HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED
ANNUAL REPORT 2010-2011
NOTES ON ACCOUNTS
NOTES FORMING PART OF THE ACCOUNTS:
1. The Corporation has availed a loan of USD 100 million from the Asian
Development Bank (Loan II). In respect of tranches 1 and 2 aggregating to
USD 60 million, as per the agreements with a scheduled bank, the
Corporation has handed over the dollar funds to the bank overseas and has
obtained rupee funds in India amounting to Rs.200 crores by way of a term
loan and Rs.100 crores through the issue of bonds which have been
subscribed by the bank.
In respect of tranche 3 of USD 40 million, as per the agreement with a
financial institution, the corporation has handed over the dollars to a
financial institution overseas and under a back-to-back arrangement
obtained rupee funds in India. All payments in foreign currency are the
responsibility of the financial institution. In terms of the agreements,
the Corporation's foreign exchange liability is protected.
2. (i) The Corporation had raised USD 500 million through the issue of zero
coupon Foreign Currency Convertible Bonds (FCCBs). The bonds were
convertible at any time into equity shares of the Corporation of the face
value of Rs.10 each from August 24, 2006 upto July 29, 2010, at the option
of the holders, at Rs.1399.148 per equity share representing a conversion
premium of 50% over the initial reference share price. The bonds were
redeemable on September 27, 2010 with an yield to maturity of 4.62% per
annum. During the year ended March 31, 2011, the entire amount outstanding
of USD 90.60 million was converted into equity shares of the Corporation.
As such, the entire FCCB amounting to USD 500 million (Previous Year USD
409.40 million) representing 1,56,23,732 (Previous Year 1,27,92,711) Equity
shares, have been converted pursuant to the exercise of options by the
bondholders of the Corporation. The Corporation had undertaken currency
options and forward contracts amounting to USD Nil (Previous Year USD 75
million) to cover the net foreign currency exposure in the outstanding
FCCBs.
(ii) The Corporation has availed USD 175 million under the Short Term
Foreign Currency Borrowing scheme of the Reserve Bank of India (RBI) under
the 'approval route' in terms of the RBI Press Release No. 2008-2009/700
dated November 17, 2008, with a maturity of three years. In term of the RBI
guidelines, these borrowings have been swapped into rupees for the entire
maturity by way of principal only swaps.
(iii) As on March 31, 2011, the Corporation has foreign currency borrowings
(excluding FCCBs) of USD 1,103.90 million equivalent (Previous Year USD
945.43 million). The Corporation has undertaken principal only swaps,
currency options and forward contracts on a notional amount of USD 963.30
million equivalent (Previous Year USD 787.99 million) to hedge the foreign
currency risk. Further, interest rate swaps on a notional amount of USD 15
million equivalent (Previous Year USD 90 million) are outstanding, which
have been undertaken to hedge the interest rate risk on the foreign
currency borrowings. As on March 31, 2011, the Corporation's net foreign
currency exposure on borrowings net of risk management arrangements is USD
Nil (Previous Year USD Nil).
As a part of asset liability management on account of the Corporation's
Adjustable Rate Home Loan product as well as to reduce the overall cost of
borrowings, the Corporation has entered into interest rate swaps wherein it
has converted its fixed rate rupee liabilities of a notional amount of
Rs.23,255 crores (Previous Year Rs.16,065 crores) as on March 31, 2011 for
varying maturities into floating rate liabilities linked to various
benchmarks. In addition, the Corporation has entered into cross currency
swaps of a notional amount of USD 697.50 million equivalent (Previous Year
USD 694 million) wherein it has converted its rupee liabilities into
foreign currency liabilities and the interest rate is linked to the
benchmarks of respective currencies.
(iv) Monetary assets and liabilities denominated in foreign currencies net
of risk management arrangement are revalued at the rate of exchange
prevailing at the year end. Cross currency Swaps are fair valued at the
year end and loss is recognised in the Profit and Loss Account while the
gains are not recognised keeping in view the principles of prudence as
enumerated in Accounting Standard (AS 1) notified by the Companies
(Accounting Standard) Rules, 2006. For forward contracts or instruments
that are in substance, forward exchange contracts, the exchange differences
on such contracts are being amortised over the life of contracts.
The amount of exchange difference in respect of such contracts to be
recognised as expense in the Profit and Loss Account over subsequent
accounting periods is Rs.0.50 crores (Previous Year Rs.1.85 crores). This
shall be amortised over the next 1 year.
(v) A net loss of Rs.27.58 crores (Previous Year Net Gain of Rs.29.57
crores) has been recognised in the Profit and Loss Account being net gain
on year end translation of foreign currency monetary assets and liabilities
and fair value loss on derivatives as shown below:
Current Year Previous Year
Rs. in Rs. in Rs. in
crores crores crores
Net Gain on derivative
revaluation not recognised
in earlier years (52.29) -
Amortisation of Premium on
Options and Forward Contracts 1.35 (34.80)
Net (gain)/loss on
Translation of Foreign
Currency Denominated Assets
and Foreign Currency
Borrowings (47.64) 95.88
Fair value Loss/(Gain) on
Derivatives (Cross Currency
swaps) 126.16 (142.94)
Amounts retained in Advance
Payments (as per note below) - 52.29 (90.65)
Net Loss/(Gain) 27.58 (29.57)
The net gain of Rs.Nil (Previous Year Rs.52.29 crores) on fair value of
Cross Currency Swaps is included under Advance Payments (Schedule No. 7)
and not recognised in the Profit and Loss Account in view of the
announcement by the Institute of Chartered Accountants of India (ICAI)
which required the principle of prudence to be followed in accounting for
mark to market gains/losses on derivatives.
