorded an Operating Profit of H388.38 Crore (previous year H 273.27 Crore) ProfitBefore Tax (PBT) of H370.17 Crore (previous year H 253.86 Crore) and Profit After Tax(PAT) of H 235.26 Crore (previous year H157.11 Crore) registering a Year-on-Year increaseof 42% 46% and 50% respectively. During the year Company has made provisions forstandard assets amounting to H 10.65 Crore (previous year H14.00 Crore) provisions forNon-performing assets amounting to H 8.15 Crore (previous year H5.41 Crore) provisionsfor Taxation and Deferred Tax Liability amounting to H134.91 Crore (previous year H96.76Crore).
Your Company has been paying dividends continuously. Your directors after giving dueconsideration to Capital Adequacy requirements projected business plan for the yeardeferred tax liability and the dividend policy are happy to recommend a dividend of H 10per equity share (100%) for the second successive year for the financial year ended March31 2017. The amount of dividend recommended for payment for the year under review isH26.62 Crore The tax on dividends u/s.115-O of the Income Tax Act 1961 at about 20.36%(H5.42 Crore) is being paid to the Government by your Company.
4. Expansion of Branch Network
During the FY16-17 10 new branches and 20 satellite offices were opened by CFHL while4 top performing satellite offices were upgraded to full-fledged branches. Further CFHLintroduced the concept of Affordable Housing Loan Centres (AHLCs) toexclusively provide smaller ticket size Loans under CLSS (PMAY) Urban Housing (LUH) andRural Housing schemes. Under this initiative the first tranche of 10 AHLCs were opened inQ4 by upgrading existing satellite offices. As at the end of FY16-17 CFHL has an expandednetwork of 170 outlets spread across 19 states comprising 124 branches 10 AHLCs and 36Satellite Offices. CFHL became the first HFC to start exclusive Affordable Housing Loancentres in sync with the Housing for all initiative by the Government.
During the FY17-18 CFHL has plans to open 12 branches and 10 SOs. CFHL will also open20 more AHLCs taking the number of such exclusive outlets for Affordable Housing Loans to30 to mark 30th year of CFHLs commitment to promote home ownership.
The Registered Office and all the branches have good ambience spacious premises andother facilities to enhance service quality and visibility in the market.
5. Technology Initiatives
All the branches and the Registered Office are linked through a core-banking platform(Integrated Business Suite) under the Application Service Provider (ASP) Model. TheCompany is also in the process of a tie-up with BSNL for a higher bandwidth MPLS lines.
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 websitecustomerportalinthewebsiteto accessaccount statements/certificates at customers end missed call facility to borrowersfor their information about outstanding balances in their loan accounts SMS alerts toremind borrowers of loan instalments/new schemes. Your Company has introduced online moneytransfer and customer portal to facilitate its borrowers to view their statement ofaccount(s) generate certificates product information and branch location.
6. Customer-Friendly Initiatives
The transparent ethical equitable practices adopted towards all customer segments isthe hallmark of your Company. With the launch of customer portal the company has taken astep in the direction of enabling the customer to get easy access to their account relatedinformation such as IT certificate EMI payment details balance outstanding etc. at theclick of a button. Your Companys website provides all the major information on theproducts and applicable charges. The Fair Practice Code (FPC) and Most Important Terms andConditions (MITC) are made available on the website as per NHBs directions. Thedistinctive referral scheme wherein customers are benefited from the refund of theirprocessing fees upon referring new customers to the Company is also one of our uniquecustomer friendly initiatives. Emphasis continues to be placed on the reduction of theturnaround time (TAT) in sanctioning and disbursing loans at all levels in order tobenefit the customers.
7. Financial Resources a. Refinance from National Housing Bank (NHB) and borrowingsfrom Banks
During the year your Company had availed fresh refinance amounting to H441.21 Crore(previous year H 630.64 Crore) under the NHB refinance scheme. The cumulative NHBborrowings as on March 31 2017 were H 3375.03 Crore (previous year H3535.04 Crore)with the overall cost of borrowing (including the loans under Rural Housing and UrbanHousing Schemes) of 8.23% p.a. as on March 31 2017.
