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Housing & Urban Development Corporation Ltd.

BSE: 540530 Sector: Financials
NSE: HUDCO ISIN Code: INE031A01017
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VOLUME 1551618
52-Week high 102.35
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P/E 18.84
Mkt Cap.(Rs cr) 17,196
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Housing & Urban Development Corporation Ltd. (HUDCO) - Director Report

Company director report

Dear Members

Your Directors take pleasure in presenting the 46th Annual Report alongwithaudited financial statement for the year ended 31st March 2016.

1. FINANCIAL RESULTS

Company's financial performance for the year ended 31st March 2016 is givenbelow with comparative position of previous year's performance: ( ` in crore)

Particulars 2015-16 2014-15
Revenue from Operations 3204.81 3346.55
Other Income 97.39 81.22
Total Revenue 3302.20 3427.77
Finance cost 1907.37 1775.38
Other expenses 193.05 208.07
Provision and contingencies (Net) 129.20 273.80
Total expenditure 2229.62 2257.25
Profit before exceptional item and tax 1072.58 1170.52
Exceptional items 5.16 -
Prior period adjustments (0.64) 10.42
Profit before tax 1077.10 1180.94
Less:
Current Tax (314.00) (391.50)
Deferred tax 21.22 (12.07)
Prior period tax adjustments (0.53) 0.26
Profit a_er tax 783.79 777.63
Balance from previous year 37.00 68.30
Total amount available for appropriation 820.79 845.93
Heritage of Chettinad Tamilnadu Less : Appropriation
Proposed dividend on equity shares 100.01 100.01
Tax on dividend 20.36 20.49
Transfer to Special Reserve 240.00 310.00
Transfer to Debenture/ Bond Redemption Reserve 439.83 378.17
Transfer to Welfare Reserves 2.04 -
General Reserve 0.05 0.26
EPS (Basic/Diluted) (In Rs) 3.92 3.88
(based on face value of equity shares as ` 10/- each)

major highlights of the Company's performance during the year under review are asunder:

(i) Posted Profit a_er Tax (PAT) of ` 783.79 crore highest ever since inception(previous year ` 777.63 crore).

(ii) Successfully raised Tax-free Bonds of ` 5000 crore at market competitive rateswith active participation from both Retail and Institutional Investors.

(iii) Incremental cost of borrowing for the funds raised (including Tax-free Bonds of `5000 crore) during the year was 7.90% p.a.

(iv) Received Income Tax refund of around `125 crore pertaining to the earlierassessment years.

(v) Sanctioned 202 Schemes for a loan amount of ` 30774 crore highest ever sinceinception (` 18790 crore for Housing

` 6273.09 crore for Core Urban Infrastructure and ` 5710.93 crore for non-CoreInfrastructure schemes). Loan outstanding has touched a level of ` 35395 crore resultingin a year-on-year growth of 9%.

(vi) Releases also are highest ever in last 46 years @ ` 8250 crore [` 3186 crore forHousing (A_ordable housing including EWS & LIG - ` 2519 crore) ` 3617 crore for coreurban infrastructure and ` 1447 crore for non-core infrastructure schemes]. the cumulativereleases have touched ` 109438 crore which is a major milestone.

(vii) Total of 457123 residential units under a_ordable housing including EWS/LIG havebeen sanctioned for various sections of the society during the year 2015-16.

(viii) HUDCO awarded Excellent MoU rating by the Department of Public EnterprisesGovernment of India for the year 2014-15 and based on the internal assessment HUDCO isexpected to get ‘Excellent" rating for the __h year in a row with respect to MoUsigned with MoHUPA for the year 2015-16.

2. DIVIDEND

Your Directors have recommended a dividend of ` 0.50 per share (on the face value of `10/- each) for the financial year 2015-16 which is subject to approval of the shareholdersin the 46th Annual General Meeting. the total dividend payout for the financial year2015-16 will amount to ` 100.01 crore (excluding dividend distribution tax of ` 20.36crore).

3. SHARE CAPITAL

the issued and paid up share capital of the Company as on March 31 2016 was ` 2001.90crore divided into 2001900000 equity shares of ` 10/- each against the AuthorisedShare Capital of ` 2500 crore divided into 2500000000 equity shares of ` 10/- each.HUDCO being a wholly owned Government Company its entire paid up equity share capital of` 2001.90 crore has been held by the Government of India through the Ministries of Housing& Urban Poverty Alleviation (MoHUPA) Urban Development (MoUD) and Rural Development(MoRD) in the ratio of 69.19% 10.08% and 20.73% respectively. During the financial year2015-16 there was no change in the shareholding pattern.

4. PROPOSED INITIAL PUBLIC OFFER

the Ministry of Housing & Urban Poverty Alleviation (MoHUPA) vide its letter dated11th August 2015 has conveyed its in-principle approval for listing of HUDCO'sequity on the Stock Exchanges by divesting 10% of its equity shares through IPO.Accordingly the necessary amendments/alterations in the existing Memorandum &Articles of Association of the Company so as to make it compliant with the requirementsof Companies Act 2013 and listing requirements have been carried out with the approval ofthe Shareholders in the Extra-ordinary General Meeting held on 28th March 2016. Withthese amendments each equity share of the Company with face value of ` 1000/- has beensub-divided into 100 equity shares of face value ofHUDCO Design Award ` 10/- each.

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

Consequent to approval of the Cabinet Committee on Economic Affairs (CCEA) Departmentof Investment and Public Asset Management (DIPAM) has initiated the process of selection /appointment of Book Running Lead Managers (BRLMs) and Legal Advisors in connection withthe proposed IPO of HUDCO.

5. MEMORANDUM OF UNDERSTANDING (MoU)

HUDCO is expected to be awarded ‘Excellent' rating from the Department of PublicEnterprises (DPE) for __h year in a row for its performance on the Memorandum ofUnderstanding(MoU) signed with the Ministry of Housing and Urban Poverty alleviation(MoHUPA) for the financial year 2015-16. MoU covers both financial and non-financialparameters like sanctions disbursements gross operating margin PAT per employee costof borrowing sanctions disbursements gross operating margin housing units sanctionedfor a_ordable housing etc.