3. The maximum amount of Commercial Paper outstanding at any time during
the year was Rs.7,550 crores (Previous Year Rs.8,280 crores).
4. Save and except the floating charge created in favour of the depositors
in respect of public deposits' as defined in Paragraph 2(1)(y) of the
Housing Finance Companies (NHB) Directions, 2010, on the Statutory Liquid
Assets maintained in terms of sub-sections (1) & (2) of Section 29B of the
National Housing Bank Act, 1987;
(i) Loans are secured by Promissory Notes and / or a negative lien on all
the assets of the Corporation.
(ii) Bonds are in the nature of Promissory Notes and are secured by a
negative lien on all the assets of the Corporation.
(iii) Non-Convertible Debentures amounting to Rs.41,623.90 crores (Previous
Year Rs.33,092.90 crores) are secured by a negative lien on all the assets
of the Corporation and by a mortgage. These debentures are redeemable at
par between 2011 and 2025.
5. During the year, the Corporation raised Rs.1,000 crores (Previous Year
Rs.500 crores) through issue of Long Term Unsecured Redeemable Non-
Convertible Debentures (subordinated debt). As at March 31, 2011, the
Corporation's outstanding subordinated debt is Rs.2,875 crores (Previous
Year Rs.1,875 crores). These Debentures are redeemable at par between 2011
and 2021. The debt is subordinated to present and future senior
indebtedness of the Corporation and qualifies as Tier II capital under
National Housing Bank (NHB) guidelines for assessing capital adequacy.
Based on the balance term to maturity as at March 31, 2011, 82.61%
(Previous Year 82.93%) of the book value of the subordinated debt is
considered as Tier II capital for the purpose of capital adequacy
computation.
6. (i) Loan Funds include Rs.10,18,29,197 (Previous Year Rs.8,63,18,061)
from Directors.
(ii) Deposits include Rs.13,474.73 crores (Previous Year Rs.14,509.05
crores) due within one year.
(iii) Deposits include Rs.172,10,00,000 (Previous Year Rs.25,79,00,000) due
to subsidiary companies.
(iv) Loan Funds include Rs.235,00,00,000 (Previous Year Rs.175,00,00,000)
due to subsidiary companies.
7. (i) Loans granted by the Corporation are secured or partly secured by:
(a) Equitable mortgage of property and / or
(b) Pledge of shares, units, other securities, assignment of life insurance
policies and / or
(c) Hypothecation of assets and / or
(d) Bank guarantees, company guarantees or personal guarantees and / or
(e) Negative lien and / or
(f) Assignment of hire purchase receivables and / or
(g) Undertaking to create a security.
(ii) Loans include Rs.36.61 crores (Previous year Rs.34.78 crores) in
respect of properties held for disposal under Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002.
8. (i) There are no Sundry Debtors which are outstanding for a period over
six months. Sundry Debtors include amounts due from subsidiary companies
Rs.3,90,594 (Previous Year Rs.58,77,128).
(ii) Cash and cash equivalents represents:
Particulars As at As at
March 31, 2011 March 31, 2010
Rupees Rupees
Cash and Bank Balances (As per
Schedule 6) 6405,25,29,218 5224,14,76,065
Current Accounts held for
Unclaimed Dividends (8,59,61,143) (7,51,94,803)
Exchange difference on Cash and
Cash equivalents 63,74,972 8,00,28,854
Cash and cash equivalents as at
the end of the year 6397,29,43,047 5224,63,10,116
(iii) Bank Balance with Non-Scheduled Banks:
Rupees
Name of the Bank A B C D
HSBC Bank Plc, London 16,15,486 1,29,88,249 6,67,443 66,30,516
DBS Bank Ltd., Singapore 1,01,00,821 1,44,84,912 15,13,904 1,43,04,467
Total 1,17,16,307 21,81,347
A = Balance as on March 31, 2011
B = Maximum amout outstanding at any time during the year ended March 31,
2011
C = Balance as on March 31, 2010
D = Maximum amout outstanding at any time during the year ended March 31,
2010
(iv) Out of the total Loans and Advances (Schedule 6), amounts aggregating
to Rs.550,02,71,805 (Previous Year Rs.627,64,00,476) are secured.
Advances recoverable in cash or in kind includes Advance Tax (net of
Provision for Taxation) Rs.453,64,87,061 (Previous Year Rs.372,88,10,994),
Rs.4,57,35,752 (Previous Year Rs.7,44,19,755) towards advances of capital
nature, and Rs.45,76,87,488 (Previous Year Rs.8,85,35,298) due from
subsidiary companies.
(v) Corporate Deposits include Rs.23,45,00,000 (Previous Year
Rs.20,00,00,000) due from a subsidiary company.
9. (i) Sundry Creditors include Rs.Nil (Previous Year Rs.Nil) payable to
'Suppliers' registered under the Micro, Small and Medium Enterprises
Development Act, 2006. No interest has been paid / payable by the
Corporation during the year to the 'Suppliers' covered under the Micro,
Small and Medium Enterprises Development Act, 2006. The above information
takes into account only those suppliers who have responded to inquiries
made by the Corporation for this purpose.