Borrowings from Banks
Your Company progressively reduced its dependence on bank borrowings. During the yearborrowings were diversified through a combination of short-term and long-term loansconsidering the asset liability management position to derive the maximum benefit ofcompetitive interest rates. The lenders included HUDCO State Bank of India Bank ofBaroda HDFC Bank and Oriental Bank of Commerce apart from Canara Bank the principalbankers to the Company. The aggregate bank borrowings (term loans plus overdraft) at theend of the financial year stood at H2247.65 Crore (previous year H 2536.58 Crore); theoverall borrowings are within regulatory ceiling of 16 times of net owned funds.
The overall cost of borrowings (average) was 9.09% p.a. as on March 31 2017. Duringthe year the long-term rating for term loans for your Company was[ICRA]AAA (pronounced ICRA triple A) by ICRA Ltd. these ratings assumed topossess the highest degree of safety with regard to the timely servicing of financialobligations.
(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 H1862 Crore(previous year H1540 Crore) in different tranches through private placement with a couponrate range of 7.57% to 8.55%. The debentures were secured by way of a floating charge onthe assets i.e. loan receivables specifically earmarked for the purpose in favour of theDebenture Trustees. Most investors in these debentures comprised major insurancecompanies public sector banks corporates and investors of repute indicating theirsafety perception in your Companys fundamentals and prospects.
The tenure of debentures is range bound for two to five years. The interest on thesedebentures was serviced regularly. The aggregate borrowings by way of Secured NCDs as onMarch 31 2017 was H3602 Crore (previous year H2090 Crore) while the overall cost was8.57% p.a.
The debentures were rated [CARE] AAA by CARE IND AAA by IndiaRatings and Research Pvt. Ltd (FITCH) and [ICRA] AAA by ICRA Limited. Thesedebentures were listed on the Wholesale Debt Market (WDM) segment of the National StockExchange of India Limited.
Your Company plans to raise Non-Convertible Debentures up to a maximum H6000 Croresubject to cost benefit and asset liability management requirements and with the approvalof members at ensuing Annual General Meeting.
(ii) Unsecured Non-Convertible Debentures
During FY14-15 your Company had issued 8.94% Unsecured Non-Convertible Debentures inthe nature of Tier II Bonds aggregating H100 Crore for a tenure of 10 years. Thesedebentures are subordinated to present and future senior indebtedness of the Company andqualify as Tier II Capital under the National Housing Bank (NHB) guidelines for assessingCapital Adequacy Requirements. These Tier II Bonds were rated IND AAAlong-term rating by India Rating & Research Pvt Limited (FITCH) [CARE]AAA by Credit Analysis & Research Ltd. (CARE) and [ICRA] AAA byICRA Ltd. Your Company has serviced the interest on the above debentures on the due date.
c. Commercial Paper
Your Company mobilises funds through commercial paper (CP). The outstanding at the endof the March 2017 was H2320.62 Crore (previous year H961.37 Crore). The effective cost offunds was 7.43% p.a. The CP issue by your Company was rated at the maximum [ICRA] A1+rating by ICRA Ltd. indicating Instruments with this rating are considered to havevery strong degree of safety regarding timely payment of financial obligations.
During the year your Company accepted deposits of H 149.93 Crore (Previous year H67.66Crore). The outstanding balance of deposits (including interest accrued but not due) asof March 31 2017 was H 226.65 Crore (previous year H220.97 Crore). The rate of intereston public deposits ranged from 7.50% to 8.10% while the overall cost (average) ofdeposits was 8.83% p.a. as on March 31 2017.
As on March 31 2017 a sum of H 20.09 Crore relating to 1020 accounts of publicdeposits (H17.06 Crore as on March 31 2016 relating to 1106 accounts) remainedunclaimed/overdue. Of this amount a sum of H2.29 Crore relating to 140 accounts (previousyear H 2.20 Crore relating to 239 accounts) were claimed and renewed/settled upto May 152017. Your Company has not defaulted in repayment of deposits or interest during the year.The Company has complied with the requirements under Chapter V of the Companies Act 2013to the extent applicable.
