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Housing & Urban Development Corporation Ltd.

BSE: 540530 Sector: Financials
NSE: HUDCO ISIN Code: INE031A01017
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VOLUME 246021
52-Week high 102.35
52-Week low 66.15
P/E 17.51
Mkt Cap.(Rs cr) 15,945
Buy Price 79.65
Buy Qty 536.00
Sell Price 79.75
Sell Qty 67.00
OPEN 80.80
CLOSE 80.05
VOLUME 246021
52-Week high 102.35
52-Week low 66.15
P/E 17.51
Mkt Cap.(Rs cr) 15,945
Buy Price 79.65
Buy Qty 536.00
Sell Price 79.75
Sell Qty 67.00

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

Company auditors report

To

The Members of

HOUSING AND URBAN DEVELOPMENT CORPORATION LIMITED

Report on 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 2017 the Statement of Profit and Loss the Cash FlowStatement for the year then ended and a summaryofthesignificantaccounting policies andother explanatory information (hereinafter referred to as "standalone financialstatements").

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.

This 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 standalone financialstatements that give a true and fair view and are free frommaterial misstatement 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 specifiedunderSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe standalone financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the standalone financial statements. The procedures selected depend onthe auditor’s judgment including the assessment of the risks of materialmisstatement of the standalone financial statements whether due to fraud or error. Inmaking those risk financial control relevant to the Company’s preparation of thestandalone financial to design audit procedures that are appropriate in the circumstances.An audit also includes evaluating the appropriateness of the accounting policies used andthe reasonableness of the accounting estimates made by the Company’s Directors aswell as evaluating the overall presentation of the standalone 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 2017 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 no. 26 the company as per the board resolutionpassed in the year 2009 has charged interest amounting to Rs. 23.40 crore [Rs. 23.12crore for the previous year ended 31st March 2016] for the year ended 31st March 2017.The same has been shown under the head "Other Income interest on constructionproject".

The balance outstanding as at the end of the year is Rs. 370.38 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 Borrower the loan was categorized as sub-standard by thecompany on 15.04.2015. However in view of Hon’ble High Court of Madras Order andlegal opinion of Law wing with respect to asset classification the loan asset has beenre-classified from sub-standard to standard. However keeping in view the prudentaccounting the interest income ofRs.101.58 crore has not been recognized in the accounts[Refer Point 7 of Note 26].

iii) In case of one of the borrower the company has accounted for interest incomeofRs. 98.84 crore (including Rs. 47.83 crore for the year 2015-16) in the statement ofprofit and loss for the period ended 31.03.2017- [Refer Point 8 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 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the Annexure- 1 a statement on the matters specifiedin the paragraphs 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 and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;

b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books and proper returnsadequate for the purposes of our audit have been received from the regional offices notvisited by us;

c) The Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account;

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 ofdisqualification of directors are not applicable to the Company being a GovernmentCompany in terms of notification no. G.S.R. 463(E) dated 5th June 2015 issued by Ministryof Corporate Affairs.

f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure 3"; and

g) With respect to the other matters to be included in the Auditor’s Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements [Refer Point 1(a) of Note 26];

ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts;

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

iv. The Company has provided requisite disclosures in its standalone financialstatements as to holding as well as dealing in SpecifiedBank Notes during the period from08 th November 2016 to 30th December 2016 and these are in accordance with the books ofaccounts maintained by the Company. [Refer Point 4 of Note 26].

NHB DIRECTIVES

4. The company is complying with National Housing Bank’s credit concentrationnorms in respect 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. 15 of Note no. 26); thesame is complied with except in case of the investment in equity share of HFC i.e. IndbankHousing Limited where more than 15% of the equity capital of the investee company asprescribed limit which was invested in the financial year 1990-91. [Refer Point no. 15 ofNote no. 26].

For Dhawan & Co.
Chartered Accountants
Firm Registration. No. 002864N
Sd/-
I.J. Dhawan
Place of Signature : New Delhi Partner
Date : 30th May 2017 Membership. No. - 081679

ANNEXURE TO THE INDEPENDENT AUDITOR’S REPORT

Annexure - ‘1’ referred to in our Independent Auditor’s Report tothe members of the Housing and Urban Development Corporation Limited on thestandalone financial statements for the year ended 31st March 2017 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 us there is a regular programme ofphysical verification of all fixed assets once every year which in our opinion isreasonable having regard to the size of the Company and the nature of its assets. In ouropinion and as per the information given by the Management the discrepancies observedwere not material and have been appropriately accounted in the books.

