TO THE MEMBERS
Your directors are pleased to present the fortieth annual report of your Corporationwith the audited accounts for the year ended March 31 2017.
|FINANCIAL RESULTS || || |
| ||For the year ended March 31 2017 ||For the year ended March 31 2016 |
| ||(Rs. in crore) ||(Rs. in crore) |
|Profit before Tax ||10726.64 ||10108.10 |
|Tax Expense (net of Deferred Tax ||2852.44 ||2636.04 |
|Liability (DTL) on Special Reserve) || || |
|Profit after Tax but before DTL on Special Reserve ||7874.20 ||7472.06 |
|DTL on Special Reserve ||431.56 ||378.96 |
|Profit after Tax ||7442.64 ||7093.10 |
| || || |
|Appropriations have been made as under: || || |
|Special Reserve No. II ||1247.00 ||1095.00 |
|General Reserve ||- ||2385.12 |
|Statutory Reserve (under Section 29C of the National Housing Bank Act 1987) ||245.00 ||325.00 |
|Shelter Assistance Reserve ||185.00 ||150.00 |
|Interim Dividend (Rs. 3 per equity share of Rs. 2 each) & Tax on Interim Dividend ||476.18 ||484.43 |
|Tax on Dividend credit taken net of dividend pertaining to previous year paid during the year ||(6.26) ||(8.50) |
|Proposed Dividend (previous year) ||- ||2211.78 |
|Additional Tax on Proposed Dividend (previous year) ||- ||450.27 |
|Surplus in the Statement of Profit & Loss ||5295.72 ||- |
| ||7442.64 ||7093.10 |
In March 2017 your directors declared an interim dividend of Rs. 3 per equity share ofRs. 2 each which was the same as in the previous financial year. The interim dividend waspaid in March 2017.
Your directors recommend payment of final dividend for the financial year ended March31 2017 of Rs. 15 per equity share of Rs. 2 each compared to Rs. 14 per equity share forthe previous year. The final dividend for the year amounts to Rs. 2383.01 crore and thetax on final dividend is Rs. 485.12 crore.
The total dividend for the year is Rs. 18 per equity share as against Rs. 17 per equityshare for the previous year.
The dividend pay-out ratio for the year ended March 31 2017 is 44.9%.
The dividend declared/recommended is in accordance with the principles and criteria asset out in the Dividend Distribution Policy which has been approved by the Board ofDirectors. The policy is placed on the Corporation's website.
In terms of the revised Accounting Standards AS-4 'Contingencies and Events Occurringafter the Balance Sheet Date' as notified by the Ministry of Corporate Affairs throughamendments to the Companies (Accounting Standards) Rules 2016 the Corporation has notappropriated the proposed final dividend (including tax) from the statement of profit andloss for the year ended March 31 2017.
Increase in Authorised Share Capital
Pursuant to the receipt of approval of the members through a postal ballot in March2017 the authorised share capital of the Corporation was increased from Rs. 340 crorecomprising 170 crore equity shares of face value of Rs. 2 each to Rs. 350 crorecomprising 175 crore equity shares of face value of Rs. 2 each.
Management Discussion and Analysis Report Report of the Directors on CorporateGovernance and Business Responsibility Report
In accordance with the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 (Listing Regulations) and directions issued by the National Housing Bank(NHB) the Management Discussion and Analysis Report and the Report of the Directors onCorporate Governance form part of this report.
In accordance with the Listing Regulations the Business Responsibility Report (BRR)has been placed on the Corporation's website. Members who wish to receive a physical copyof the BRR are requested to write to the Corporation. The policy on BusinessResponsibility is also placed on the Corporation's website.
The Corporation is a housing finance company registered with the National Housing Bankand is engaged in financing the purchase and construction of residential houses realestate and certain other purposes in India. All other activities of the Corporationrevolve around the main business.
The Assets Under Management (AUM) as at March 31 2017 was Rs. 338478 crore ascompared to Rs. 291531 crore in the previous year.
On an AUM basis the growth in the individual loan book was 16% and the non-individualloan book was 17%. The growth in the total loan book on an AUM basis was 16%.
During the year the Corporation's loan book increased from Rs. 259224 crore to Rs.296472 crore in March 2017 representing a growth of 14%. In addition loans securitisedand/ or assigned by the Corporation and outstanding as at March 31 2017 amounted to Rs.42006 crore.
Further details of lending operations are provided in the Management Discussion andAnalysis Report.
The Corporation is in compliance with the provisions of the Housing Finance CompaniesIssuance of NonConvertible Debentures on private placement basis (NHB) Directions
2014 and has been regular in making payments of principal and interest on thenon-convertible debentures. Details of borrowings are provided in the ManagementDiscussion and Analysis Report.
