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Housing & Urban Development Corporation Ltd.

BSE: 540530 Sector: Financials
NSE: HUDCO ISIN Code: INE031A01017
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VOLUME 717958
52-Week high 102.35
52-Week low 66.15
P/E 17.85
Mkt Cap.(Rs cr) 16,295
Buy Price 81.45
Buy Qty 991.00
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OPEN 80.85
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VOLUME 717958
52-Week high 102.35
52-Week low 66.15
P/E 17.85
Mkt Cap.(Rs cr) 16,295
Buy Price 81.45
Buy Qty 991.00
Sell Price 0.00
Sell Qty 0.00

Housing & Urban Development Corporation Ltd. (HUDCO) - Auditors Report

Company auditors report

To the Members of

HOUSING AND URBAN DEVELOPMENT CORPORATION LIMITED

REPORT O THE STANDALONE FINANCIAL STATEMENTS

We have audited the accompanying standalone financial statements of Housing andUrban Development Corporation Limited ("the Company") which comprise theBalance Sheet as at 31st March 2016 the Statement of Profit and Loss the Cash FlowStatement for the year then ended and a summary of the significant accounting policiesand other explanatory information.

Management's Responsibility for the Standalone Financial Statements

the Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014. is responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.

We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. ose Tamilnadu Standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. the procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at 31st March 2016 and its profit and its cash flows for the year ended on that date.

Emphasis of Matters

We draw attention to the following matters in the Notes to the financial statements:

i) As indicated in Point 2(b) of Note 26 the company as per the board resolutionpassed in the year 2009 has charged interest amounting to ` 23.12 crore [` 22.98 crorefor the previous year ending 31st March 2015] for the year ended 31st March 2016. thesame has been shown under the head "Other Income – interest on constructionproject". the balance outstanding as at the end of the year is ` 320.10 crore (debit)in "HUDCO AGP Account". the same has been informed to the concerned ministry butspecific confirmation from the ministry is awaited. ii) In case of one of the Borrowerthe loan was categorized as sub-standard by the company on 15.04.2015. However in view ofHon'ble High Court of Madras Order and legal opinion of Law wing with respect to assetclassification the loan asset has been re-classified from sub-standard to standard.However keeping in view the prudent accounting the interest income of ` 100.28 crore(including ` 15.69 crore of interest accrued as on 31.03.2015) has not been recognized inthe accounts.[Refer Point 6 of Note 26].

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the Annexure- 1 a statement on the matters specified in theparagraphs 3 and 4 of the said Order.

2. We are enclosing our report in terms of Section 143 (5) of the Act on the basis ofsuch checks of the books and records of the Company as we considered appropriate andaccording to the information and explanations given to us in the Annexure 2 on thedirections and sub-directions issued by the Comptroller and Auditor General of India.

3. As required by Section 143 (3) of the Act we report that: a) We have sought andobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purposes of our audit; b) In our opinion proper books ofaccount as required by law have been kept by the Company so far as it appears from ourexamination of those books and proper returns adequate for the purposes of our audit havebeen received from the regional offices not visited by us; c) the Balance Sheet theStatement of Profit and Loss and the Cash Flow Statement dealt with by this ReportHUDCODesign Award

are in agreement with the books of account; First Prize : CUBOID Architects: UnderCategory Conservation of Heritage Architectural Heritage of Chettinad Tamilnadu

d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014; e) We are informed that the provisions of Section 164(2)of the Act in respect of disqualification of directors are not applicable to the Companybeing a Government Company in terms of notification no. G.S.R.463(E) dated 5th June 2015issued by Ministry of Corporate Affairs. f) With respect to the adequacy of the internalfinancial controls over financial reporting of the Company and the operating effectivenessof such controls refer to our separate Report in "Annexure 3". g) With respectto the other matters to be included in the Auditor's Report in accordance with Rule 11 ofthe Companies (Audit and Auditors) Rules 2014 in our opinion and to the best of ourinformation and according to the explanations given to us: i. the Company has disclosedthe impact of pending litigations on its financial position in its financial statements– [Refer Point 1(a) of Note 26]; ii. the Company has made provision as requiredunder the applicable law or accounting standards for material foreseeable losses if anyon long-term contracts including derivative contracts; iii. ere has been no delay intransferring amounts required to be transferred to the Investor Education and ProtectionFund by the Company.

NHB DIRECTIVES

4 company is complying with National Housing Bank's credit concentration norms inrespect of loans to private sector agencies. However in case of loans to StateGovernments / State Governments agencies the said norms have been relaxed to HUDCO by NHBvide various letters (Refer table given in point no. 14 of Note 26); the same is compliedwith except in case of the investment in equity share of HFC i.e. Indbank Housing Limitedwhere more than 15% of the equity capital of the investee company as prescribed limitwhich was invested in the financial year 1990-91. [Refer Point no. 14 of Note no. 26].