(ii) As required under Section 205C of the Companies Act, 1956, the
Corporation has transferred Rs.65,72,191 (Previous Year Rs.65,55,580) to
the Investor Education and Protection Fund (IEPF) during the year. As of
March 31, 2011, no amount was due for transfer to the IEPF.
(iii) Sundry Creditors include Rs.Nil (Previous Year Rs.19,911) due to a
subsidiary company.
(iv) Sundry Creditors include Rs.43,00,000 (Previous Year Rs.Nil) being
amount payable to HDFC Provident fund trust towards deficiency in the fund
account.
(v) Interest Accrued but not due includes Rs.10,03,92,182 (Previous Year
Rs.7,48,03,734) due to Subsidiary Companies and Rs.48,19,055 (Previous Year
Rs.53,99,783) due to the Directors of the Corporation.
10. Estimated amount of contracts remaining to be executed on capital
account and not provided for (net of advances) is Rs.269.95 crores
(Previous Year Rs.304.69 crores).
11. (i) Profit on sale of investments includes profit of Rs.8,22,000
(Previous Year Rs.16,44,000) in respect of investments held as current
investments and Rs.11,75,576 (Previous Year Rs.Nil) on account of shares
bought back by India Value Fund Advisors Pvt. Ltd. (Associate Company).
(ii) Surplus from deployment in Cash Management Schemes of Mutual Funds
amounting to Rs.217,53,39,542 (Previous Year Rs.189,84,42,216) is in
respect of investments held as current investments.
(iii) Dividend income includes Rs.83,73,25,003 (Previous Year
Rs.97,02,94,818) received from subsidiary companies and Rs.10,67,54,945
(Previous Year Rs.31,26,62,788) in respect of current investments.
(iv) Other Interest includes Interest on Investments amounting to
Rs.198,20,20,862 (Previous Year Rs.157,28,02,047), including
Rs.33,48,78,022 (Previous Year Rs.3,86,05,659) in respect of current
investments.
(v) Fees and Other Charges is net of the amounts paid to Direct Selling
Agents Rs.199.45 crores (Previous Year Rs.151.59 crores).
12. Other Income includes rent of Rs.9,97,03,190 (Previous Year
Rs.11,71,47,500), of which Rs.24,00,000 (Previous Year Rs.24,00,000) is in
respect of rent for certain assets given on operating lease and also
includes sub-lease payments received Rs.6,90,000 (Previous Year
Rs.1,00,74,150) in respect of a property acquired under operating lease as
per Note 25(ii).
Current year Previous Year
Rupees Rupees
13. (i) Earnings in foreign
currency (Cash basis):
Interest on Bank Deposits 3,04,39,541 5,92,78,024
Consultancy and other fees 8,66,49,503 17,41,78,305
(ii) Expenditure in
foreign currency (Cash
basis):
Interest and Other Charges
on Loans 71,39,15,576 67,34,14,330
Others 14,31,89,046 10,68,67,583
14. In accordance with the Accounting Standard on Employee Benefits (AS-15)
(Revised 2005) notified by the Companies (Accounting Standards) Rules,
2006, the following disclosures have been made:
(i) Salaries and Bonus include Rs.7,02,62,861 (Previous Year
Rs.3,18,78,173) towards provision made in respect of accumulated leave
salary and leave travel assistance which is in the nature of Long Term
Employee Benefits and has been actuarially determined as per the AS 15
(Revised).
(ii) The Corporation has recognised the following amounts in the Profit and
Loss Account which are included under Contributions to Provident Fund and
Other Funds:
Particulars Current Year Previous Year
Rupees Rupees
Provident Fund 6,96,90,658 5,70,39,794
Superannuation Fund 4,78,60,025 3,95,97,432
Employees' Pension Scheme-1995 1,07,59,993 99,30,400
The Rules of the Corporation's Provident Fund administered by a Trust
require that if the Board of Trustees are unable to pay interest at the
rate declared for Employees' Provident Fund by the Government under para 60
of the Employees' Provident Fund Scheme, 1952 for the reason that the
return on investment is less or for any other reason, then the deficiency
shall be made good by the Corporation. The deficiency of Rs.87,27,194
(Previous Year Rs.Nil) included in Staff Training and Welfare Expenses, was
made good by the Corporation.
(iii) The details of the Corporation's post-retirement benefit plans for
its employees including whole-time directors are given below which is as
certified by the actuary and relied upon by the auditors:
Particulars Current Year Previous Year
Rupees Rupees
Change in the Benefit Obligations:
Liability at the beginning of the year 81,40,43,535 69,59,67,492
Current Service Cost 3,28,99,376 3,01,53,839
Interest Cost 6,78,48,311 5,28,34,887
Past Service Cost (Vested benefit) - 3,34,76,920
Benefits Paid (4,37,20,642) (4,19,72,934)
Actuarial loss 7,13,16,912 4,35,83,331
Liability at the end of the year* 94,23,87,492 81,40,43,535
* The Liability at the end of the year Rs.94,23,87,492 (Previous Year
Rs.81,40,43,535) includes Rs.26,23,00,986 (Previous Year Rs.24,72,40,739)
in respect of an un-funded plan.
