TO THE MEMBERS
Your directors are pleased to present the forty-second annual report of yourCorporation with the audited accounts for the year ended March 31 2019.
|Financial Results ||For the year ended March 31 2019 ||For the year ended March 31 2018 |
| ||(Rs. in crore) ||(Rs. in crore) |
|Profit Before Sale of Investments and Provision for Expected Credit Loss ||12841.42 ||9695.64 |
|Profit on Sale of Investments ||1212.35 ||5609.00 |
|Impairment on Financial Instruments (Expected Credit Loss) ||(935.00) ||(2115.00) |
|Profit Before Tax ||13118.77 ||13189.64 |
|Tax Expense ||3486.31 ||2230.30 |
|Net Profit After Tax ||9632.46 ||10959.34 |
|Other Comprehensive Income ||(131.53) ||(71.97) |
|Total Comprehensive Income ||9500.93 ||10887.37 |
|Retained Earnings || || |
|Opening Balance ||7929.24 ||5295.72 |
|Profit for the year ||9632.46 ||10959.34 |
|Re-measurement of Defined Benefit Plan ||(11.94) ||(6.23) |
|Amount Available for Appropriations ||17549.76 ||16248.83 |
|Appropriations: || || |
|Special Reserve No. II ||1850.00 ||1355.00 |
|General Reserve ||- ||2432.10 |
|Statutory Reserve (Under Section 29C of the National Housing Bank Act 1987) ||100.00 ||1078.00 |
|Interim Dividend (Rs. 3.50 per equity share of Rs. 2 each) & Tax on Interim Dividend ||616.70 ||590.87 |
|Final Dividend & Tax pertaining to the previous year paid during the year ||3347.82 ||2863.62 |
|Surplus in Statement of Profit & Loss ||11635.24 ||7929.24 |
Note: The nancial statements for the year ended March 31 2019 have been prepared underIndian Accounting Standards (Ind AS). The nancial statements for the year ended March 312018 have been restated in accordance with Ind AS for comparative purposes.
In March 2019 your directors declared an interim dividend of Rs. 3.50 per equity shareof Rs. 2 each which was same as in the previous nancial year. The interim dividend waspaid in March 2019.
Your directors recommend payment of nal dividend for the nancial year ended March 312019 of Rs. 17.50 per equity share of Rs. 2 each compared to Rs. 16.50 per equity sharefor the previous year.
The total dividend for the year is Rs. 21 per equity share as against Rs. 20 per equityshare for the previous year.
The dividend pay-out ratio for the year ended March 31 2019 is 44.1%.
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 Corporations website www.hdfc.com.
Management Discussion and Analysis Report Report of the Directors on CorporateGovernance and Business Responsibility Report In accordance with the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 (Listing Regulations) and directions issued by the National Housing Bank (NHB) theManagement Discussion and Analysis Report (MD&A) 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 Corporations website. Members who wish to receive a physicalcopy of the BRR are requested to write to the Corporation.
The policy on Business Responsibility is also placed on the Corporations website.
Adoption of Indian Accounting Standards (Ind AS)
The Ministry of Corporate Affairs vide its press release dated January 18 2016 hadissued directions for implementation of Ind AS for the accounting period beginning April1 2018 along with comparatives for the period beginning April 1 2017. NHB vide itscircular dated April 16 2018 and June 14 2018 had directed HFCs to comply with Ind AS asstated above. Accordingly the standalone and the consolidated financial statements forthe financialyear ended March 31 2019 forming part of this annual report have beenprepared in accordance with Ind AS specified under the Companies Act 2013 and otherrelevant provisions of the Companies Act 2013. The adoption of Ind AS has resulted insignificant changes in the financial details of which are provided in the notes toaccounts.
Conversion of Warrants
In October 2015 the Corporation had issued 36500000 warrants at an issue price ofRs. 14 per warrant with a right exercisable by the warrant holder to exchange each warrantfor one equity share of Rs. 2 each of the Corporation at any time on or before October 52018 at a warrant exercise price of Rs. 1475 per equity share to be paid by the warrantholder at the time of exchange of the warrants.
As at October 5 2018 36499471 warrants had been lodged for exchange with equityshares of the Corporation representing 99.99% of the warrants issued. Accordingly theCorporation issued and allotted 36499471 equity shares of Rs. 2 each and realised anamount of Rs. 5384 crore (of which Rs. 5308 crore was received during the year). Theequity shares so issued rank pari passu with the existing equity shares of the Corporationin all respects.
The amount received upon the exchange of warrants was utilised for on lending forhousing finance and capital requirements of the Corporation.
The Corporation is a housing finance company registered with NHB and is engaged infinancing the purchase and construction of residential houses real estate and certainother purposes in India. All other activities of the Corporation revolve around the mainbusiness.