HUDCO has not only achieved ‘Excellent' level rating in respect of all the 27parameters but has also surpassed the targets in case of a few parameters as was set outin the MoU. the Company would take this opportunity to acknowledge the unrelenting andtimely support provided by MoHUPA from time to time which gave a real push to the Companyto reach further heights.

6. OPERATIONS

HUDCO the premier techno-financing institution under the Ministry of Housing and UrbanPoverty Alleviation has completed yet another year of excellence full of challenges witha great sense of satisfaction both on operational and financial front in the service ofthe nation.

Since inception HUDCO has financed over 17000 housing and infrastructure projects witha cumulative sanctions of ` 161871 crore and releases of ` 109438 crore. HUDCO hassupported more than 16.57 million houses in the REPORT country both in rural andurban areas thus making it the largest facilitator of housing delivery in the country. Atotal of 4.57 lakh housing units were sanctioned during the year 2015-16 against the MoUtarget of 4.50 lakh under a_ordable housing including EWS and LIG category beneficiaries.HUDCO has also been consistently working to accelerate the pace of providing quality urbaninfrastructure in the country by financing around 2149 infrastructure projects. During theyear 2015-16 a total of 170 urban infrastructure projects have been sanctioned with atotal loan component of `11984 crore covering utility social and commercialinfrastructure. HUDCO has entered into Memorandum of Understanding with Government ofTelangana for ‘Mission Bhagiratha' a safe drinking water flagship project and withTelangana State Housing Corporation for construction of houses for weaker section of thesociety. HUDCO has been identified as one of the Central Nodal Agencies to channelize thesubsidy in the Credit Linked Subsidy Scheme (CLSS) of Housing for All (urban) Programmesunder the ‘Pradhan Mantri Awas Yojana'. HUDCO being a Prime lending institution(PLI) through its Retail Finance Window i.e. ‘HUDCO Niwas' has executed 36 MoUs withvarious Public Sector Private Sector Cooperative Banks and Gramin Banks.

(i) New Products/Initiatives

As a part of promoting innovative products and initiatives HUDCO has launched two newproducts during the year under review namely:

Scheme for providing concessional funding to public agencies for taking up homes withappropriate senior citizen-friendly design and related facilities.

Programme Assistance to State/ULBs for development of Housing & UrbanInfrastructure for facilitating the

State Governments/ULBs to leverage substantial quantum of long term funds from HUDCO.

(ii) HUDCO Design Awards

In order to appreciate encourage and recognize innovative ideas of Architects TownPlanners and Engineers that make cities inclusive livable and environmentallysustainable HUDCO constituted ‘HUDCO Design Award'. Based on the recommendation ofthe Jury comprising of eminent persons from the field of Architecture Planning andEngineering constituted for evaluating the entries in various fields 19 awardees werefacilitated with ‘HUDCO Design Tamilnadu Awards 2015' at HUDCO Annual dayfunction.

(iii) HUDCO Build-Tech 2015

Inauguration of HUDCO Design Awards Book 2015

‘Hudco Build Tech – 2015' was inaugurated by Shri Babul Supriyo

Minister of State for Housing & Urban Poverty Alleviation Government of India on14th November 2015. It displayed HUDCO's contribution in sustainable urbandevelopment focusing on funding of housing and infrastructure projects as well asinnovative consultancy assignments in architecture city planning utilization of costeffective and sustainable building material technologies and services and energy efficientGreen Buildings etc. HUDCO Build Tech pavilion 2015 has earned a tremendous response fromNational and International visitors including professionals from diverse fields likeArchitecture Interior Designers Builders Contractors Civil Engineers and Consultants.(iv) Consultancy Initiatives/Jawaharlal Nehru National Urban Renewal Mission (JNNURM)Rajiv Awas Yojana (RAY) and Pradhan Mantri Awas Yojna – ‘Housing for all' (PMAY– HFA).

HUDCO provides consultancy services in the field of URP Environmental EngineeringGovernment Programmes and Disaster Mitigation. HUDCO has handled more than 300 projectssince its inception covering diversified fields under housing and urban developmentsector.

Under JNNURM programme of Government of India HUDCO has appraised 1205 projects withproject cost of

` 22836.08 crore and Central assistance of ` 12795.72 crore for theconstruction/upgradation of 9.25 lac dwelling units across 850 cities/towns in the countryas on 31st March 2016. Further HUDCO has also conducted 411 field visits andanalysed 1856 TPIMA Reports.

Under RAY programme of the Government of India for creating ‘Slum Free India'HUDCO has appraised 86 projects with project cost of ` 3337.70 crore and centralassistance of ` 1685.15 crore for the construction/upgradation of 65505 dwelling units.PMAY-HFA - 2022 was launched in June 2015 which aims to accomplish the Government of ndia'svision for facilitating ‘Housing to All' by 2022 RAY has been subsumed into PMAY.Under PMAY HUDCO has been appointed as an appraisal agency for the three components i.e.in-situ slum redevelopment (using land as a resource) A_ordable Housing in Partnership(AHP) Beneficiary Led Construction (BLC) projects. Upto March 2016 HUDCO has appraised42 projects with project cost of ` 6432.43 crore and central assistance of ` 1564.47 crorefor construction of 1.11 lac dwelling units covering 38 cities/towns.

During the year HUDCO has earned fee based income of ` 3.61 crore.

7. FINANCIAL REVIEW

(i) Accounting policies

Your company has made some clarificatory changes in the Accounting Policies and one newaccounting policy on ‘Cash and Cash Equivalent' has been added having no financialimpact of the same on the financial position of the company.