Particulars Current Year Previous Year
Rupees Rupees
Fair Value of Plan Assets:
Fair Value of Plan Assets at the
beginning of the year 53,86,80,959 46,92,99,407
Expected Return on Plan Assets 4,84,78,746 4,35,59,369
Contributions 9,18,42,476 9,68,48,873
Benefits Paid (4,37,20,642) (4,19,72,934)
Actuarial loss on Plan Assets (3,36,00,727) (2,90,53,756)
Fair Value of Plan Assets at the
end of the year 60,16,80,812 53,86,80,959
Total Actuarial loss to be
recognised (10,49,17,639) (7,26,37,087)
Actual Return on Plan Assets:
Expected Return on Plan Assets 4,84,78,746 4,35,59,369
Actuarial loss on Plan Assets (3,36,00,727) (2,90,53,756)
Actual Return on Plan Assets 1,48,78,019 1,45,05,613
Expense Recognised in the Profit
and Loss Account:
Current Service Cost 3,28,99,376 3,01,53,839
Interest Cost 6,78,48,311 5,28,34,887
Expected Return on Plan Assets (4,84,78,746) (4,35,59,369)
Net Actuarial loss to be recognised 10,49,17,639 7,26,37,087
Past Service Cost (Vested benefit) - 3,34,76,920
Expense recognised in the Profit
and Loss Account under 'Staff
Expenses' 15,71,86,580 14,55,43,364
Reconciliation of the Liability
Recognised in the Balance Sheet:
Opening Net Liability 27,53,62,576 22,66,68,085
Expense recognised 15,71,86,580 14,55,43,364
Contribution by the Corporation 9,18,42,476 9,68,48,873
Amount recognised in the Balance
Sheet under 'Provision for Employee
Benefits' 34,07,06,680 27,53,62,576
Particulars 2010-11 2009-10 2008-09 2007-08 2006-07
Rupees Rupees Rupees Rupees Rupees
Amount Recognised
in the Balance
Sheet:
Liability at the
end of the year 942387492 814043535 695967492 558726275 426525077
Fair Value of Plan
Assets at the end
of the year 601680812 538680959 469299407 353659997 284535665
Amount recognised
in the Balance
Sheet under
'Provision for
Employee Benefits' 340706680 275362576 226668085 205066278 141989412
Experience
Adjustment:
On Plan
Liabilities 71316912 70397016 39433507 62821665 68668384
On Plan Assets (33600727) (29053756) (23239520) (10107530) (4843603)
Estimated
Contribution for
next year 57929763 47178929 20511000
Investment Pattern:
Particulars % Invested % Invested
Current Year Previous Year
Central Government securities 20.19 12.79
State Government securities/
securities guaranteed by
State/Central Government 2.98 3.82
Public Sector/Financial
Institutional Bonds 27.13 40.22
Private Sector Bonds 16.69 14.41
Special Deposit Scheme 3.66 4.09
Certificate of Deposits 2.41 0.59
Deposits with Banks and
Financial Institutions 5.84 5.69
Equity Shares 15.82 13.16
Others (Including bank balances) 5.28 5.23
Total 100.00 100.00
Based on the above allocation and the prevailing yields on these assets,
the long term estimate of the expected rate of return on fund assets has
been arrived at.
Principal Assumptions:
Particulars Current Year Previous Year
% %
Discount Rate 8.25 8.25
Return on Plan Assets 8 8
Salary Escalation 5 5
The estimate of future salary increase, considered in the actuarial
valuation takes account of inflation, seniority, promotion and other
relevant factors.
15. Managerial Remuneration:
Particulars Current Year Previous Year
Rupees Rupees
Salaries and Commission 8,48,10,000 8,57,10,000
Corporation's contribution
to Provident and
Superannuation Funds 59,94,000 59,89,950
Perquisites and other
allowances 1,99,48,895 5,70,44,211
Managerial Remuneration amounting to Rs.1,73,55,059 (Previous Year
Rs.1,41,84,475) is subject to the shareholders' approval at the ensuing
Annual General Meeting.
The above is excluding contribution to the gratuity fund and provision made
for the post retirement pension scheme for the whole-time Directors.
Computation of net profit in accordance with Section 198 read with Section
349 of the Companies Act, 1956 in respect of commission payable to
Directors:
Rupees Rupees
Profit Before Tax 4866,95,81,311
Add: Provision for Contingencies 70,00,00,000
Managerial Remuneration 11,07,52,895
Directors' Fees and Commission 2,14,11,347
Accrued Loss on Redemption of
Investments 4,82,97,512
4955,00,43,065
Less: Profit on Sale of Investments 359,74,01,913
Surplus from deployment in Cash
Management Schemes of Mutual Funds 217,53,39,542
Amounts utilised out of Shelter
Assistance Reserve 11,47,63,981
Capital Profit on sale of Leased
Properties/Fixed Assets 23,53,41,040
612,28,46,476
Net Profit as per Section 198 4342,71,96,589
i) Commission payable to
whole-time Directors:
At 3% of net profit to the
whole-time Directors 130,28,15,898
Restricted to 6,26,10,000
ii) Commission payable to non
whole-time Directors :
At 1% of net profit for all
non whole-time Directors 43,42,71,966
Restricted to 1,99,41,347
16. (i) Expenditure shown in Schedule 11 is net of recovery from a
subsidiary company in respect of Salaries Rs.1,56,44,075 (Previous Year
Rs.1,32,85,336) and expenditure shown in Schedule 13 is net of recovery
from a subsidiary company in respect of Miscellaneous Expenses Rs.Nil
(Previous Year Rs.4,00,000).