The Assets Under Management (AUM) as at March 31 2019 amounted to Rs. 461913 croreas compared to Rs. 402880 crore in the previous year. On an AUM basis the growth in theindividual loan book was 17% and the non-individual loan book was 8%. The growth in thetotal loan book on an AUM basis was 15%.
The Corporations outstanding loan book stood at Rs. 406607 crore as at March31 2019 compared to Rs. 362811 crore in the previous year. The lower growth in theloan book was due to the unfavourable lending environment for non-individual loans thatprevailed in the second half of the financial year. Tight liquidity conditions overleverage and credit rating downgrades led to heightened risks across the corporate sector.In order to preserve asset quality the Corporation opted to be prudent by curtailing someof its lending to non-individual loans. The loan book also reflects a lower growth becauseloans assigned during the year were significantly higher at Rs. 25150 crore compared toRs. 6453 crore in the previous year. Loans assigned during the year included a backlog ofloans of the previous year. There were no loans assignments in the second half of FY18 ascertain regulatory clarifications pertaining to the Goods and Services Tax were awaited.Loan assignments resumed from June 2018 onwards once necessary clarifications werereceived.
Further details of lending operations are provided in the MD&A.
The Corporation is in compliance with the provisions of the Housing Finance Companiesissuance of Non-Convertible Debentures on private placement basis (NHB) Directions 2014and has been regular in payment of principal and interest on the non-convertibledebentures. During the year the Corporation also raised funds under its Medium Term Note(MTN) Programme in accordance with Reserve Bank of Indias External CommercialBorrowings policy. Details of market borrowings are provided in the MD&A and notes toaccounts.
Deposits outstanding as at March 31 2019 amounted to Rs. 105599 crore as compared toRs. 91269 crore in the previous year. CRISIL and ICRA have for the twenty-fourthconsecutive year reaffirmed their CRISIL FAAA/Stable and ICRAMAAA/Stable ratings respectively for HDFCs deposits. These ratings representthe highest degree of safety regarding timely servicing of financial obligations.Increasing uncertainties in market conditions led to a flight to safety which wasreflected in the strong mobilisation of retail deposits of the Corporation particularlyin the second half of the financial year. There has been no default in repayment ofdeposits or payment of interest during the year. All the deposits accepted by theCorporation are in compliance with the requirements of Chapter V of the Companies Act2013.
As of March 31 2019 public deposits amounting to Rs. 769 crore had not been claimedby 45752 depositors. Since then 10007 depositors have claimed or renewed deposits ofRs. 223 crore. Depositors were intimated regarding the maturity of deposits with a requestto either 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 fromthe date they became due for payment have to be transferred to the Investor Education andProtection Fund (IEPF) established by the central government. The concerned depositor canclaim the deposit from the IEPF. During the year an amount of Rs. 1.56 crore wastransferred to the IEPF.
Capital Adequacy Ratio
The Corporations capital adequacy ratio (CAR) stood at 19.1% of which Tier Icapital was 17.5% and Tier II capital was 1.6%. The investment in HDFC Bank has beenconsidered as a deduction in the computation of Tier I capital. As per regulatory normsthe minimum requirement for the capital adequacy ratio and Tier I capital is 12% and 6%respectively.
The Corporation has complied with the Housing Finance Companies (NHB) Directions 2010and other directions/guidelines prescribed by NHB regarding deposit acceptance accountingstandards prudential norms for asset classification income recognition provisioningcapital adequacy credit rating corporate governance information technology frameworkfraud monitoring concentration of investments capital market exposure norms and knowyour customer and anti-money laundering.
Corporate Social Responsibility (CSR)
During the year the Corporations CSR activities focused on three key sectors healthcare education and skilling and livelihoods. The Corporation contributed torebuilding efforts of homes in the state of Kerala that were damaged due to floods inAugust 2018. The Corporation also supported projects relating to community developmentdifferently abled environment and sports. The Corporation contributed directly andthrough H T Parekh Foundation to these identifiedsocial sectors. Further details on theprescribed CSR spend under Section 135 of the Companies Act 2013 and the amount committedand disbursed during the year under review are provided in the Annual Report on CSRactivities annexed to this report.
Subsidiary and Associate Companies
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 Corporations subsidiary companies are placed on the website of the Corporation.Shareholders may download the annual financial statements and detailed information on thesubsidiary companies from the Corporations website or may write to the Corporationfor the same. Further the documents shall also be available for inspection by theshareholders at the registered office of the Corporation. In July 2018 HDFC Bank Limitedon a preferential basis allotted 39096817 equity shares of Rs. 2 each at an issue priceof Rs. 2174.09 per equity share to the Corporation.