(ii) Income from Operations and Profitability

the total operating income of your Company for the financial year 2015-16 was ` 3204.81crore. While the overall Profit before Tax (PBT) for the year was ` 1077.10 crore theProfit before tax (excluding other income extraordinary and exceptional items) was `975.19 crore. the Profit a_er Tax (PAT) increased to ` 783.79 crore from ` 777.63 crore inthe previous year which was highest since inception.

(iii) Non-Performing Assets

HUDCO being a Housing Finance Company is adhering to prudential guidelines forNon-Performing Assets (NPA) under the Housing Finance Companies (NHB) Directions 2010 inits letter and spirit. the position of NPA's is regularly monitored by the management andreviewed by the Board of Directors periodically and necessary corrective/remedial measuresincluding legal action wherever required are taken to reduce the level of NPA's. theCompany did not recognise any income on the NPA's in its books of accounts and thenecessary provisioning as required under the NHB Directions has been created. the Companyhas also made additional provisioning to meet unforeseen contingencies. During the yearunder review HUDCO reported Gross NPA of ` 2382.45 crore constituting 6.68% to total loanportfolio and Net NPA of ` 701.39 crore constituting 2.06% to Net Outstanding. In theabove however two accounts i.e. M/s RKM Powergen Private Limited and M/s Nagarjuna OilCorporation Limited with totalHUDCO Design Award

outstanding amount ofFirst Prize : CUBOID Architects: Under Category Conservationof Heritage Architectural Heritage of Chettinad Tamilnadu

` 832.45 crore have not been considered as NPA in terms of the order of Hon'ble MadrasHigh Court and as per relaxation in norms given by NHB respectively. Total provisioningmade towards NPA as on 31st March 2016 stands at ` 1829.86 crore inclusive of` 115 crore as an additional provisioning. rough persistent efforts of the managementHUDCO has been able to reduce the Project Loan defaults to the tune of ` 575.21 crore i.e.11.89% from the level of ` 4837.22 crore as on 31st March 2015. the ProjectLoan default is 17.23% as on 31st March 2016.

(iv) Resource Mobilization

the Company mobilized ` 5000 crore from the market during the financial year 2015-16 byway of Tax Free Secured Redeemable Non-convertible Bonds u/s 10(15)(iv)(h) of the IncomeTax Act 1961 (`1500 crore through Private Placements and ` 3500 crore throughPublic Issue(s)). HUDCO's Public Issue of Tax Free bonds received overwhelming responsefrom investors; the issue was oversubscribed 3.61 times including the retail portionwhich was oversubscribed 1.91 times of the allocated limit. Further during the financialyear 2015-16 to meet the short term fund requirement an amount of ` 5250 crore wasraised through Commercial Papers against which ` 1300 crore was also outstanding as on 31stMarch 2016. In addition an amount of ` 1332.80 crore (including renewals) was alsomobilized through HUDCO Public deposit scheme. HUDCO'S borrowings (long term) to Net worthas on 31st March 2016 stood at 2.53 times as against 2.35 times as on 31stMarch 2015.

(v) Cash Credit Facilities

the Company has approved Cash Credit/ Working Capital Demand Loan limits of ` 5800crore for availment REPORT from various banks for its day-to-day operations. theCash Credit facilities availed and outstanding as on 31st March 2016was ` 173.50 crore.

(vi) Credit Rating

the domestic debt instruments of HUDCO continue to enjoy "AAA" rating –the highest rating on standalone basis assigned by three credit rating agencies namely M/sIndia Ratings & Research Private Limited (Fitch group) M/s Care Ratings and ICRALimited.

(vii) Cost of Borrowing

the overall weighted average incremental cost of borrowing for the funds raised(including Tax-free Bonds of

` 5000 crore) during the financial year 2015-16 was 7.90% p.a. As a result theCompany was able to deliver debt financing at competitive rates. the weighted average costof incremental borrowings excluding Tax-free Bonds raised during the year however workedout to 136 bps over 10 year G.Sec as on 31st March 2016.

(viii)Redemption and Pre-Payment

During the financial year 2015-16 the Company repaid a total sum of ` 9549.26 crore.is includes repayment of `1314.75 crore to bond holders ` 62.83 crore on account offoreign currency loans

` 0.17 crore on account of loan from Govt. of India and Public deposits of ` 1101.29crore matured/paid during the year. the Company also redeemed long term and short termloans from Banks and Financial Institutions of

` 3120.22 crore and Commercial Paper of ` 3950 crore.

(ix) Unclaimed amount under HUDCO Bonds

Bonds amounting to ` 39459796 (inclusive of interest amounting to ` 25459796) inrespect of 1247 bondholders' remain unpaid as on 31st March 2016 as the samehave not been claimed by the investors. Further there were no bonds which have beenclaimed but remained unpaid as at the end of the financial year.

In respect of unpaid Bonds the Bond holder(s) have been intimated through email/letterregularly with a request to claim the amount matured. Further as per the provisions ofthe Companies Act 2013 and rules made thereunder the bonds remaining unclaimed for morethan seven years from the date of maturity have been transferred to the InvestorsEducation and Protection Fund (IEPF). During the Financial year 2015-16 total amount of `6173/- was transferred to Investor Education and Protection fund (IEPF) on account ofBonds.

(x) HUDCO Public Deposit Scheme

Chettinad Tamilnadu HUDCO being a Housing Finance Company registered withNational Housing Bank (NHB) is governed by the provisions of Housing Finance Companies(NHB) Directions 2010 relating to Public Deposits.

During the financial year 2015-16 an amount of ` 1332.80 crore (including renewals)was mobilized from 3002 depositors and total amount of Rs 1101.29 crore was matured/paidto 2083 depositors under the HUDCO Public Deposit Scheme. the total amount outstandingunder HUDCO Public Deposit Scheme was ` 1655.68 crore from 4313 depositors as on 31stMarch 2016 as against ` 1424.17 crore from 3394 depositors as on 31stMarch 2015.