(ii) Miscellaneous Expenses under Schedule 13 exclude Rs.11,47,63,981
(Previous Year Rs.8,48,45,183) in respect of amounts utilised out of
Shelter Assistance Reserve during the year.
17. (i) Interest on Deposits include Rs.26,18,102 (Previous Year
Rs.7,89,108) payable to the Chief Executive Officer of the Corporation.
(ii) Other Expenses include Provision for Wealth Tax amounting to
Rs.65,00,000 (Previous Year Rs.65,00,000) and Securities Transaction Tax
amounting to Rs.29,45,001 (Previous Year Rs.71,97,658).
(iii) Auditors' Remuneration:
Current Year Previous Year
Rupees Rupees
Audit Fees 80,46,800 62,47,000
Tax Matters 27,30,000 21,00,000
Other Matters 59,36,000 99,63,000
Reimbursement of Expenses 2,17,502 22,311
Service Tax 17,20,976 18,65,662
1,86,51,278 2,01,97,973
Less: Service Tax Input Credit 17,20,976 18,65,662
1,69,30,302 1,83,32,311
Audit Fees include Rs.2,46,800 (Previous Year Rs.2,47,000) paid to Branch
Auditors and other matters includes fees of Rs.Nil (Previous Year
Rs.55,15,000) including service tax of Rs.Nil (Previous Year Rs.5,15,000)
paid towards expenditure incurred for raising Zero Coupon Secured
Redeemable Non Convertible Debentures to Qualified Institutional Buyers on
a Qualified Institutional Placement Basis.
18. (i) As per the Housing Finance Companies (NHB) Directions, 2001, non-
performing assets are recognised on the basis of ninety days overdue. The
total provision carried by the Corporation in terms of paragraph 29 (2) of
the Housing Finance Companies (NHB) Directions, 2010 and NHB circular
NHB(ND)/DRS/Pol-No.09/2004-05 dated May 18, 2005 in respect of Housing and
Non-Housing Loans is as follows:
Rs. in crores
Sub-Standard Assets Doubtful Assets
Current Previous Current Previous
Year Year Year Year
Housing 29.59 53.72 112.04 106.03
Non-Housing 32.89 29.13 17.39 20.80
(ii) During the year, in addition to the charge of Rs.70 crores (Previous
Year Rs.58 crores) to the Profit and Loss Account an amount of Rs.298.59
crores (net of Deferred Tax of Rs.143.41 crores) [(Previous Year Rs.Nil)
(net of Deferred Tax of Rs.Nil)], has been transferred from Additional
Reserve created as per Section 29C of the National Housing Bank Act,1987
pursuant to circular NHB(ND)/DRS/Pol-No.03/2004-05 dated August 26, 2004 to
Provision for Contingencies Account.
(iii) Provision for Contingencies debited to the Profit and Loss Account
includes Provision for Diminution in the Value of Investments amounting to
Rs.22.58 crores (Previous Year Rs.7.23 crores). The balance of the
Provision represents provision made against non-performing assets and other
contingencies.
19. (i) Special Reserve has been created over the years in terms of Section
36(1)(viii) of the Income-tax Act, 1961 out of the distributable profits of
the Corporation. Special Reserve No. I relates to the amounts transferred
upto Financial Year 1996-97, whereas Special Reserve No. II relates to the
amounts transferred thereafter.
(ii) As per Section 29 C of the National Housing Bank Act, 1987, the
Corporation is required to transfer atleast 20% of its net profits every
year to a reserve before any dividend is declared. For this purpose any
Special Reserve created by the Corporation under Section 36(1)(viii) of the
Income-tax Act, 1961 is considered to be an eligible transfer. The
Corporation has transferred an amount of Rs.625 crores (Previous Year
Rs.500 crores) to Special Reserve II in terms of Section 36(1)(viii) of the
Income-tax Act, 1961 and an amount of Rs.530 crores (Previous Year Rs.432
crores) to 'Additional Reserve (u/s 29C of the NHB Act)'.
(iii) During the year an amount of Rs.Nil (Previous Year Rs.43,790) has
been written back on account of Nil (Previous Year 8,185) stock options
lapsed under Employee Stock Option Scheme 2002. The same has been included
in the Accounts under Salaries and Bonus.
(iv) During previous year, the Corporation has made a simultaneous issue of
Zero Coupon Secured Redeemable Non-Convertible Debentures (ZCD) aggregating
to Rs.4,000 crores and 1,09,53,706 warrants at a warrant issue price of
Rs.275 per warrant aggregating to Rs.301.23 crores. Each of the warrants
entitles the holder to acquire one equity share of the Corporation at an
exercise price of Rs.3,000 per share of face value of Rs.10 each (now
exercise price of Rs.600 per share of face value of Rs.2 each) on or before
August 23, 2012. The said issue of ZCD and Warrants was made under Chapter
XIII-A of the Securities and Exchange Board of India (Disclosure and
Investor Protection) Guidelines, 2000. The Subscription amount received on
Issue of warrants has been credited to Capital Reserve as the same is not
refundable / adjustable in future.
20. The following additional disclosures have been given in terms of the
circular no. NHB/ND/DRS/Pol-No.35/2010-11 dated October 11, 2010 issued by
the National Housing Bank.