For Dhawan & Co.
Chartered Accountants
(Firm Registration. No. 002864 N)
Sd/-
I.J.Dhawan
Place of Signature : New Delhi (Partner)
(Membership. No. - 081679)
Date : 16th June 2016

ANNEXURE TO THE AUDITOR'S REPORT

Annexure - ‘1' referred to in our Independent Auditor's Report to the membersof the Housing and Urban Development Corporation Limited on the financialstatements for the year ended 31st March 2016 we report that:

(i) (a) the company has maintained proper records showing full particulars of fixedassets including quantitative details. (b) As per information and explanation given to usthere is a regular programme of physical verification of all fixed assets once every yearwhich in our opinion is reasonable having regard to the size of the Company and thenature of its assets. In our opinion and as per the information given by the Managementthe discrepancies observed were not material and have been appropriately accounted in thebooks.

(c) the title/ lease deeds of the immovable properties are held in the name of theCompany except cases of Leasehold Land/fiats/buildings measuring 14080.38 square metershaving cost of ` 35.08 crore and Freehold Land/fiats/ buildings measuring 3261.37 squaremeters having cost of ` 4.89 crore of which title/ lease deeds are pending for executionin the name of the Company.

(ii) the nature of business of the company does not require it to have any inventory.Hence the requirement of clause (ii) of paragraph 3 of the said Order are not applicableto the company.

(iii) According to the information and explanation given to us the company has notgranted any loans secured or unsecured to any companies firm or other parties covered inthe register required to be maintained under section 189 of the Companies Act 2013(‘the Act'). Hence Clause (III) (a) (III) (b) and (III) (c) are not applicable. (iv)According to the information and explanations given to us the Company being a HousingFinance Company is exempted from the provisions of section 186 (2) as it is engaged inthe business of providing financial assistance for housing and infrastructure facilitiesas provided under Schedule-VI of the Companies Act'2013. However we have been informedthat the company has complied with the provisions of section 186 (1) where applicable.According to the information and explanations given to us there were no transactionsduring the year to which the provisions of section 185 were applicable.

(v) the company has accepted deposits from the public. In our opinion and according tothe information and explanations given to us the company during the year has compliedwith the directives issued by the National Housing Bank under the Housing FinanceCompanies (NHB) Directions 2010 with regard to deposits accepted from the public and therules framed thereunder; and the provisions of Section 73 to 76 and other relevantprovisions of the Companies Act 2013 and the rules framed there under.

(vi) According to the information and explanations given to us the Central Governmenthas not prescribed the maintenance of cost records under sub section (1) of section 148 ofthe Companies Act 2013 in respect of the business of the company.

(vii) (a) According to the information and explanations given to us and according tothe records produced before us for verification the company is generally regular indepositing with appropriate authorities the undisputedHUDCO Design Award

First Prize : CUBOID Architects: Under Category Conservation of HeritageArchitectural Heritage of Chettinad Tamilnadu

statutory dues including provident fund income tax wealth tax service tax and anyother material statutory dues applicable to it.

(b) According to the information and explanations given to us no undisputed amountspayable in respect of Income Tax Wealth Tax Service Tax and any other material statutorydues were in arrears as at 31st March 2016 for a period of more than six months from thedate they became payable.

(c) According to the information and explanations given to us there are no dues ofincome tax wealth tax and Service Tax which have not been deposited on account of anydispute except the following:

Name of the Nature of Financial Year to which the matter Forum where Matter is Amount
statue Dues pertains Pending (` in Crores)
Income Tax Act Income Tax 1996-1997 Deputy Commissioner of
4.14
1961 Interest & Penalty 1999-2000 & 2000-2001 Income Tax and ITAT
Finance Act Service Tax 2005-2006
1994 Interest & Penalty 2006-2007
2007-2008
2008-2009
2009-2010
Commissioner of Service Tax 4.62
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

d) According to the information and explanations given to us the amount which wasrequired to be transferred to investor education and protection fund in accordance withsub section (5) of section 124 of the Companies Act 2013 except a sum of ` 0.20 crorewhich has not been deposited on account of unclaimed interest on bonds and depositsremaining unpaid for seven years from their date of payment. (viii) In our opinion andaccording to the information and explanations given to us the Company has not defaultedin repayment of dues to financial institutions banks and Government or debentureholders.

(ix) According to the information and explanations given to us the Company has raisedthe money through Tax Free Bonds through private placement and public offer or furtherpublic offer. the proceeds of such bonds have been utilised for the purpose as mentionedin offer documents. (x) According to the information and explanations given to us and asrepresented by the Management and based on our examination of the books and records of theCompany and in accordance with generally accepted auditing practices in India no materialcase of frauds by the Company or on the company by its officers or employees has beennoticed or reported during the year. (xi) As informed the provisions of Section 197relating to managerial remuneration are not applicable to the Company being a GovernmentCompany in terms of MCA Notification no. G.S.R. 463 (E) dated 5th June 2015.