(xi) Unclaimed amount under HUDCO Public Deposit Scheme

As on 31st March 2016 deposit(s) amounting to ` 37730249/-(inclusive ofPrincipal and Interest) from 101 depositors were not claimed and hence remained unpaid.Further there were no deposits which have been claimed but remained unpaid at the end ofthe financial year except deposit of ` 50000/- from 1 depositor which was claimed on 29thMarch 2016 and remained unpaid due to non-submission of requisite documents howeverthe same was paid on 04th April 2016.

In respect of unpaid Deposits the Deposit holder(s) have been intimated through email/letters regularly with a request to claim the amount matured or renew the deposits.Further as per the provisions of the Companies Act 2013 and rules made thereunder theDeposits remaining unclaimed for more than seven years from the date of maturity have beentransferred to the Investor Education and Protection Fund (IEPF). During the FinancialYear 2015-16 under HUDCO Public Deposit Scheme total amount of ` 245211/- wastransferred to IEPF.

(xii) Deployment of Resources at the close of the year

At the close of the financial year 2015-16 the total resources of your company stoodat ` 35878.15 crore. Out of this Equity Share Capital amounted to ` 2001.90 croreReserves & Surplus stood atDIRECTORS'' REPORT ` 6443.91 crore Loans fromFinancial Institutions Commercial Banks Multilateral Institutions and Market Borrowingsthrough Bonds and Commercial paper accounted for ` 25608.96 crore Deferred TaxLiabilities (Net) amounted to ` 485.67 crore and other liabilities & provisions stoodat ` 1337.71 crore. These funds were deployed as Long/Short Term Loan & Advances of `33805.06 crore Fixed Assets (net of depreciation) of ` 100.89 crore (including capitalwork-in-progress) Investments of ` 368.53 crore Cash & Bank Balances of ` 590.07crore and other assets of

` 1013.60 crore.

8. RISK MANAGEMENT IN HUDCO

For management of the various risks to which HUDCO is exposed viz credit riskoperational risk market risk liquidity risk and foreign currency risk HUDCO has inplace a Risk Management Policy and Operating Manual. the Policy aims at establishing thecompany's risk management strategy in line with the goals of the organization and theinternal and external environment.

HUDCO has a prudent and efficient risk management framework. There is a Risk ManagementCommittee (RMC) to review the various reports and action taken by Sub-Committees such asAssets & Liabilities Management Committee (ALCO) Credit Risk Management Committee(CRMC) and Operational Risk Management Committee (ORMC). the Assets & LiabilitiesManagement Committee (ALCO) and Credit Risk Management Committee (CRMC) are headed byDirector (Finance) and the Operational Risk Management Committee (ORMC) is headed byDirector (Corporate Planning). the Risk Management Committee (RMC) functions under thechairmanship of the Chairman & Managing Director and its recommendations are submittedto the Board of Directors.

Constant efforts were made by the Company for management and mitigation of the variousrisks which are brie_y described as given below: a) Credit Risk

To manage the credit risk the Company has appraisal mechanism which containscomprehensive appraisal guidelines in order to ensure timely repayments of principal &interest amount. Default Recovery and Monitoring Cell has been set up for constant reviewof the default position and follow up. b) Liquidity Risk

To manage the liquidity risk HUDCO has in place an effective Asset LiabilityManagement System. the liquidity risk is being monitored with the help of liquidity gapanalysis. Further the funds are mobilized at competitive rates through various strategiesviz bonds public deposits term loans etc.

HUDCO Design Award c) Market Risk First Prize : CUBOID Architects: UnderCategory Conservation of Heritage Architectural Heritage of Chettinad Tamilnadu

the market risk in the Company arises primarily from fluctuations in interest rates andforeign currency exchange rates. In order to mitigate the interest rate risk the Companyperiodically reviews and determines its lending rates based on its cost of funds and theprevailing market rates. Further the interest rate risk is being monitored with the helpof interest rate sensitivity analysis under the Asset Liability Management System. d)Foreign Currency Risk

HUDCO has a Currency Risk Management policy to manage risks associated with foreigncurrency borrowings.

the company has entered into hedging transactions to cover the exchange rate andinterest rate risks. As on 31st March 2016 the total foreign currencyliabilities are USD 67.80 million and JPY 2985.16 million. On overall basis as on 31stMarch 2016 the currency exchange rate risk is covered to the extent of 67.93% throughhedging instruments. e) Operational Risk

Operational risk management framework covers managing each and every source ofoperational risk as a distinct risk to the institution's safety and soundness includingtechnology risk employee risk capital asset risk external risk viz external fraudlegal risk etc. To mitigate the Operational risk a reporting and monitoring mechanismhas been put in place by the Company. the requisite information on the Operational risk isobtained through quarterly reports of ‘Operational risk Factors and Key RiskIndicators (KRIs)' from Regional Offices/ departments which is further reviewed andanalysed for mitigating the operational risk.

Rajiv Gandhi Government Women and Children Hospital Puducherry

9. JOINT VENTURE AND ASSOCIATE COMPANY

(i) HUDCO had formed four Joint Venture Companies (JVs) viz Pragati SocialInfrastructure Development Ltd. (PSIDL) Shristi Urban Infrastructure Development Ltd(SUIDL) MCM Infrastructure Pvt. Ltd. (MCMI) and Signa Infrastructure India Ltd. (SIIL)with total equity contribution of ` 2.403 crore. HUDCO has decided to exit from all thefour aforesaid JVs by invoking the Exit Clauses as the performance of these JVs was notfound to be satisfactory.

In addition HUDCO has one Associate company viz "Ind Bank Housing Ltd"(IBHL). HUDCO has ` 2.50 crore investments in IBHL (25% of its paid up capital). theaforesaid investment is appearing in the books of HUDCO at ` 1 only. Further the proposalof merger of Ind Bank Housing Ltd. into "Indian Bank" the promoter of IBHLwhich has been approved and further necessary action on the above is to be taken by IBHLand Indian Bank. Post IBHL's merger into Indian Bank IBHL will no more be associatecompany of HUDCO.