(a) Capital to Risk Assets Ratio (CRAR):
Items As at March 31, 2011
1) CRAR (%) 14.04
2) CRAR - Tier I Capital (%) 12.23
3) CRAR - Tier II Capital (%) 1.81
(b) Exposure to Real Estate Sector:
As on March 31, 2011
Rs. in crores
1. Direct Exposure:
A. Residential Mortgages:
Lending fully secured by mortgages on
residential property that is or will be
occupied by the borrower or that is rented.
(Individual Housing Loans upto Rs.15 Lacs:
Rs.21,933 crores) 72,036
B. Commercial Real Estate:
Lending secured by mortgages on commercial
real estate (Includes Rs.22,744 crores
loan given for Rental Discounting and
Residential purpose) 28,026
C. Investments in Mortgage Backed Securities
(MBS) and other securitised exposures:
(i) Residential 47
(ii) Commercial Real Estate Nil
2. Indirect Exposure:
Fund based and non-fund based exposures on
National Housing Bank (NHB) and Housing
Finance Companies (HFCs) 124
In computing the above information, certain estimates, assumptions and
adjustments have been made by the Management which have been relied upon by
the auditors.
(c) Asset Liability Management:
Maturity pattern of certain items of assets and liabilities as on March 31,
2011:
Assets and Liabilities are classified in the maturity buckets as per the
guidelines issued by the National Housing Bank:
Rs. in crores
Particulars 1 day to Over one Over 2 Over 3
30 days month to months to months to
(one month) 2 months 3 months 6 months
Liabilities:
Borrowings from Banks 2,140 3,017 1,611 2,504
Market Borrowings 1,100 1,305 452 3,150
Assets:
Advances 2,403 1,601 2,055 6,090
Investments 300 1,910 - 22
Rs. in crores
Particulars Over 6 Over 1 Over 3 Over 5
months year to years to years to
to 1 3 years 5 years 7 years
year
Liabilities:
Borrowings from Banks 2,067 14,531 8,025 3,950
Market Borrowings 4,754 9,363 11,445 5,652
Assets:
Advances 12,241 34,107 22,169 14,214
Investments 15 646 193 8,043
Rs. in crores
Particulars Over 7 Over 10 Total
years to years
10 years
Liabilities:
Borrowings from Banks - 2,500 40,345
Market Borrowings 10,062 1,013 48,296
Assets:
Advances 14,064 8,183 1,17,127
Investments 158 545 11,832
In computing the above information, certain estimates, assumptions and
adjustments have been made by the Management which have been relied upon by
the auditors.
21. During the year, Corporation utilised Rs.532,08,66,097 (Previous Year
Rs.198,80,56,461) out of the Securities Premium Account in accordance with
Section 78 of the Companies Act, 1956. Out of the above, Rs.532,08,66,097
(Previous Year Rs.192,39,08,528) has been utilised towards the
proportionate premium payable on redemption of Zero Coupon Secured
Redeemable Non Convertible Debentures (ZCD) and an amount of Rs.Nil
(Previous Year Rs.6,41,47,933) has been utilised towards expenditure
incurred for raising ZCD. The Corporation has written back Rs.93,75,77,892
(Previous Year Rs.3,45,91,573) on conversion of FCCBs to the Securities
Premium Account, being the provision for premium on redemption of FCCBs
created in the earlier years by debit to the Securities Premium Account.
22. (i) Contingent Liability in respect of guarantees provided by the
Corporation aggregated to Rs.2.45 crores (Previous Year Rs.29.79 crores).
(ii) Contingent liability in respect of income-tax demands, net of amounts
provided for and disputed by the Corporation, amounts to Rs.483.04 crores
(Previous Year Rs.298.56 crores). The matters in dispute are under appeal.
The said amount has been paid/adjusted and will be received as refund if
the matters are decided in favour of the Corporation.
(iii) Contingent Liability in respect of corporate undertakings provided by
the Corporation for securitisation of receivables aggregated to Rs.1,539.27
crores (Previous Year Rs.1,081.15 crores). The outflows would arise in the
event of a shortfall, if any, in the cash flows of the pool of the
securitised receivables.
(iv) Contingent Liability in respect of disputed dues towards sales tax,
wealth tax, interest on lease tax, stamp duty and payments towards
employer's contribution to ESIC, not provided for by the Corporation,
amounts to Rs.19,44,596 (Previous Year Rs.17,98,148).
23. The Corporation's main business is to provide loans for the purchase or
construction of residential houses, commercial real estate and loans for
certain other purposes in India. All other activities of the Corporation
revolve around the main business. As such, there are no separate reportable
segments, as per the Accounting Standard on Segment Reporting' (AS 17),
notified by the Companies (Accounting Standards) Rules, 2006.
24. As per the Accounting Standard on Related Party Disclosures' (AS 18),
notified by the Companies (Accounting Standards) Rules, 2006, the related
parties of the Corporation are as follows:
A) Subsidiary Companies:
HDFC Developers Ltd.
HDFC Holdings Ltd.
HDFC Trustee Company Ltd.
HDFC Standard Life Insurance Company Ltd.
GRUH Finance Ltd.
HDFC Venture Capital Ltd.
HDFC Ventures Trustee Company Ltd.
HDFC Asset Management Company (Singapore) Pte. Ltd.
(Subsidiary of HDFC Asset Management Company Ltd.)
B) Associate Companies:
HDFC Bank Ltd.
India Value Fund Advisors Pvt. Ltd.
Indian Association for Savings and Credit
RuralShores Business Services Pvt. Ltd.
Credila Financial Services Pvt. Ltd. (upto July 8, 2010)
HDFC Investments Ltd.