(c) The title/ lease deeds of the immovable properties are held in the name of theCompany except cases of Leasehold Land/flats/buildings measuring 11521.53 square metershaving cost of Rs. 33.99 crore and Freehold Land/flats/buildings measuring 5718.03 squaremeters having cost of Rs. 6.51 crore of which title/ lease deeds are pending forexecution in 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 aHousing Finance Company is exempted from the provisions of section 186 (2) as it isengaged in the business of providing financial assistance for housing and infrastructurefacilities as provided under Schedule-VI of the Companies Act 2013. However we have beeninformed that the company has complied with the provisions of section 186 (1) whereapplicable. According to the information and explanations given to us there were notransactions during 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 undisputed statutory dues including providentfund income tax wealth tax service tax and any other material statutory dues applicableto it.

(b) According to the information and explanations given to us no undisputed amountspayable in respect of Income Tax Sales/ Value added Tax Service Tax and any othermaterial statutory dues were in arrears as at 31st March 2017 for a period of more thansix months from the date they became payable.

(c) According to the information and explanations given to us there are no dues ofincome tax Sales/Value added Tax and Service Tax which have not been deposited on accountof any dispute except the following:

Name of the statue Nature of Dues Financial Year to which the matter pertains Forum where Matter is Pending Amount (Rs. in Crores)
Income Tax Act 1961 Income Tax Interest & Penalty 1996-1997 Adnl. Commissioner of Income Tax Commissioner of Income Tax (A) and ITAT 74.36
1999-2000
2000-2001
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2013-2014
Finance Act 1994 Service Tax Interest & Penalty 2005-2006 Assistant/Deputy/Joint Commissioner/ Commissioner of Service Tax /CESTAT 4.62
2006-2007
2007-2008
2008-2009
2009-2010
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 Rs.0.20 crore which has not been deposited on account of unclaimed interest on bonds anddeposits remaining unpaid for seven years from their date of payment.

(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in repayment of dues to financial institutions banks andGovernment or debenture holders.

(ix) According to the information and explanations given to us the Company has raisedthe money against bonds through private placement offer. The proceeds of such bonds havebeen utilised for the purpose as mentioned in private placement offer letter.

(x) According to the information and explanations given to us and as represented by theManagement and based on our examination of the books and records of the Company and inaccordance with generally accepted auditing practices in India no material case of fraudsby the Company or on the Company by its officers or employees has been noticed or reportedduring the year.

(xi) As informed the provisions of Section 197 relating to managerial remuneration arenot applicable to the Company being a Government Company in terms of MCA Notificationno. G.S.R. 463 (E) dated 5th June 2015.

(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company and hence the requirement of Clause 3 (xii) of the order isnot applicable.

(xiii) In our opinion and according to the information and explanations given to usall transactions during the year with the related parties were approved by the AuditCommittee and are in compliance with section 177 of the Companies Act 2013 whereapplicable and since the said transactions were in the ordinary course of business of thecompany and were at arm’s length basis the provisions of section 188 are notapplicable and the details have been disclosed in the Financial Statements as requiredby the applicable accounting standards;

(xiv) According to the information and explanations given to us the Company has notmade any preferential allotment or private placement of shares or fully or partlyconvertible debentures during the year under review. However Under the Disinvestmentprogramme of Government of India the President of India acting through the Ministry ofHousing and Urban Poverty Alleviation (Selling Shareholder) sold 10.193% of its equityshareholding (i.e. 204058747 equity shares of face value of Rs. 10/- each) in Housingand Urban Development Corporation Ltd. (HUDCO) through an Initial Public Offer (IPO) at aprice of Rs.60/- per equity share vide allotment dated 17.05.2017. As the offer comprisedsolely of the Offer For Sale by the selling shareholder and with HUDCO not raising anyfresh equity capital through the offer no proceeds of the offer have been received byHUDCO. The equity shares of HUDCO got listed on 19th May 2017.

(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.

According to the information and explanations given to us the Company is not requiredto be registered under section 45-IA of the Reserve Bank of India Act 1934. However thecompany being a Housing Finance Company is registered with National Housing Bank videRegistration No. 01.0016.01 by which NHB has granted status of Housing Finance Company(HFC) to HUDCO on 31st July 2001.