During the year the deposit schemes of your Company are rated MAAA(pronounced as M Triple A) by ICRA Ltd. indicating highest credit-quality andthat the rated deposit programme carried the lowest credit risk. Your Company being ahousing finance Company registered with National Housing Bank (NHB) has complied with theDirections/Guidelines issued by the NHB with regard to deposit acceptance and renewal.Your Company is exempted from the applicability of the Companies (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 2017.
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)Most Important Terms and Conditions (MITC) Customer Complaints Redressal Mechanism KnowYour Customer (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 your Company has made a generalprovision @:
(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 ResidentialHousing and
(iii) 0.40% of the total outstanding amount of loans which are Standard Assets otherthan (i) and (ii) above.
Loans to individuals for third dwelling unit onwards are treated as Commercial RealEstate (CRE) exposure. A provision of H10.65 Crore was made in the books as on March 312017 and the cumulative provision in that regard stood at H62.65 Crore as on the abovedate. The recognition of income and provision for all assets was made in the books as perthe Guidelines on Prudential Norms applicable as of March 31 2017.
Your Company this year has carved out H22.50 Crore from current year P&L and H37.00Crore from General Reserves towards Deferred Tax Liability (DTL) as per NHB guidelinesNHB(ND)/DRS/ Pol.62/2014 dated May 27 2014 and NHB(ND)/DRS/Pol.65/2014 dated August 222014 and ensured full compliance of regulatory guidelines. Amount which is proposed to betransferred to reserves is given in detail in Note no. 3 of Notes forming part of thefinancial statements.
During the year the NHB has issued 3 new directions viz.
(1) Housing Finance Companies Auditors Report (National Housing Bank)Directions 2016
(2) Housing Finance Companies - Approval of Acquisition or Transfer of Control(National Housing Bank) Directions 2016
(3) Housing Finance Companies Corporate Governance (National Housing Bank)Directions 2016
Your Company has taken steps to comply with the requirements of all the applicableprovisions of the above Directions for FY16-17. In terms of the CG Directions the Companyhas given the "Related party transaction policy" as Annexure 7 to this Report.
The NHB had conducted Audit of 2014-15 during the previous year and raised an issue onthe procedure followed by the Company since beginning on valuation of Government Securityunder HTM Category (Held to Maturity) invested for SLR purpose. Since there is no changein regulations/procedures during the period the matter has been represented by theCompany and a final decision is awaited. These facts have been disclosed in the Notes toaccounts.
Your Company has complied with the Accounting Standards issued by the ICAI New Delhiand other related statutory Guidelines/Directions as applicable to the Company from timeto time. Compliance of all Regulatory guidelines of NHB/other statutes are periodicallyreviewed at Audit Committee/Board.
9. Compliance under the Companies Act 2013
Your Company has complied with the requirements of the applicable provisions of theCompanies Act 2013 and related Rules during the FY 16-17. In accordance with Sec 134 (3)(a) of the said Act an extract of the Annual Return in the prescribed format is appendedas Annexure 4 to this Report.
During FY 16-17 Canara bank Promoters of the Company had disinvested 3580849(13.45%) equity shares of the Company and the shareholding of the Bank as on March 312017 stood at 30%. The disinvested portion of 13.45% was purchased by M/s. CaladiumInvestments Pte. Ltd. Singapore an affiliate of GIC Singapores Sovereign WealthFund.
10. Capital Adequacy
The Capital Adequacy Ratio (CAR) of your Company as at March 31 2017 was 18.50%(previous year 20.69%) well above the Regulatory benchmark of 12% prescribed by theNational Housing Bank (NHB).
Depreciation was calculated on the Written Down Value Method based on useful life inthe manner prescribed in Schedule II to the Companies Act 2013.