HDFC Asset Management Company Ltd.
HDFC Realty Ltd.
HDFC ERGO General Insurance Company Ltd.
HDFC Sales Pvt Ltd.
HDFC Property Ventures Ltd.
Griha Investments (Subsidiary of HDFC Holdings Ltd.)
Credila Financial Services Pvt. Ltd. (w.e.f. July 9, 2010)
C) Entities over which control is exercised:
HDFC PROPERTY FUND - SCHEME -HDFC IT Corridor Fund HDFC Investment Trust
D) Key Management Personnel:
Mr. Keki M. Mistry
Ms. Renu Sud Karnad
Mr. V. Srinivasa Rangan
E) Relatives of Key Management Personnel - (where there are transactions):
Ms. Arnaaz K. Mistry
Mr. Ashok Sud
Ms. Abinaya S Rangan
Mr. Rishi R. Sud
Ms. Riti Karnad
Ms. Swarn Sud
Mr. Ketan Karnad
I) The nature and volume of transactions of the Corporation during the
year, with the above related parties were as follows:
Rs. in crores
Subsidiary
Companies Associates
Particulars Current Previous Current Previous
Year Year Year Year
INCOME:
Dividend 83.73 97.03 94.42 52.50
Interest 3.19 12.51 5.39 0.99
Consultancy &
Other Fee 15.31 24.92 - 0.03
Rent 3.10 5.15 1.75 0.87
Other Income 0.15 0.37 9.99 5.99
EXPENDITURE:
Interest 33.64 18.76 - -
Bank and Other
Charges - - 1.45 1.66
Remuneration - - - -
Other Expenses 84.74 65.01 94.85 75.40
ASSET:
Investments 2,400.54 2,124.43 5,554.58 5,553.09
Deposits 23.45 20.00 960.65 1,502.00
Bank Balance - - 110.47 -
Sundry Debtors 0.04 0.58 - -
Others 45.78 9.03 4.26 1.72
LIABILITIES:
Deposits 172.10 29.79 0.17 0.17
Short Term Loans - - - 126.15
Non-Convertible
Debentures 235.00 175.00 - -
Others 10.04 7.52 11.20 -
Rs. in crores
Entities over which Key Management
control is exercised Personnel
Particulars Current Previous Current Previous
Year Year Year Year
INCOME:
Dividend - - - -
Interest 16.78 16.78 - -
Consultancy &
Other Fee - - - -
Rent - - - -
Other Income - - - -
EXPENDITURE:
Interest - - 0.39 0.57
Bank and Other
Charges - - - -
Remuneration - - 11.08 14.87
Other Expenses - - - -
ASSET:
Investments 549.55 497.20 - -
Deposits - - - -
Bank Balance - - - -
Sundry Debtors - - - -
Others - - - -
LIABILITIES:
Deposits - - 3.82 3.01
Short Term Loans - - - -
Non-Convertible
Debentures - - - -
Others - - 0.52 0.28
Rs. in crores
Relatives of Key
Management Personnel
Particulars Current Previous
Year Year
INCOME:
Dividend - -
Interest - -
Consultancy &
Other Fee - -
Rent 0.03 0.23
Other Income - -
EXPENDITURE:
Interest 0.06 0.24
Bank and Other Charges - -
Remuneration - -
Other Expenses 0.06 0.06
ASSET:
Investments - -
Deposits - -
Bank Balance - -
Sundry Debtors - -
Others - -
LIABILITIES:
Deposits 0.75 0.69
Short Term Loans - -
Non-Convertible
Debentures - -
Others 0.03 0.04
During the year, the Corporation has sold individual loans amounting to
Rs.4,379 crores (Previous Year Rs.4,870 crores) to HDFC Bank Limited.
II) The nature and volume of material transactions of the Corporation
during the year, with the above related parties were as follows:
Rs. in crores
Subsidiary Companies Associates
Particulars Current Previous Current Previous
Year Year Year Year
INCOME:
Dividend:
- HDFC Asset
Management Co.
Ltd. 43.78 33.21 - -
- HDFC Investments
Ltd. - 21.34 - -
- HDFC Holdings
Ltd. - 18.00 - -
- HDFC Bank Ltd. - - 94.37 52.44
Interest:
- HDFC Asset
Management
Co. Ltd. - 10.41 - -
- HDFC Bank Ltd. - - 4.88 -
- HDFC IT Corridor
Fund - - - -
Consultancy and
Other Fees:
- HDFC Asset
Management Co.
Ltd. 14.00 19.35 - -
- HDFC ERGO
General Insurance
Co. Ltd. - 4.79 - -
Rent:
- HDFC Asset
Management Co.
Ltd. 2.75 3.90 - -
- HDFC Property
Ventures Ltd. - 0.94 - -
- HDFC Bank Ltd. - - 1.75 0.87
Other Income:
- HDFC Bank Ltd. - - 9.99 5.99
EXPENDITURE:
Interest:
- HDFC Standard
Life Insurance
Co. Ltd. 27.58 16.77 - -
Bank and Other
Charges:
- HDFC Bank Ltd. - - 1.45 1.66
Remuneration:
- Mr. Deepak S.
Parekh - - - -
- Mr. Keki M.
Mistry - - - -
- Ms. Renu Sud
Karnad - - - -
- Mr. V.