For Dhawan & Co.
Chartered Accountants
Firm Registration. No. 002864N
Sd/-
I.J. Dhawan
Place of Signature : New Delhi Partner
Date : 30th May 2017 Membership. No. - 081679

Annexure – ‘2’ referred to in our Independent Auditor’s Reportto the members of the Housing and Urban Development Corporation Limited onthe standalone financial statements for the year ended 31st March 2017

Directions indicating the areas to be examined by the Statutory Auditors during thecourse of audit of annual accounts of Housing and Urban Development Corporation Limitedfor the year 2016-17 issued by the Comptroller & Auditor General of India undersection 143(5) of the Companies Act 2013.

SI No. 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 flats. The company has clear title in respect of these except some cases of Leasehold Land/flats/buildings measuring 11521.53 square meters having cost of Rs. 33.99 crore and Freehold Land/flats/ buildings measuring 5718.03 square meters having cost of Rs. 6.51 crore of which title/ lease deeds are pending for execution in the name of the Company.
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 2016-17 Company has waived off/ 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 during the year 2016-17 stood at Rs. 34.11 Crores.
3. Whether proper records are maintained for inventories lying with third parties & assets received as gift/grant(s) from the Government or other authorities. The nature of business of the Company does not require it to have any inventory. Therefore the clause with respect to inventories lying with third parties is not applicable. Further during the year Company has not received assets as gift/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 deficiencies in this regard may be suitably commented upon. During the year HUDCO has Restructured/ Re-Scheduled some UIF with the specific permission of its regulator National Housing Bank. Further HUDCO has Re-Scheduled some Housing loans as per guidelines. Company has made accelerated provision applicable to such cases. (Refer Annexure-A)
As per practice HUDCO is getting the valuation of realizable value of securities in Doubtful cases once in 3 years. In the cases examined by us Company has made adequate provision as per NHB guidelines.

 

For Dhawan & Co.
Chartered Accountants
Firm Registration. No. 002864N
Sd/-
I.J. Dhawan
Place of Signature : New Delhi Partner
Date : 30th May 2017 Membership. No. - 081679

Annexure-A

DETAILS OF THE RE-STRUCTURED/ RE-SCHEDULED OR RE-NEGOTIATED LOANS DURING THE YEAR2016-17

A. UIF

S. No. Name of Borrower Scheme No. Date of Sanction Amount (Rs. in Lakh) Remarks
Amount of Sanction Principal o/s as on 31.03.2017 Provision @ 5% as per NHB Directions
1 M/s Sikkim Industrial Devt. & Invest. Corp. Ltd. 20212 13.03.2013 11335.00 5464.85 273.24 Re-Schd of repayment
2 M/s K.S.K Mahanadi Power Co. Ltd. 19853 29.07.2010 10000.00 9998.87 499.94 Re-Schd of repayment

B. RET AIL

S. No. Name of Borrower Loan A/c No. Date of Sanction/ Amount (Rs. in Lakh) Remarks
Amount of Sanction Principal o/s as on 31.03.2017 Provision @ 5% as per NHB Directions
1 Udai Kumar K. THR002026 29.03.2014 2.50 2.57 0.13 Re-Schd of repayment
2 K.K. Santosh Kumar THR000695 16.10.2001 1.00 0.23 0.01 Re-Schd of repayment
3 K.K. Santosh Kumar THR001603 01.02.2005 1.50 1.02 0.05 Re-Schd of repayment

ANNEXURE "3" TO THE INDEPENDENT AUDITOR’S REPORT OF EVEN DATE ON THESTANDALONE FINANCIAL STATEMENTS OF HOUSING AND URBAN DEVELOPMENT CORPORATION LIMITED FORTHE YEAR ENDED 31ST MARCH 2017

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 ofHOUSINGAND URBAN DEVELOPMENT CORPORATION LIMITED ("the Company") as of March 312017 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 reportingestablished by the Company considering the essential components of internalcontrolcriteria stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India". Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company’s policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required 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. Those 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 audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial system over financial reporting and their operating effectiveness.Our audit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat 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 reportingcontrols system over

Meaning of Internal Financial Controls over Financial Reporting

A company’s internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures 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 override ofcontrols 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 2017 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. 002864N
Sd/-
I.J. Dhawan
Place of Signature : New Delhi Partner
Date : 30th May 2017 Membership. No. - 081679