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 FY14-15. Accordingly the Company has to adjust the DTLof H7399.96 Lakh in three years. The Company has transferred the third and final trancheof 50% being H3700 Lakh in this year ending March 31 2017 from the General Reserves toDTL (H3700 Lakh transferred in the previous two years). Further Deferred Tax Liability(net) of H 1977.65 Lakh (previous year H1675.56 Lakh) was charged to the Statement ofProfit & Loss on account of various components of asset & liabilities includingSpecial Reserve appropriated during the current 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 188 defaulting borrowers underthe Securitisation and Reconstruction of Financial Assets and Enforcement of SecurityInterest ("SARFAESI") Act 2002 and recovered H8.94 Crore (previous year H2.66Crore) from borrowers of Non-Performing accounts. By way of seized assets your
Company has recovered H 3.80 Crore (previous year H1.09 Crore). During the yearCompany recovered H 0.37 Crore in written off accounts (previous year H0.74 Crore). Duringthe year your Company negotiated one-time settlement (OTS) with eligible NPA borrowers asper its recovery policy and recovered H16.75 Lakh (previous year H 86.08 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 2014 bearing 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 Companyentered into Listing Agreements with the National Stock Exchange of India Ltd and BSELimited within the prescribed period. Smt. Veena G Kamath ACS is the Compliance Officerof the Company from FY 16-17 (Shri K S Sathyaprakash FCS was the Compliance Officer ofthe Company upto 31/05/2016). The Board of Directors has authorised the Company Secretaryand the Chief Financial Officer severally for reporting disclosure of material eventsif any in terms of Regulation 30 of the said Regulations.
Dividend distribution policy is given as Annexure 8 as required under SEBI amended LODRRegulations.
15. Human Resources Development
The total number of employees of your Company was 626 (471 regular and 155 on contract)as on March 31 2017 as against 553 (395 regular and 158 on contract) as at the end of theprevious year. Attrition rate stood at about 3.50% for regular employees which is farbelow the industry level.
To upgrade knowledge/skill of the employees some employees were deputed for trainingprogrammes/ seminars organised by the National Housing Bank and other reputedinstitutions. During the year training in credit information technology humanrelations finance taxation marketing fraud prevention and other topics of importancewere imparted to employees and executives. Your Company has put in place a series of HRmeasures including promotions appropriate employee recognition and reward schemes.Industrial relations in your Company continued to be cordial during the year.
Particulars of Employees:
During FY16-17 your Company had not employed anyone with a remuneration of H102 Lakhor more per annum nor had employed for a part of the year with a remuneration of H8.5 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 FY16-17 was 3.18
: 1 (Non-executive directors and Independent Directors are eligible for sitting feeonly)
ii. The percentage increase in remuneration in the financial year under the headManaging Director was 24% of which part terminal benefits of the earlier ManagingDirector is also included (the remuneration of Managing Director is as per the ServiceRegulations of Canara Bank in terms of the resolution passed by the members at the GeneralMeeting for appointment in the Company).
The Chief Financial Officer and the Company Secretary are employees of the Company andthe percentage increase in their remuneration was 16.06% and 7.15% respectively.
iii. The percentage increase in the median remuneration of employees in the financialyear is 23.84%.
iv. Apart from 471 permanent employees on the rolls of the Company there were 155employees on contract as on March 31 2017.
v. Average percentile increase already made in the salaries of employees other than themanagerial 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 as well as that of Managerial remuneration wasaround 10% during the period under review.
The Company affirms that the remuneration is as per the remuneration policy of theCompany.
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 FY16-17 no cases of sexualharassment were reported. The Company has laid down a Code of Conduct for Prevention ofInsider Trading in accordance with the requirements under the Securities and ExchangeBoard of India (Prevention of Insider Trading) Regulations 2015 and Companies Act 2013with a view to regulate trading in Securities of the Company by its directors designatedpersons and employees. The same is made available on the website of the 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 only section 125 (8) to (11)notified by MCA on September 05 2016) the amounts (dividend deposits etc. withinterest) that remained unclaimed and unpaid for more than 7 years from the date theyfirst 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 matureddeposits or lodge their claim for payment of due if any from time to time and claimsmade are settled. As per the statutory requirements unclaimed deposits/ other dues forthe previous seven years as of the date of the Annual General Meeting are made availableon the 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 the Company/Depository Participants promptly.
a. Unclaimed dividends
As at March 31 2017 dividends aggregating to H 124.18 Lakh (previous year H98.34Lakh) relating to dividends declared for the years FY09-10 to FY15-16 (of whichH34.28 Lakh related to dividend for the year 2016) had not been claimed by shareholders.As an investor friendly measure your Company has intimated shareholders to lodge theirclaims and related particulars were provided in the annual reports each year as well as onthe website of your Company.