(ii) Consolidated Financial Statements

Pursuant to Section 129 (3) of the Companies Act 2013 and Accounting Standard- 23& 27 the Company has

Tamilnadu

prepared Consolidated Financial Statement (CFS) including that of its Joint VentureCompany i.e. M/s Shristi Urban Infrastructure Development Ltd. However consolidation inrespect of two JVs (PSIDL & MCMI) and also in case of Associate company (IBHL) havenot been considered during the financial year 2015-16 as HUDCO has provided for fulldiminution in the value of investment. Further consolidation in respect of one JV (SIIL)has not been considered during the financial year 2015-16 as financial figures are notmaterial. Statement containing salient features of financial statements of Joint Venturesand Associate companies as required under Section 129(3) of the Companies Act 2013 inthe prescribed Form AOC-I is annexed as part of the Directors Report.

10. INTERNAL FINANCIAL CONTROLS POLICY OF HUDCO

the Companies Act 2013 has introduced the concept of Internal Financial Controls (IFC)vide section 143(3) (i) which covers the whole range of financial and non-financialcontrols existing in a Company relating to day to day operations functions and processesof a Company and casting additional responsibility on Management and Auditors to evaluateand report on adequacy and effectiveness of these Controls. Section 143(3)(i) has beenmade mandatory w.e.f. 1st April 2015.

Accordingly HUDCO has prepared an Internal Financial Controls Policy. the InternalFinancial Controls Policy document gives a broad framework of different activities ofHUDCO with policies and procedures for ensuring the orderly and efficient conduct of thebusiness adherence to such policies safeguarding assets of the Company Prevention andDetection of Frauds and Errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information.

CMD HUDCO with the Participants of International Training Programme on "Planningand Management of Urban Services" conducted by HUDCO

the company has in all material aspects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting are operating effectively. As further required under the provision of Section143(3)(i) of the Companies Act 2013 the Statutory Auditors have also audited theInternal Financial Controls over financial reporting of HUDCO on 31st March2016 and is part of the Independent Auditors' report of even date on the standalonefinancial statements of HUDCO for the year ending 31st March 2016.

Internal Audit

During the financial year 2015-16 internal audit of all the Regional Offices and majordivisions of Corporate Office were carried out by in-house internal audit team and/byChartered Accountants' firm. the significant observations of the Internal Audit up toFinancial Year 2015-16 were periodically submitted to the Audit Committee and furthernecessary action as directed by the Audit Committee is being taken by Internal Auditdivision. Directions have also been issued from time to time to all concerned foradherence to the laid down policies guidelines and procedures and for timely complianceof the Audit Observations.

11. HUDCO – AN ISO 9001:2008 CERTIFIED COMPANY

HUDCO Design Award

ISO 9001:2008 certification accorded to HUDCO the premier techno-financinginstitution has been further renewedFirst Prize : CUBOID Architects: Under CategoryConservation of Heritage Architectural Heritage of Chettinad Tamilnadu by‘United Registrar of Systems' on 9th March 2016 in recognition of the organization'sQuality Management System which complies with ISO 9001:2008. the above certification hasbeen accorded in the field of project and retail financing services resource mobilisationfor funding consultancy and joint ventures as certified by URS.

12. HUMAN RESOURCES

HUDCO recognizes the efforts of employees at all level in furthering the interest ofthe organization and the same is demonstrated by overall harmony and cordial relationsprevalent in the company.

the total employee's strength of the Company as on 31st March 2016 stood at863 as against 892 in the previous year. With the objective of overall professionaldevelopment of employees employees were imparted training covering wide range offunctional areas through 29 different training programmes out of which 4 wereInternational Training Programmes.

(i) Human Settlement Management Institute (HSMI)

HSMI Research & Training Wing of HUDCO continued its efforts in providingcapacity building to various professionals engaged in Housing & Urban DevelopmentSector including HUDCO's Borrowing Agencies Local Bodies and HUDCO's own functionaries.During the year 2015-16 as a training initiative HUDCO conducted 17 training programmesincluding 15 for Urban Local Bodies 1 for NAREDCO & 1 International trainingprogramme for processional from different sectors and imparted training to 497Professionals

Ministry of Housing & Urban Poverty Alleviation Government of India has identifiedHSMI as one of the Nodal Resource Centre for undertaking various training and otheractivities for implementing action plan REPORT programmes of the Ministry.

(ii) Implementation of Micro Small & Medium Enterprises (MSME) Policy

In line with the procurement policy notified by the Government of India vide its order2012 which is effective from 1st April 2012 and as communicated by theMinistry of Micro Small & Medium Enterprises HUDCO has initiated action forcompliance of the instruction on the subject. the procurement guidelines have beensuitably amended by inserting the conditions governing the procurement from the MSMEregistered firms/ vendors; particularly the HUDCO NITs mention the relevant provisions.For wider publicity the copies of such NITs covering procurement of goods & servicesare forwarded to the MSME for uploading the NIT on their website to enable vendors toparticipate in the bidding process besides allowing all other applicable concession likewaiver of EMD price preference & part execution of orders as per guidelines toachieve the stipulated 20% procurement targets.

(iii) Disclosure under the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013

HUDCO has constituted a Committee for redressal of complaint(s) against sexualharassment of women employees as per the provisions of the ‘Sexual Harassment ofWomen at Workplace (Prevention Prohibition & Redressal) Act 2013'. the Committee isheaded by a senior level woman official of the company and includes an NGO representativeas one of its members. Anti-sexual harassment stance of the Company is also outlined inHUDCO (Conduct Discipline and Appeal) Rules.

During the financial year 2015-16 the Company did not receive any complaint of sexualharassment.

(iv) Representation of Women Employees

As on 31st March 2016 HUDCO had 247 women employees representing 28.62%of the total work force. There is no discrimination of employees on the basis of gender.