Deposits outstanding as at March 31 2017 amounted to Rs. 86574 crore. There has beenno default in repayment of deposits or payment of interest during the year. All thedeposits accepted by the Corporation are in compliance with the requirements of Chapter Vof the Companies Act 2013.
As of March 31 2017 public deposits amounting to Rs. 770 crore had not been claimedby 57783 depositors. Since then 9034 depositors have claimed or renewed deposits of Rs.167 crore. Depositors were intimated regarding the maturity of deposits with a request toeither renew or claim their deposits. Where the deposit remains unclaimed reminderletters are sent to depositors periodically and follow up action is initiated through theconcerned agent or branch.
Deposits remaining unclaimed for a period of seven years from the date they became duefor payment have to be transferred to the Investor Education and Protection Fund (IEPF)established by the central government. The concerned depositor can claim the deposit fromthe I EPF. During the year an amount of Rs. 1.09 crore was transferred to the IEPF.
Capital Adequacy Ratio
The Corporation's capital adequacy ratio (CAR) stood at 14.5% of which Tier I capitalwas 11.8% and Tier II capital was 2.7%. Deferred tax liability on Special Reserve and theinvestment in HDFC Bank has been considered as a deduction in the computation of Tier Icapital. Further the proposed final dividend and tax thereon for the year ended March 312017 has been reckoned in determining the net owned funds in the computation of thecapital adequacy ratio.
As per regulatory norms the minimum requirement for the capital adequacy ratio andTier I capital is 12% and 6% respectively.
The Corporation has complied with the Housing Finance Companies (NHB) Directions 2010and other directions prescribed by NHB regarding deposit acceptance accounting standardsprudential norms for asset classification income recognition provisioning capitaladequacy credit rating corporate governance concentration of investments and capitalmarket exposure norms.
Corporate Social Responsibility (CSR)
The Corporation contributed directly and through H T Parekh Foundation to identifiedsocial sectors in urban and rural areas in sectors such as education water &sanitation skilling & livelihoods healthcare community development differentlyabled persons child welfare and environmental sustainability.
Further details on the prescribed CSR spend under Section 135 of the Companies Act2013 and the amount committed and disbursed during the year under review are provided inthe Annual Report on CSR activities annexed to this report.
In accordance with the provisions of Section 136 of the Companies Act 2013 the annualreport of the Corporation the annual financial statements and the related documents ofthe Corporation's subsidiary companies are placed on the website of the Corporation www.hdfc.com.
Shareholders may download the annual financial statements and detailed information onsubsidiary companies from the Corporation's website or may write to the Corporation forthe same. Further the documents shall be available for inspection by the shareholders atthe registered office of the Corporation.
During the year HDFC ERGO General Insurance Company Limited (HDFC ERGO) acquiredL&T General Insurance Company Limited (L&T General) whereby it became a 100%subsidiary of HDFC ERGO. L&T General has been renamed HDFC General Insurance Limited.
The Board of Directors of the Corporation at the meeting held on July 27 2016approved the scheme of amalgamation of five of its wholly- owned subsidiaries WindermereProperties Private Limited Haddock Properties Private Limited Grandeur PropertiesPrivate Limited Winchester Properties Private Limited and Pentagram Properties PrivateLimited with itself. The applications for the proposed merger have been filed with theNational Company Law Tribunal Mumbai bench and the order on the same is awaited.
The Corporation has not made any loans or advances in the nature of loans to any of itssubsidiary or associate company or companies in which its directors are deemed to beinterested other than in the ordinary course of business.
The Corporation has obtained a certificate from its statutory auditors that it is incompliance with the provisions of Foreign Exchange Management Act 1999 with respect todownstream investments made in/by its subsidiaries and in other companies during the yearunder review.
A review of the key subsidiary and associate companies of the Corporation form part ofthe Management Discussion and Analysis Report which forms part of this report.
Particulars of Employees
HDFC had 2305 employees as of March 31 2017. During the year 7 employees employedthroughout the year were in receipt of remuneration of Rs. 1.02 crore or more per annumand 1 employee employed for part of the year was in receipt of remuneration of Rs. 8.5 lacor more per month.
In accordance with the provisions of Rule 5.2 of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the names and particulars of the topten employees in terms of remuneration drawn and of the aforesaid employees are set out inthe annex to the Directors' Report. In terms of the provisions of Section 136(1) of theCompanies Act 2013 read with the rule the Directors' Report is being sent to allshareholders of the Corporation excluding the annex. Any shareholder interested inobtaining a copy of the annex may write to the Corporation.