The dividend pertaining to 2008-09 which remained unclaimed/unpaid amounting to H5.41Lakh (in respect of 1824 shareholders) was transferred to IEPF on October 3 2016 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 2009-10 remaining unclaimed and unpaid amounting to H6.98Lakh (in respect of 2062 shareholders) as on March 31 2017 would be transferred to IEPFduring August 2017 after settlement of the claims received up to the date of completion ofseven years i.e. on August 25 2017. 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 2008-09 amounting to H 0.72 Lakh (previous year H 3.62 Lakh) that remained unclaimedand unpaid for a period of 7 years were transferred to IEPF during the year under review.
c. Transfer of shares to IEPF Demat account
Investor Education and Protection Fund Authority (Accounting Audit Transfer andrefund) Rules 2016 was notified by the Ministry of Corporate Affairs (MCA) on September05 2016. As per Rule 6 of the said Rules the shares in respect of which dividendamounts have not been paid or claimed for 7 consecutive years are required to betransferred to IEPF Suspense Account (CFHL)
On verification of records of unclaimed dividend amounts from 2003 to 2009 which havealready been transferred to IEPF on lapse of 7 years (during 2010 to 2016 respectively)430 shareholders have not claimed dividend for consecutive 7 years and their shares areliable to be transferred to IEPF.
In terms of the above Rules two reminders dated September 24 2016 and December 022016 were sent by the Company to all the shareholders who have not claimed their dividendsfor a consecutive period of 7 years informing that their shares will be transferred toIEPF suspense account on December 25 2016 if they do not place their claim for unclaimeddividend amounts before the Company.
In the meantime the action was stayed due to a General Circular No.15/2016 datedDecember 07 2016 issued by the MCA informing that revised notifications will be issued.
Further the MCA issued a revised notification dated February 28 2017 extending theperiod for transfer of unclaimed shares to IEPF Demat Account upto May 31 2017. TheCompany has sent a third reminder dated April 13 2017 in this regard to 389 shareholderswho have not claimed their dividend amounts for a consecutive period of 7 years informingthe said due date for transfer of shares to IEPF Demat account. Your Company has providedthe IEPF Rules the paper notifications issued and a list of the shareholders whoseshares will be transferred to IEPF in the Investor Page of the website of theCompany.
17. Particulars regarding conservation of energy technology absorption and foreignexchange earnings and expenditure
Since your Company is a housing finance Company and does not own any manufacturingfacility the requirement relating to providing the particulars relating to conservationof energy and technology absorption as per Sec 134 (3) (m) of the Companies Act 2013 readwith Rule 8 of the Companies (Accounts) Rules 2014 are not applicable.
Your Directors are pleased to inform that Solar Power systems and power saving lampshave been installed in 16 branches so far as a measure for conservation of energy. YourCompany has installed Solar-UPS in some of its branches.
As a part of Save Green efforts and leverage of technology a lot of paper work atbranches and the Registered Office has been reduced (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 H 26.73 Lakh through authorised dealers.
18. Directors & Key Managerial Personnel Appointments / Reappointments:
The Board of Directors made the following appointments/ re-appointments based on therecommendations of the Nomination and Remuneration Committee:
(1) Shri S K Hota General manager of Canara Bank was appointed as the ManagingDirector with effect from May 19 2016. His appointment was approved by the members at the29th Annual General Meeting of the Company held on July 20 2016.
(2) Shri Naganathan Ganesan FCA was appointed as an Additional Director (IndependentDirector) with effect from September 07 2016.
(3) Shri Thallapaka Venkateswara Rao Independent Director has been re-appointed bythe Board as an Independent Director for a period of one year from the conclusion of theensuing Annual General Meeting upto the conclusion of the Annual General Meeting of theCompany of the year 2018.
(4) Shri Kokkarne Natarajan Prithviraj Independent Director has been re-appointed bythe Board as an Independent Director for a period of one year from the conclusion of theensuing Annual General Meeting upto the conclusion of the Annual General Meeting of theCompany of the year 2018.
The directors had filed their consent(s) and declarations that they are notdisqualified 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 proposals relating to the appointmentand re-appointment of directors will be placed for approval by members at the ensuingAnnual General Meeting.