(v) Public Grievance Redressal Mechanism of HUDCO

HUDCO has an appropriate Grievance Redressal Mechanism and a procedure for redressal ofcomplaints and grievances in each of its offices. the National Housing Bank (NHB) hasformulated a Fair Practices Code which has been adopted by the Board in its 484thmeeting held on 31st May 2011. the procedure regarding lodging of complaintsboth at the Regional Office/ Corporate Office is available on HUDCO web site along withescalation matrix. Further complaints can also be lodged in the Government of Indiaportal for public grievances. HUDCO website is linked to this external linkwww.pgportal.govt.in by the Department of Administrative Reforms & Public Grievance.

Tamilnadu Till date all the complaints are redressed well in time and there is nocomplaint pending at our end.

13. OFFICIAL LANGUAGE

HUDCO has taken several steps for promotion and implementation of use of Hindi asofficial language in all of its offices in compliance with the Government of India'sPolicy on O_cial Language. ‘Rajbhasha Pakhwada' was celebrated from 1stSeptember to 15th September 2015 in its Corporate Office and all RegionalOffices spread throughout the country wherein various Hindi competitions and workshopswere organised. Prizes were given to winners of various competitions by the Chairman &Managing Director in a ceremony on the concluding day of the celebration. FurtherParliamentary Committee on O_cial Language inspected HUDCO NCR Regional Office New DelhiHSMI and Chennai Regional Office during the year and no adverse comment was conveyed toHUDCO by the Committee. HUDCO also organized Hindi quiz competition for various officesunder the administrative control of Ministry of Urban Development and Ministry of Housing& Urban Poverty Alleviation during the year.

14. RIGHT TO INFORMATION ACT

In order to promote transparency and accountability the company has implemented theprovisions of RTI Act 2005 and an appropriate mechanism has been set up in the companywith a dedicated centralized RTI Cell to provide information to the citizens under theprovisions of the RTI Act 2005. All the RTI applications and the appeals received duringthe year 2015-16 have been processed and information provided in time bound manner asstipulated in the Act.

There have been no instances of non-compliance by the Company. No penalties orstrictures were imposed on the Company by any statutory authority during the last threeyears with respect to RTI.

Vigilance Awareness Week

15. VIGILANCE

Corporate Vigilance Department (CVD) is fully committed to improve transparency in thesystems procedure(s) and operations of HUDCO both in Head Office and its RegionalOffices for which several steps were taken with special emphasis on implementation ofe-governance to ensure easy & timely accessibility of information to the users bothinternal as well as external.

Besides as per CVC guidelines a threshold limit of ` 50 lakhs and above was fixed inconsultation with all the concerned departments for signing of ‘Integrity Pact' inall contracts to be awarded for procurement of goods and services. Instructions on thesubject are being adhered to by all the concerned departments. During the year underreference routine inspection of 7 Regional Offices were conducted which apart fromrandom check of activities of Regional Office(s) included scrutiny of 189 ‘AnnualProperty Returns' of officials and the officials were apprised ofHUDCO Design Award

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

various aspects of preventive vigilance pertaining to operational issues.

During the year under review ‘Vigilance Awareness Week' was observed from 26thOctober 2015 to 31st October 2015 in Head Office as well as at all theRegional Office(s) with focus on "Preventive Vigilance as a Tool of GoodGovernance".

16. MANAGEMENT DISCUSSION & ANALYSIS REPORT

Management Discussions & Analysis Report for the year under review as requiredunder the DPE Guidelines is annexed to this report.

17. CORPORATE GOVERNANCE

Pursuant to DPE's Guidelines a separate section on ‘Corporate Governance'alongwith certificate from Grover Ahuja & Associates Company Secretaries confirmingcompliance of the conditions of Corporate Governance as stipulated in the DPE guidelinesalongwith management reply to the observation(s) is annexed to this report.

18. DIRECTORS' RESPONSIBILITY STATEMENT

As required under Section 134 (5) of the Companies Act 2013 it is confirmed that: a)In preparation of the annual accounts the applicable accounting standards have beenfollowed and no material departure have been made from the same; b) Such accountingpolicies have been selected and applied consistently (except for changes in accountingpolicies as disclosed in the notes to accounts to the financial statements) and madejudgments and estimates that are REPORT reasonable and prudent so as to give a trueand fair view of the state of affairs of the Company at the end of the

financial year and of the profit of the Company for that period; c) proper andsufficient care for the maintenance of adequate accounting records in accordance withprovisions of Companies Act 2013 for safeguarding the assets of the Company and forpreventing and detecting fraud and other irregularities; d) the annual accounts have beenprepared on a ‘going concern' basis; e) the company has laid down internal financialcontrols to be followed and that such internal financial controls were adequate andoperating effectively; and f) proper systems have been devised to ensure compliance withthe provisions of all applicable laws and that such systems were adequate and operatingeffectively.

19. DIRECTORS' AND KEY MANAGERIAL PERSONNEL

During the year under review HUDCO had only one Part-time Non-official Director(Independent Director) on its Board at the beginning of the financial year 2015-16 fromwhom necessary declaration has been received under section 149 (7) of the Act. However atthe close of the financial year there was no Part-time Non-official Director (IndependentDirector) on the Board.

There was no change in the composition of the Board of Directors of your Company fromthe date of signing of last Directors' Report for the financial year 2014-15 till theclose of the financial year. Further Ministry of Housing & Urban Poverty AlleviationGovernment of India vide its order dated 17th June 2016 has appointedthree Part-time Non-official Directors (Independent Directors) on the Board of HUDCOnamely Shri Anand K Pandit (DIN No. 00015551) Shri Mukesh Arya (DIN No. 02753885) andProf. Chetan V. Vaidya (DIN No. 07550281) for a period of three years. Your Board extendedwarm welcome to Shri Anand K Pandit Shri Mukesh Arya and Prof. Chetan V. Vaidya for beingpart of HUDCO Board. During the year under review there is no change in Key ManagerialPersonnel except Shri Rakesh Kumar Arora who has been appointed/ nominated as DirectorFinance/ CFO w.e.f 1st October 2015 in place of Shri Anil Kumar Kaushik.