(xii) the Company is not a Nidhi Company and hence the requirement of Clause 3 (xii) ofthe order is not applicable. (xiii) In our opinion and according to the information andexplanations given to us all transactions during the year with the related parties wereapproved by the Audit Committee and are in compliance with sections 177 of the CompaniesAct 2013 where applicable and since the said transactions were in the ordinary course ofbusiness of the company and were at arm's length basis the provisions of section 188 arenot applicable and the details have been disclosed in the Financial Statements asrequired by the applicable accounting standards; (xiv) According to the information andexplanations given to us the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year underreview. Hence Clause (xiv) is not applicable.

(xv) In our opinion and according to the information and explanations given to us theCompany has not entered into any non-cash transactions with directors or persons connectedwith him.

(xvi) According to the information and explanations given to us the Company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.However the company being a Housing Finance Company is registered with National HousingBank vide Registration No. 01.0016.01 by which NHB has granted status of Housing FinanceCompany (HFC) to HUDCO on 31st July 2001.

Heritage of Chettinad Tamilnadu For Dhawan & Co.
Chartered Accountants
(Firm Registration. No. 002864 N)
Sd/-
I.J.Dhawan
Place of Signature : New Delhi (Partner)
(Membership. No. - 081679)
Date : 16th June 2016

Annexure – ‘2' referred to in our Independent Auditor's Report to themembers of the Housing and Urban Development Corporation Limited on the financialstatements for the year ended 31st March 2016

Directions indicating the areas to be examined by the Statutory

Auditors during the course of audit of annual accounts of Housing And Urban DevelopmentCorporation Ltd. for the year 2015-16 issued by the Comptroller & Auditor General ofIndia under section 143(5) of the Companies Act 2013.

Observations Reply
1. Whether the Company has clear title/lease deeds for freehold and leasehold land respectively? If not please state the area of freehold and leasehold land for which title/lease deeds are not available. We have verified the copies of title/lease deeds for freehold and leasehold land building and fiats. the company has clear title in respect of these except some cases of Leasehold Land/ fiats/buildings measuring 14080.38 square meters having cost of _35.08 crore and Freehold Land/fiats/buildings measuring 3261.37 square meters having cost of _4.89 crore of which title/ lease deeds are pending for execution in the name of the Company. the company has maintained records/details on the computer system.
2. Whether there are any cases of waiver/write off of debts/ loans/interest etc. if yes the reason there for and the amount involved During the year 2015-16 company has waived o_/ written off interest i.e. (simple interest compound interest penal interest including loss of rebate and EMI waiver) on account of default resolution. the total amount waived stood at _117.29 crores.
3. Whether proper records are maintained for inventories lying with third parties & assets received as gi_/grant(s) from the Government or other authorities. nature of business of the company does not require it to have any inventory. erefore the clause with respect to inventories lying with third parties is not applicable. Further during the year company has not received assets as gi_/grant(s) from the Government or other authorities. Further the company is maintaining records of grant assets.
Sub Directions:
4. In respect of provisioning requirement of all restructured or renegotiated loans whether a system of periodical assessment of realizable value of securities available against all such loans is in place and adequate provision has been created during the year? Any defficiencies in this HUDCO Design Award First Prize : CUBOID Architects: Under Category Conservation In the cases of Heritage examined Architectural Heritage by us Company of Chettinad has made Tamilnadu adequate regard may be suitably commented upon. During the year HUDCO has not restructured or renegotiated any loans. As per practice HUDCO is getting the valuation of realizable value of securities in Doubtful cases once in 3 years. provision as per NHB guidelines.

 

For Dhawan & Co. Chartered Accountants (Firm Registration. No. 002864 N)
Sd/-
I.J.Dhawan
Place of Signature : New Delhi (Partner)
(Membership. No. - 081679)
Date : 16th June 2016

ANNEXURE "3" TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THESTANDALONE FINANCIAL STATEMENTS OF HOUSING AND URBAN DEVELOPMENT CORPORATION LIMITED

FOR THE YEAR ENDED 31st MARCH 2016

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of HOUSINGAND URBAN DEVELOPMENT CORPORATION LIMITED ("the Company") as of March 312016 in conjunction with our audit of the standalone financial statements of the Companyfor the year ended on that date.

Management's Responsibility for Internal Financial Controls

the Company's management is responsible for establishing and maintaining internalfinancial controls based on "the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India".] ese responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. ose Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects Our auditinvolves performing procedures to obtain audit evidence about the adequacy of the internalfinancial controls system over financial reporting and their operating effectiveness. Ouraudit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting assessing the risk

of Chettinad Tamilnadu

that a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. the procedures selecteddepend on the auditor's judgement including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management overrideof controls material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2016 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.

For Dhawan & Co. Chartered Accountants (Firm Registration. No. 002864 N)
Sd/-
I.J.Dhawan
Place of Signature : New Delhi (Partner)
(Membership. No. - 081679)
Date : 16th June 2016
HUDCO Design Award
First Prize : CUBOID Architects: Under Category Conservation of

Heritage Architectural Heritage of Chettinad Tamilnadu