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 the30th Annual General Meeting of the Company seeking approval from the members. Theparticulars relating to the Directors and all other relevant information are provided inthe explanatory statement forming part of the said Notice for the information of members.
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 Smt. P V Bharathi Director retires byrotation at the ensuing Annual General Meeting and being eligible offers herself for re-appointment.The particulars relating to Smt. P V Bharathi Director are provided in the Report of theDirectors on Corporate Governance. Your Directors recommend the reappointment of Smt. P VBharathi as a Director.
The agenda relating to re-appointment of Smt. P V Bharathi Director forms part of thenotice convening the ensuing Annual General Meeting and all other relevant information asper SEBI Regulations are also provided in the explanatory statement.
Shri C Ilango Managing Director of the Company had submitted his resignation witheffect from May 18 2016 (after office hours) consequent to his repatriation toCanara Bank.
19. Meetings of the Board
During the year nine 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.
Your Company has complied with all the requirements as applicable under Companies Act2013 and related rules SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 and also HFCs Corporate Governance (NHB) Directions 2016 in relationto the Board of Directors and the Committees of the Board.
Committees of the Board
Currently the Board has 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 Accounting Standards have beenfollowed along with proper explanation relating to material departures if any; b) theDirectors have selected such accounting policies and applied them consistently and madejudgements and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company at the end of the financial year and of theprofit and loss of the Company for that period;
c) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and otherirregularities;
d) the Directors have prepared the annual accounts on a going concern basis;
e) the Directors in the case of a listed Company have laid down internal financialcontrols to be followed by the Company and that such internal financial controls areadequate and were operating effectively and
f) the Directors have devised proper systems to ensure compliance with the provisionsof all 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 Section149(6).
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 FY16-17. As required under Schedule V (D) of the said Regulations adeclaration 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) Policy
Your Company has constituted a Nomination and Remuneration Committee (NRC) of the Boardin terms of Section 134(3)(e) of the Act Regulation 19 of the SEBI (Listing Obligations& Disclosure Requirements) Regulations 2015 and Para 3(II) of NHB CorporateGovernance (National Housing Bank) Directions 2016 consisting of 3 Directors. ThisCommittee identifies persons who are qualified to become Directors of the Company. Theappointment renewal reappointment re-categorisation and/ or removal of the Directors soidentified including extension or continuation of the term of appointment will berecommended by the NRC to the Board. This Committee has also laid down the criteria toidentify persons who may be appointed to the senior management of the Company. The NRC hasformulated the criteria for determining qualifications positive attributes andindependence of a Director carrying out evaluation of every Directors performance.The NRC Policy of the Company covering all the above aspects is made available on theofficial website of the Company at http://www.canfinhomes.com/Aboutus/CorporateGovernancedocuments(path).
The Board ensures the annual evaluation of its own performance and that of itsCommittees and individual directors through the meeting of independent directors the NRCand evaluation by each of the directors independently.
22. Corporate Social Responsibility (CSR) Policy
Your Company constituted a Corporate Social Responsibility (CSR) Committee of the Boardas prescribed under Section 135 of the Companies Act 2013 and has put the CSR policy inplace. The Company has focussed in promoting education including special education andemployment in enhancing vocation skills especially among children. The company alsofocuses on women empowerment by Promoting gender equality setting up homes and hostelsfor women and orphans; setting up old age homes day care centres livelihood enhancementprojects for the elderly & the differently abled. Reducing inequalities faced bysocially and economically backward groups and contribution to Prime MinistersNational Relief Fund also forms part of its CSR activities.