This investment amounting to Rs. 8500 crore has enabled the Corporation along withits wholly owned subsidiaries to retain its shareholding in HDFC Bank at 21.4%. Theinvestment was made out of the proceeds of equity shares issued by the Corporation on apreferential and qualified institutions placement basis in the previous financial Duringthe year the Corporation offered for sale 4.08% of the paid-up and issued equity sharecapital of HDFC Asset Management Company Limited (HDFC AMC) a subsidiary of theCorporation in the initial public offer (IPO) of HDFC AMC. HDFC AMCs equity shareswere listed on BSE and NSE on August 6 2018. As at March 31 2019 the Corporationsshareholding in HDFC AMC stood at 52.8%.
In August 2018 the Corporation acquired 3052469 equity shares of Good Host SpacesPrivate Limited (Good Host) representing 25.01% of the paid-up share capital of thecompany. Good Host operates and manages hostel facilities for students.
Pursuant to the acquisition Good Host became an associate company of the Corporation.
On January 7 2019 the Board of Directors of GRUH Finance Limited (GRUH) a listedsubsidiary of the Corporation approved the scheme of amalgamation of GRUH with and intoBandhan Bank Limited (Bandhan). As per the scheme the appointed date is January 1 2019and the share exchange ratio is 568 equity shares of face value Rs. 10 each of Bandhan forevery 1000 fully paid-up equity shares of face value Rs. 2 each of GRUH. In April 2019the RBI granted its approval to the Corporation to acquire up to 9.9% of the paid-upvoting equity capital of Bandhan upon the effective date of the scheme. The applicationfor the proposed merger has been filed by GRUH and Bandhan with the National Company LawTribunal Ahmedabad and Kolkata bench respectively. The scheme has also received approvalfrom the Competition Commission of India and remains subject to other regulatory andstatutory approvals including the respective shareholders and creditors of GRUH andBandhan.
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 is in compliance with the provisions of the Foreign Exchange ManagementAct 1999 with respect to downstream investments made in/by its subsidiaries and in othercompanies during the year. Further as required by the RBI Master Direction - ForeignInvestments in India the Corporation has obtained a certificate from its statutoryauditors on the same.
A review of the key subsidiary and associate companies of the Corporation form part ofthe MD&A which forms part of this report.
Particulars of Employees
HDFC had 2840 employees as of March 31 2019. During the year 12 employees were inreceipt of remuneration of Rs. 1.02 crore or more per annum. In accordance with theprovisions of Rule 5(2) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 the names and particulars of the top ten employees in terms ofremuneration drawn and of the aforesaid employees are set out in the annex to theDirectors Report. In terms of the provisions of Section 136(1) of the Companies Act2013 read with the rule the
Directors Report is being sent to all shareholders of the Corporation excludingthe annex. Any shareholder interested in obtaining a copy of the annex may write to theCorporation. 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 of women at the workplace and has an Internal Complaints Committee (ICC) incompliance with the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. The Corporations policy on the same is placed on theCorporations website. Members of the Corporations ICC are responsible forreporting and conducting inquiries pertaining to such complaints. The Corporation on aregular basis sensitises its employees including outsourced employees on the prevention ofsexual harassment at the workplace through workshops group meetings online trainingmodules and awareness programmes. The Corporation also conducted a special trainingprogramme for the members of the ICC. During the year one complaint was received by thecommittee. The case was reviewed and disposed of and thus there were no pending complaintswith the committee as at March 31 2019.
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 provided innotes to the statements of the Corporation for the year ended March 31 2019 (note 10).
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 policyon Related Party Transactions of the Corporation ensures proper approval and reporting ofthe concerned transactions between the Corporation and its related parties.
The policy on Related Party Transactions is published elsewhere in the annual reportand is also placed on the Corporations website.
Particulars Regarding Conservation of Energy Technology Absorption and ForeignExchange Earnings and Outgo
During the year ended March 31 2019 earnings in foreign currency stood at Rs. 8 croreand expenditure in foreign currency stood at Rs. 1367 crore.
The Corporation is in the business of housing finance and hence its operations are notenergy intensive. The Corporation is cognisant of the importance of imbibing measurestowards optimum energy utilisation and conservation.
Employees Stock Option Scheme
Presently stock options granted to the employees operate under the following schemes-- ESOS-07 ESOS-08 ESOS-11 ESOS-14 and ESOS-17. There has been no variation in theterms of the options granted under any of these schemes and all the schemes are incompliance with the SEBI (Share Based Employee Benefits)Regulations 2014. The disclosuresas required under the regulations have been placed on the website of the Corporation.