20. AUDITORS & AUDITORS REPORT Statutory Auditors

Chettinad Tamilnadu M/s Dhawan & Co. Chartered Accountants (Firms Regn. No.002864N) New Delhi appointed as Statutory Auditors' by the Comptroller & AuditorGeneral of India (C&AG) under section 139 of the Companies Act 2013 for the financialyear 2015-16 had conducted the audit of the financial statement (standalone andconsolidated) and submitted their report thereon. the observations/comments of theStatutory Auditors on the standalone financial statement alongwith management replythereto are annexed hereto and forms part of the report.

Further M/s Dhawan & Co. Chartered Accountants has been reappointed as StatutoryAuditors' for the financial year 2016-17 by the C&AG New Delhi vide letter dated 13thJuly 2016.

Comments of Comptroller & Auditor General of India (C&AG)

Comptroller & Auditor General of India (C&AG) through letter dated 22ndJuly 2016 has given ‘NIL' comments on the Audited Financial Statement(s) (Standaloneand Consolidated) of the Company for the financial year 2015-16 under section 143 of theCompanies Act 2013 and the same are annexed hereto and forms part of the report.

21. SECRETARIAL AUDITORS & AUDIT REPORT

Pursuant to the provisions of section 204 of the Companies Act 2013 the Board hasappointed M/s. Grover Ahuja & Associates Company Secretaries as Secretarial Auditorto conduct Secretarial Audit for the financial year 2015-16. the Secretarial Audit Reportfor the financial year ended 31st March 2016 alongwith Management reply on theobservations is annexed hereto and forms part of the report.

22. DISCLOUSRES

(i) Corporate Social Responsibility Committee DIRECTORS'' REPORT

HUDCO has constituted ‘Corporate Social Responsibility' Committee of the Board incompliance with the provisions of Section 135 of the Companies Act 2013. As on 31stMarch 2016 CSR Committee of the Board comprises of three member(s) namely; Dr. M. RaviKanth as Chairman Shri Rajiv Ranjan Mishra and Shri Rakesh Kumar Arora as member(s). theconstitution of the Committee as on 31st March 2016 was not as per theprovisions of the Companies Act 2013 since the Company does not have Part-timeNon-official Directors (Independent Directors) on its Board. the Company has framed andimplemented ‘Corporate Social Responsibility Policy' (CSR Policy) during the yearwhich lays down the guidelines and the activities to be undertaken by the Company and thesame has been put on the Company's website www.hudco.org. the Company has not been able tospend the whole of the amount earmarked for CSR activities during the year 2015-16;the reasons for the same are given in the Annual Report on CSR activities. the AnnualReport on CSR activities is annexed to this Report.

(ii) Board and its Committees

the details of the composition terms of reference number of meetings held/attended bydirectors/members and other particulars are given in the Corporate Governance Reportannexed to this Report.

(iii) Particulars of Loans Guarantee or Investments

the provision(s) of section 186 of the Act regarding loan made guarantee given orsecurities provided are not applicable to Housing Finance Company hence the same are notgiven. Further details of investments covered under the provisions of section 186 of theAct forms part of the financial statement for the financial year 2015-16.

(iv) Extract of Annual Return

Pursuant to provisions of section 92(3) read with section 134(3)(a) of the CompaniesAct 2013 the extract of Annual Return as at 31st March 2016 in theprescribed format is annexed to this Report.

(v) Energy Conservation Technology Absorption and Foreign Exchange Earning &Outgo. a) Conservation of Energy

Your Company being a Housing Finance Company is not engaged in any manufacturingoperations and the present area of operations are not energy intensive. Your Company beingenergy conscious has taken lot of HUDCO Design Award

initiative with a view to conserve energy both at its Head Office and its RegionalOffices. First Prize : CUBOID Architects: Under Category Conservation of HeritageArchitectural Heritage of Chettinad Tamilnadu

b) Technological Absorption

HUDCO being a Housing Finance Company having no manufacturing operations thereforehas not absorbed any technology indigenous/ imported. Further no technology was importedduring the last three years. c) Foreign Exchange Earnings and Outgo the inflow onaccount of foreign exchange transaction was amounted to ` 1.45 crore (previous year ` 1.40crore) while foreign exchange outgo/ expenditure was amounted to Rs 5.36 crore (previousyear ` 5.93 crore).

(vi) Particulars of employees

As per notification dated 5th June 2015 issued by the Ministry of CorporateAffairs Government Companies are exempted from complying with the provisions of Section197 read with rules on Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 hence the particulars with respect to the remuneration drawn by employees/directors have not been given.

23. GENERAL

1. As per notification dated 5th June 2015 issued by the Ministry ofCorporate Affairs Government Companies are exempted from complying with the provisionssection 178(3) of the Companies Act 2013 hence the particulars with regard to Company'spolicy on directors appointment and remuneration etc. has not been disclosed.

BSUP Block Housing at Asansol West Bengal

2. the Company has not entered into any contract with related parties referred to inSection 188(1) of the Companies Act 2013.

3. There is no change in the nature of business of the Company during the year.

4. No Company has become subsidiaries joint ventures or associate of HUDCO during theyear under review. HUDCO had formed four Joint Venture Companies (JVs) viz Pragati SocialInfrastructure Development Ltd. (PSIDL) Shristi Urban Infrastructure Development Ltd(SUIDL) MCM Infrastructure Pvt. Ltd. (MCMI) and Signa Infrastructure India Ltd. (SIIL)with total equity contribution of Rs 2.403 crore. HUDCO has decided to exit from all thefour aforesaid JVs by invoking the Exit Clauses as the performance of these JVs was notfound to be satisfactory.

5. No significant and material orders were passed by the regulators or courts ortribunals which impacts the going concern status and Company's operations in future.

6. the Company has in place adequate Internal Financial Controls with reference to theFinancial Statements.