The activities undertaken by the Company under CSR initiative is on Pan India basis andthe projects are executed by our branches in those areas. The total amount to be spentunder the CSR initiatives for FY16-17 was H 402 Lakh (previous year
H372 Lakh) out of which projects sanctioned under CSR activities was H392 Lakh. Thedisbursements/ amount spent on the approved projects during 2016-17 is H436 Lakh whichincludes H 155 Lakh of previous sanctions that are carried over. The unspent amount of H18 Lakh (H8 Lakh pertaining to FY15-16 and H10 Lakh to FY16-17) is carried forward as perprovisions of Companies Act with the aim to go in for granular details/ appropriateprojects before spending in FY17-18. A summary of CSR details as on March 31 2017 isgiven below:
|Sl No. Activities undertaken ||No. of Beneficiaries ||Amount in Rupees |
|1 Construction of Schools ||6 ||3940412.00 |
|2 Desks & benches/ Tables/ Almirah/ Green Board/ Chairs/ School Bags/ Books ||124 ||21580691.00 |
|3 Drinking water facility/ supply of other articles of necessity etc. ||28 ||2078533.00 |
|4 Repair and Renovation of schools ||11 ||4419961.00 |
|5 Electrical & Electronic Items ||5 ||405551.00 |
|6 Toilet Facility ||5 ||1115380.00 |
|7 Scholarship ||1 ||34600.00 |
|8 Contribution to Pradhan Mantri National Relief Fund ||1 ||10000000.00 |
|Total ||181 ||43575128.00 |
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 asenior executive of the Company. In terms of Section 134(3)(n) of the Act your directorswish to state that your Company has drawn and implemented a Risk Management Policyincluding identification of elements of risks if any which may threaten the existence ofyour Company. The above policy is being reviewed/re-visited once a year or at such otherintervals as deemed necessary for modifications and revisions if any.
24. Audit and Internal Control
Your Company strengthened existing internal control systems for loan reviews atperiodical intervals and introduced measures for minimising operational risks commensuratewith the nature of its business and size of operations. Further your Company has revieweddelegation of authorities and streamlined standard operating procedures for all areas ofits business/ operations/ functions strengthened the Offsite Transaction MonitoringSystem (OTMS) to track transactions/early-warning signals across all branches byintroducing innovative 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 December 2016 forthe position as at March 2016. The compliance on the observations were submitted withinthe prescribed time to the NHB which were reviewed by the Audit Committee and the Board.
Your Company has also put in place a well- defined policy on Risk Based Internal Audit(RBIA) and as per the said policy all the 120 branches that became due for audit wereaudited in the FY16-17.
Apart from the RBIA Audit considering the volume of business branches are alsosubjected to quarterly/ half yearly internal audit by empanelled audit firms. The AuditCommittee reviewed the audit reports/remarks/ observations and replies/ compliancesincluding the compliance of KYC norms.
25. Secretarial Audit
The Secretarial Audit for FY16-17 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 (Annexure 3) in terms ofSection 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 of the Notes forming part of the financialstatements for FY16-17 forming a part of the Annual Report. The particulars of RelatedParty Transactions as required u/s sec 134(3)(p) and 134(3)(n) in the prescribed format isattached to this Report as Annexure 5.
M/s K P Rao & Co. Chartered Accountants Bengaluru Statutory Auditors ofyour Company (Firm Registration No.003135S) appointed by the members at the 29th AnnualGeneral Meeting (AGM) of your Company held on July 20 2016 and other 53 firms of branchauditors who were appointed by the Board based on the approval of the members at the aboveAGM to hold office from the conclusion of the said meeting until the conclusion of theensuing AGM of your Company would retire at the ensuing AGM. Considering theapplicability of the Companies (Audit and Auditors) Rules 2014 M/s K P Rao & Co arenot eligible for reappointment as Statutory Auditors for your Company for the FY17-18 asthey have completed 3 years from the applicability of the Companies (Audit and Auditors)Rules 2014.
Your Directors recommend the appointment of M/s. Varma & Varma CharteredAccountants (Firm Regn. No. 004532S) as the Statutory Auditors. The resolutions seekingapproval of the members for appointment of Statutory Auditors and fixation of theirremuneration and authorisation to the Board of Directors for appointment of BranchAuditors and fixation of their remuneration are included in the notice convening theensuing Annual General Meeting. The above said appointment attracts the provisions ofSection 139142 143 and all other applicable provisions if any of the Companies Act2013 and Rules. 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.
Statutory Auditors Report
In terms of Section 134(4) and 134(3)(ca) of the Act your Directors are pleased toinform that as in the previous years there is no qualification reservation or adverseremark or disclaimer made by the statutory auditors of the Company in their audit reportfor the financial year FY16-17.
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 forFY16-17.