Unclaimed Dividend and Shares
As at March 31 2019 dividend amounting to Rs. 25.04 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.1.62 crore for FY 2010-11 was transferred to the IEPF on August 28 2018. Further incompliance with the Investor Education and Protection Fund Authority (Accounting AuditTransfer and Refund) Rules 2016 as amended the Corporation transferred 73237 equityshares of Rs. 2 each (corresponding to the dividend for the FY 2010-11 and remainingunclaimed for a continuous period of 7 years) in favour of the IEPF. However theconcerned shareholders may claim the unclaimed dividend and unclaimed shares from IEPFthe procedure for which is detailed in the Shareholders Information section. Theunclaimed dividend in respect of FY 2011-12 must be claimed by shareholders on or beforeAugust 10 2019 failing which the Corporation would be required to transfer the unclaimeddividend and the corresponding shares to the IEPF within a period of 30 days from the saiddate.
Independent directors Mr. B. S. Mehta and Dr. Bimal Jalan resigned from the board witheffect from July 30 2018. The independent directors resigned on account of personalcommitments. The board placed on record its sincere appreciation for the wise counsel andenormous contributions made by the directors to the board over the years. The boardappointed Dr. Bhaskar Ghosh and Ms. Ireena Vittal with effect from September 27 2018 andJanuary 30 2019 respectively as independent directors of the Corporation for a term offive consecutive years each. Their appointments are subject to the approval of the membersof the Corporation at the ensuing AGM. The board has approved the reappointment of Dr. J.J. Irani and Mr. Nasser Munjee as independent directors of the Corporation for a term oftwo consecutive years each with effect from July 21 2019 subject to the approval ofmembers at the ensuing AGM as their present tenure expires on July 20 2019. The boarddeliberated on the contributions made by Dr. J. J. Irani and Mr. Nasser Munjee andconcluded that given their vast experience knowledge and strategic inputs to the boardit would be benefic ial for the Corporation to retain them as directors. In accordancewith the provisions of the Companies Act 2013 and the Articles of Association of theCorporation Mr. V. Srinivasa Rangan executive director of the Corporation is liable toretire by rotation at the ensuing AGM. He is eligible of which for reappointment. Thenecessary resolutions for the appointment/re-appointment of the directors and their briefprofiles have been included in the notice convening the ensuing AGM. All the directors ofthe Corporation have confirmed that they satisfy the proper criteria as prescribed fitunder the applicable regulations and that they are not disqualified from being appointedas directors in terms of Section 164(2) of the Companies Act 2013. The details on thenumber of board/ committee meetings held are provided in the Report of the Directors onCorporate Governance which forms part of this report.
At the 40th AGM of the Corporation the members had appointed Messrs B S R & Co.LLP Chartered Accountants (firm registration number 101248W/W-100022) as the statutoryauditors for a term of 5 consecutive years and to hold office until the conclusion of the45th AGM. Messrs B S R & Co. LLP Chartered Accountants is a leading firm ofchartered accountants and adheres to high professional standards and benchmarks. The firmhas several experienced partners on a pan-India basis. The Auditors Report annexedto the financial statements for the year under review does not contain any qualifications.During the year Messrs B S R & Co. LLP chartered accountants and all entities in thenetwork firm the statutory auditor is a part received a total remuneration of Rs. 6.25crore from the Corporation and its certain subsidiaries. The remuneration pertains to feesfor audit internal financial control reporting limited reviews tax audits and taxationservices certifications and other matters and reimbursement of expenses.
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 practicing company secretaries to undertakethe secretarial audit of the Corporation. The Secretarial Audit Report is annexed to thisreport and does not contain any The Secretarial Compliance Report as prescribed by SEBI isprovided elsewhere in the annual report.
Significant and Material Orders
Passed by Regulators
During the year there were no significantor material orders passed by the regulatorsor courts or tribunals that would impact the going concern status or operations of theCorporation in the future.
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 March 31 2019 and of the profit of the Corporation forthe year ended on that date;
c) Proper and sufficient care has been taken for the maintenance of adequate accountingrecord s i n accordance with the provisions of the Companies Act 2013 for safeguardingthe assets 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 theCorporations 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. The annual return for the financial 2018-19 is uploaded on thewebsite of the Corporation.
Material changes and commitment if any affecting the of the Corporation from the yearend 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 2019 till the date of this report.
The directors place on record their gratitude for the support of various regulatoryauthorities including
National Housing Bank Reserve Bank of India Securities and Exchange Board of IndiaInsurance Regulatory and Development Authority of India Pension Fund Regulatory andDevelopment Authority Ministry of Housing and Urban Affairs Ministry of CorporateAffairs Registrar of Companies Financial Intelligence Unit (India) the stock exchangesand 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 13 2019 ||Chairman |