7. Board of Directors of HUDCO are appointed by the President of India through theAdministrative Ministry i.e. Ministry of Housing and Urban Poverty Alleviation (MoHUPA)Government of India and their performance is being evaluated by the Ministry itself hencethe requirement of carrying out formal annual evaluation by the Board of its ownperformance and that of its committees and individual directors is not applicable as perMinistry of Corporate Affairs notification dated 5th June 2015.

8. No material changes and commitments have occurred a_er the close of financial yeartill the date of this Report affecting the financial position of the Company.

Tamilnadu

9. No material case of frauds by the company or on the company by its officers oremployees has been reported by auditors under Section 143(12) of the Companies Act 2013.

24. STATUTORY AND OTHER INFORMATION REQUIREMENT

the various information required as per the Companies Act 2013 DPE guidelines andlisting agreement are annexed to the report as under:

Particulars Annexure
Statement containing salient features of financial statements of Joint Ventures 1
and Associate Companies in Form AOC-I
Management Discussion & Analysis Report 2
Corporate Governance Report 3
Observations/comments of Statutory Auditors alongwith Management Reply 4
Comments of Comptroller & Auditors General of India 5
Secretarial Auditors Report alongwith Management Reply 6
Annual Report on CSR Activities 7
Extract of Annual Return 8

25. ACKNOWLEDGMENTS

Directors are grateful to the Government of India particularly theDIRECTORS'' REPORTMinistry of Housing and Urban Poverty

Alleviation Urban Development Rural Development Ministry of Finance the NITI AayogNational Housing Bank and Reserve Bank of India for their continued co-operation supportand guidance in effective management of the Company's affairs and resources.

Directors thank the State Governments Housing Boards Development AuthoritiesMunicipal/Local Bodies and other Borrowers for their continued support and valuablesuggestions.

Directors also place on record their sincere appreciation for the continued supportprovided by the International Finance Institutions such as KfW Japan InternationalCooperation Agency (JICA) Asian Development Bank (ADB) USAID in the fund raisingprogrammes of the Company.

Directors also place on record its appreciation to the domestic and overseas BanksStock exchange(s) Credit Rating Agencies Debenture/Bond holders especially the RetailInvestors depositors and other Stakeholders for their support extended to the Companyfrom time to time.

Directors also thank the Comptroller & Auditor General of India M/s Dhawan &Co. Statutory Auditors M/s. Grover Ahuja & Associates Company SecretariesSecretarial Auditors for their valued guidance and support. the Directors also sincerelyappreciate and thank all the employees of the Company for their valuable contribution anddedicated efforts in steering the Company to excellent performance for yet another year insuccession.

for and on behalf of the Board of Directors
Sd/-
Dr. M. Ravi Kanth
Place : New Delhi Chairman & Managing Director
Date : 27th July 2016 (DIN:01612905)

Annexure-1

REPORT Form AOC-1

[Pursuant to first proviso to sub-section (3) of section 129 read with rule 5 ofCompanies (Accounts) Rules 2014]

Statement containing salient features of the Financial Statement of Subsidiaries/Associate Companies/JointVenture

Part "A": Subsidiaries

(Information in respect of each subsidiary to be presented with amounts in _)

Particulars Details
1 Name of the subsidiary
2. Reporting period for the subsidiary concerned if different from the holding company's reporting period
3. Reporting currency and Exchange rate as on the last date of the relevant Financial year in the case of foreign subsidiaries
4. Share capital
5. Reserves & surplus
6. Total assets
7. Total Liabilities NOT APPLICABLE
8. Investments
9. Turnover
10. Profit before taxation
11. Provision for taxation
12. Profit a_er taxation
13. Proposed Dividend
14. % of shareholding

Part "B": Associates and Joint Ventures

Statement pursuant to Section 129 (3) of the Companies Act 2013 related to AssociateCompanies and Joint Ventures

Name of Associates/ Joint Ventures Shristi Urban Infrastructure Development Ltd. MCM Infrastructure Pvt. Ltd. Signa Infrastructure India Ltd. Pragati Social Infrastructure Development Ltd. * Ind Bank Housing Ltd.
1. Latest audited Balance Sheet Date Unaudited Unaudited Unaudited Not Available Unaudited
2. Shares of Associate/ Joint Ventures held by the company on the year end
Number of Shares 2000000 260000 13000 130000 2500000
Amount of Investment in Associates/Joint Venture (`) 20000000 2600000 130000 1300000 25000000
Extend of Holding % 40 26 26 26 25
3. Description of how there is significant influence J V Agreement J V Agreement J V Agreement J V Agreement Associates
4. Reason why the associate/ joint venture is not consolidated Not Applicable HUDCO has decided to exit from the said entity and provided for full diminution in the value of investment. HUDCO has decided to exit from the said entity and the figures not being material HUDCO has decided to exit from the said entity and provided for full diminution in the value of investment. HUDCO has provided for full diminution in the value of investment.
5. Net worth attributable to shareholding as per latest un audited Balance Sheet (` in crore) 1.90 Not Applicable Not Applicable Not Applicable Not Applicable
6. Profit/Loss for the year

HUDCO Design Award

Considered in First Prize : CUBOID Architects: Under Category Conservation of (1.00) Not Heritage Not Architectural Heritage of Chettinad Tamilnadu Not Not

Consolidation (` in crore) Applicable Applicable Applicable Applicable
Not considered in Consolidation (` in crore) Not Applicable 0.01 0.00 Not Applicable (2.87)

* Case filed before Company Law Board Kolkata Law Bench on 28.2.2013 against M/s.Pragati Social Infrastructure & Development Ltd. under section 397 and 398 (Preventionof Oppression and Mismanagement) of Companies Act 1956 therefore the company has notprovided unaudited / audited accounts for the year 2014-2015 & 2015-2016 and also notavailable at MCA site.

for and on behalf of the Board of Directors

Sd/-
Dr. M. Ravi Kanth
Place : New Delhi Chairman & Managing Director
Date : 27th July 2016 (DIN:01612905)