Further disclosures on managerial remuneration are annexed to this report.
Prevention Prohibition and Redressal of Sexual Harassment of Women at the Workplace
The Corporation has a policy on prevention prohibition and redressal of sexualharassment at the workplace. Members of the Internal Complaints Committee constituted bythe Corporation are responsible for reporting and conducting inquiries pertaining to suchcomplaints. The Corporation on a regular basis continues to sensitise all employees onprevention of sexual harassment at the workplace through workshops group meetings andawareness programmes. During the year no complaints were received by the committee.
Particulars of Loans Guarantees or Investments
Since the Corporation is a housing finance company the disclosures regardingparticulars of the loans given guarantees given and security provided is exempt under theprovisions of Section 186(11) of the Companies Act 2013.
As regards investments made by the Corporation the details of the same are providedunder notes 13 and 17 in the financial statements of the Corporation for the year endedMarch 31 2017.
Particulars of Contracts or Arrangements with Related Parties
The particulars of contracts or arrangements with related parties as prescribed in FormNo. AOC-2 of the Companies (Accounts) Rules 2014 is annexed to this report. Details ofrelated party transactions are given in the notes to the financial statements.
The Related Party Transactions policy of the Corporation ensures proper approval andreporting of the concerned transactions between the Corporation and related parties. Thepolicy on Related Party Transactions is placed on the Corporation's website.
Particulars Regarding Conservation of Energy Technology Absorption and ForeignExchange Earnings and Outgo
The particulars regarding foreign exchange earnings and expenditure appear under notes26.1 and 26.3 in the financial statements. Since HDFC does not own any manufacturingfacility the other particulars relating to conservation of energy and technologyabsorption as stipulated in the Companies (Accounts) Rules 2014 are not applicable.
Employees Stock Option Scheme (ESOS)
Presently stock options granted to the employees operate under the following schemes;ESOS-07 ESOS- 08 ESOS-11 and ESOS-14. There has been no material variation in the termsof the options granted under any of these schemes and all the schemes are in compliancewith the SEBI (Share Based Employee Benefits) Regulations 2014. The disclosures asrequired under the regulations have been placed on the website of the Corporation.
During the year the members of the Corporation approved the issuance of 49851524stock options representing 49851524 equity shares of Rs. 2 each under ESOS-17 through apostal ballot. However during the year no options were granted under ESOS-17.
Unclaimed Dividend and Unclaimed Shares
As at March 31 2017 dividend amounting to Rs. 24.74 crore had not been claimed byshareholders of the Corporation. The Corporation takes various initiatives to reduce thequantum of unclaimed dividend and has been periodically intimating the concernedshareholders requesting them to encash their dividend before it becomes due for transferto the Investor Education and Protection Fund (IEPF).
Unclaimed dividend amounting to Rs. 1.07 crore for FY 2008-09 was transferred to theIEPF on September 22 2016. In terms of the Investor Education and Protection FundAuthority (Accounting Audit Transfer and Refund) Rules 2016 as amended the Corporationwill be transferring the corresponding shares to IEPF where the dividends for the lastseven consecutive years have not been claimed by the concerned shareholders.
Further the unclaimed dividend in respect of FY 2009-10 must be claimed byshareholders on or before August 20 2017 failing which the Corporation will betransferring the unclaimed dividend and the corresponding shares to the IEPF within aperiod of 30 days from the said date. The concerned shareholders however may claim thedividend and shares from IEPF the procedure for which is detailed in the Shareholders'Information section.
In accordance with the provisions of the Companies Act 2013 and the Articles ofAssociation of the Corporation Ms. Renu Sud Karnad and Mr. V. Srinivasa Rangan are liableto retire by rotation at the ensuing Annual General Meeting (AGM). They are eligible forre-appointment.
The necessary resolutions for the re-appointment of Ms. Renu Sud Karnad and Mr. V.Srinivasa Rangan and their detailed profiles have been included in the notice conveningthe ensuing AGM.
All the directors of the Corporation have confirmed that they satisfy the fit andproper criteria as prescribed under the applicable regulations and that they are notdisqualified from being appointed as directors in terms of Section 164(2) of the CompaniesAct 2013.
Dr. S. A. Dave is the Corporation's nominee director on the board of HDFC Life. This isin accordance with the Listing Regulations which requires the Corporation to nominate atleast one of its independent directors on the board of HDFC Life which is a materialunlisted Indian subsidiary company of the Corporation.
The details on the number of board/ committee meetings held are provided in the Reportof the Directors on Corporate Governance which forms part of this report.