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 to which the financialstatements relate and the date of this report. Your Directors also wish to inform thatthere were no significant and material orders passed by the Regulators/Courts/Tribunalsimpacting the going concern status and Companys operations in future.
On January 18 2016 the Press Information Bureau Government of India Ministry ofCorporate Affairs (MCA) issued a note outlining the road map for implementation of IndianAccounting Standards converged with IFRS (Ind AS) for Scheduled Commercial Banks(excluding RRBs) Insurance Companies and NBFCs. Companies having Networth of more thanH500 Crore shall comply with the Indian Accounting Standards (Ind AS) for financialstatements for accounting period beginning from April 1 2018 onwards with comparativesfor the period ending March 31 2018 or thereafter.
The applicability of the said notification on your Company is with effect from FY18-19onwards and necessary steps have been taken for smooth implementation INDIAN ACCOUNTINGSTANDARDS (IND AS).
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 Regulation 34 read with Schedule V of theSEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 and HousingFinance Companies
Corporate Governance (National Housing Bank) Directions 2016 the Reportof Directors on Corporate Governance for the year FY16-17 is placed in this AnnualReport.
The said Report covers in detail the Corporate Governance Philosophy of the CompanyBoard Diversity Directors appointment and remuneration declaration by IndependentDirectors Board evaluation familiarisation programme vigil mechanism 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 read with the SEBI Circular No. SEBI/HO/CFD/CMD/CIR/P/2017/004 dated January 5 2017 your Company has put in place the Boardand Directors 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 its 16 branches and the like. The usage of the paper is minimised.
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 Annual GeneralMeeting Notices and such other notices are being sent to all members whose e-mail addressare registered with the Company/Depository participants. For members who have notregistered their e-mail address and to those who specifically request for physical copiesthe same is sent in the permitted mode.
30. Outlook for 2017-18
In tune with the Governments mission to provide "Housing For All By2022" your Company has geared itself to provide home loans under Credit Link SubsidyScheme (CLSS) for the Low Income Group (LIG) and Middle Income Group (MIG) segment underPradhan Mantri Awas Yojana (PMAY) which is likely to give a fillip to the aspirations ofpersons desirous of owning a home. We have also introduced 2 new products NewGruhalakshmi Rural Housing Scheme (new GRHS) and New Loan For UrbanHousing (New LUH) with low interest rates to compete with the best rates prevailingin the market. The real estate scenario is expected to improve and credit off take is alsoexpected to emerge stronger in the current year. Implementation of Real Estate RegulationAct (RERA) in most of the states of the country is expected to bring a disciplined growthboosting the confidence level of new home buyers.
For the FY17-18 your Company is targeting a loan book size of H17000 Crore byMarch 18. Lending to the salaried class will continue to be our mainstay. The primefocus of your Company would be growth with quality duly ensuring enhancement ofoperations increasing the Non Housing Loan (NHL) portfolio further improvement in theasset quality and reduction of cost.
The performance of the Company is keenly viewed by our shareholders stake-holderscustomers banks peer groups and the general public. The onus of maintaining the highstandards is a formidable challenge however your Company is confident of meeting thesame.
Your Directors would like to thank Canara Bank for continuous support.
Your Directors would like to acknowledge the role of all its stakeholders viz.shareholders debenture holders CP holders depositors bankers lenders borrowersmerchant bankers Debenture Trustees and all others for their continued support to yourCompany and the confidence and faith 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 ofIndia (SEBI) Ministry of Corporate Affairs (MCA) Registrar of Companies Karnataka theStock Exchanges and the NSDL and CDSL.
Your Directors thank the Rating Agencies ICRA CARE India Ratings & Research Ltd.(FITCH) the Registrars Share Transfer Agents Debenture Trustees and Trustees of publicdeposits of your Company Government(s) local/ statutory authorities and all others fortheir whole-hearted support during the year and look forward to their continued support inthe years ahead.
Your Directors value the professionalism of all the employees who have provedthemselves in a challenging environment and whose efforts have stood the Company in goodstead and taken it to present level.
For and on behalf of the Board of Directors
|Place: Bengaluru ||K N Prithviraj |
|Date : May 15 2017 ||Chairman |