Messrs Deloitte Haskins & Sells LLP Chartered Accountants (firm registrationnumber 117366W/ W-100018 with the Institute of Chartered Accountants of India) have beenthe statutory auditors of the Corporation and will complete their term at the conclusionof the ensuing Annual General Meeting. Due to the mandatory rotation of statutory auditorsin accordance with the provisions of Section 139 of the Companies Act 2013 and theCompanies (Audit and Auditors) Rules 2014 Messrs Deloitte Haskins & Sells LLP arenot eligible for re-appointment.
The board placed on record their appreciation for the professional services rendered byMessrs Deloitte Haskins & Sells LLP during their association with the Corporation asits auditors.
Pursuant to the recommendation of the Audit Committee of Directors the board proposesto appoint Messrs B S R & Co. LLP Chartered Accountants (firm registration number101248W/W- 100022) as the statutory auditors of the Corporation for a term of 5consecutive years and to hold office from the conclusion of the 40th AGM untilthe conclusion of the 45th AGM.
Messrs B S R & Co. LLP have consented to the appointment and have issued acertificate to the effect that the appointment if made shall be in accordance with theconditions as prescribed in Section 139 of the Companies Act 2013 and the Companies(Audit and Auditors) Rules 2014. They have confirmed that they meet the criteria forindependence eligibility and qualification as prescribed in Section 141 of the CompaniesAct 2013.
The appointment will be subject to ratification by the members of the Corporation atevery AGM.
The Auditors' Report annexed to the financial statement for the year under review doesnot contain any qualifications.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Corporation hasappointed Messrs Vinod Kothari & Company practising company secretaries to undertakethe secretarial audit of the Corporation. The Secretarial Audit Report is annexed to thisreport and does not contain any qualifications.
Significant and Material Orders Passed by Regulators
During the year no significant or material orders were passed by any regulatorsagainst the Corporation other than that disclosed separately in the notes to the financialstatements and in the Report of the Directors on Corporate Governance.
Directors' Responsibility Statement
In accordance with the provisions of Section 134(3)(c) of the Companies Act 2013 andbased on the information provided by the management your directors state that:
a) In the preparation of annual accounts the applicable accounting standards have beenfollowed;
b) Accounting policies selected have been applied consistently. Reasonable and prudentjudgements and estimates have been made so as to give a true and fair view of the state ofaffairs of the Corporation as at the end of March 31 2017 and of the profit of theCorporation for the year ended on that date;
c) Proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Corporation and for preventing and detecting frauds and otherirregularities;
d) The annual accounts of the Corporation have been prepared on a going concern basis;
e) Internal financial controls have been laid down to be followed by the Corporationand such internal financial controls are adequate and operating effectively; and
f) Systems to ensure compliance with the provisions of all applicable laws are in placeand were adequate and operating effectively.
Internal Financial Control
The Corporation has put in place adequate policies and procedures to ensure that thesystem of internal financial control is commensurate with the size and nature of theCorporation's business. These systems provide a reasonable assurance in respect ofproviding financial and operational information complying with applicable statutessafeguarding of assets of the Corporation prevention and detection of frauds accuracyand completeness of accounting records and ensuring compliance with corporate policies.
Extract of Annual Return - Form No. MGT-9
The details forming part of the extract of the Annual Return in Form No. MGT-9 isannexed to this report.
Material changes and commitment if any affecting the financial position of theCorporation from the financial year end till the date of this report
There are no material changes and commitments affecting the financial position of theCorporation which have occurred after March 31 2017 till the date of this report.
It is with a great sense of pride that your directors present the 40thAnnual Report of your Corporation. The Corporation is the pioneer of retail housingfinance in India and has cumulatively financed over 5.8 million units. During all theseyears the Corporation is grateful for the support and goodwill it received. The currentthrust on affordable housing by the government bodes well to increase home ownership inIndia.
The directors place on record their gratitude for the support of various regulatoryauthorities including National Housing Bank Reserve Bank of India Securities andExchange Board of India Insurance Regulatory and Development Authority of India Ministryof Housing and Urban Poverty Alleviation Ministry of Corporate Affairs Registrar ofCompanies Financial Intelligence Unit (India) Foreign Investment Promotion Board thestock exchanges and the depositories.
The Corporation acknowledges the role of all its key stakeholders - shareholdersborrowers channel partners depositors deposit agents and lenders for their continuedsupport to the Corporation.
Your directors place on record their appreciation for the hard work and dedication ofall the employees of the Corporation.
On behalf of the Board of Directors
|MUMBAI ||DEEPAK S. PAREKH |
|May 4 2017 ||Chairman |