Srinivasa Rangan - - - -
Other Expenses:
- HDFC Sales
Pvt. Ltd. 79.94 62.48 - -
- HDFC Bank Ltd. - - 94.85 75.40
ASSETS:
Investments:
- HDFC Standard
Life Insurance
Co. Ltd. 1,545.64 1,428.06 - -
- HDFC Bank Ltd. - - 5,549.74 5,549.74
Deposits:
- HDFC Bank Ltd. - - 957.94 1,500.00
Bank Balances:
- HDFC Bank Ltd. - - 110.47 -
Sundry Debtors:
- HDFC ERGO
General Insurance
Co. Ltd. - 0.52 - -
- HDFC Standard
Life Insurance
Co. Ltd. 0.02 0.07 - -
Others:
- HDFC Standard
Life Insurance
Co. Ltd. 7.55 7.56 - -
- HDFC ERGO
General
Insurance
Co. Ltd. 38.21 - - -
- HDFC Bank Ltd. - - - 1.59
LIABILITIES:
Deposits:
- HDFC Holdings
Ltd. 35.73 21.84 - -
- HDFC
Investments
Ltd. 133.87 - - -
- HDFC
Developers Ltd. - 3.95 - -
- Credila
Financial
Services Pvt.
Ltd. - - - 4.00
Short Term Loan:
- HDFC Bank Ltd. - - - 126.15
Non-Convertible
Debentures:
- HDFC Standard
Life Insurance
Co. Ltd. 200.00 165.00 - -
- HDFC ERGO
General Insurance
Co. Ltd. 35.00 - - -
Others:
- HDFC Standard
Life Insurance
Co. Ltd. 8.63 7.54 - -
- HDFC Bank Ltd. - - 11.20 -
(***)
Rs. in crores
Entities over which Key Management
control is exercised Personnel
Particulars Current Previous Current Previous
Year Year Year Year
INCOME:
Dividend:
- HDFC Asset
Management Co.
Ltd. - - - -
- HDFC
Investments Ltd. - - - -
- HDFC Holdings
Ltd. - - - -
- HDFC Bank Ltd. - - - -
Interest:
- HDFC Asset
Management Co.
Ltd. - - - -
- HDFC Bank Ltd. - - - -
- HDFC IT Corridor
Fund 16.78 16.78 - -
Consultancy and
Other Fees:
- HDFC Asset
Management Co.
Ltd. - - - -
- HDFC ERGO
General Insurance
Co. Ltd. - - - -
Rent:
- HDFC Asset
Management Co.
Ltd. - - - -
- HDFC Property
Ventures Ltd. - - - -
- HDFC Bank Ltd. - - - -
Other Income:
- HDFC Bank Ltd. - - - -
EXPENDITURE:
Interest:
- HDFC Standard
Life Insurance
Co. Ltd. - - - -
Bank and Other
Charges:
- HDFC Bank Ltd. - - - -
Remuneration:
- Mr. Deepak S.
Parekh - - - 7.04
- Mr. Keki M.
Mistry - - 4.63 3.86
- Ms. Renu Sud
Karnad - - 4.31 3.60
- Mr. V. Srinivasa
Rangan - - 2.14 -
Other Expenses:
- HDFC Sales Pvt.
Ltd. - - - -
- HDFC Bank Ltd. - - - -
ASSETS:
Investments:
- HDFC Standard
Life Insurance Co.
Ltd. - - - -
- HDFC Bank Ltd. - - - -
Deposits:
- HDFC Bank Ltd. - - - -
Bank Balances:
- HDFC Bank Ltd. - - - -
Sundry Debtors:
- HDFC ERGO
General Insurance
Co. Ltd. - - - -
- HDFC Standard
Life Insurance
Co. Ltd. - - - -
Others:
- HDFC Standard
Life Insurance
Co. Ltd. - - - -
- HDFC ERGO
General Insurance
Co. Ltd. - - - -
- HDFC Bank Ltd. - - - -
LIABILITIES:
Deposits:
- HDFC Holdings
Ltd. - - - -
- HDFC
Investments Ltd. - - - -
- HDFC
Developers Ltd. - - - -
- Credila
Financial Services
Pvt. Ltd. - - - -
Short Term Loan:
- HDFC Bank Ltd. - - - -
Non-Convertible
Debentures:
- HDFC Standard
Life Insurance
Co. Ltd. - - - -
- HDFC ERGO
General Insurance
Co. Ltd. - - - -
Others:
- HDFC Standard
Life Insurance
Co. Ltd. - - - -
- HDFC Bank Ltd. - - - -
Rs. in crores
Relatives of Key
Particulars Management Personnel
Current Previous
Year Year
INCOME:
Dividend:
- HDFC Asset Management
Co. Ltd. - -
- HDFC Investments Ltd. - -
- HDFC Holdings Ltd. - -
- HDFC Bank Ltd. - -
Interest:
- HDFC Asset Management
Co. Ltd. - -
- HDFC Bank Ltd. - -
- HDFC IT Corridor Fund - -
Consultancy and Other
Fees:
- HDFC Asset Management
Co. Ltd. - -
- HDFC ERGO General
Insurance Co. Ltd. - -
Rent:
- HDFC Asset Management
Co. Ltd. - -
- HDFC Property Ventures
Ltd. - -
- HDFC Bank Ltd. - -
Other Income:
- HDFC Bank Ltd. - -
EXPENDITURE:
Interest:
- HDFC Standard Life
Insurance Co. Ltd. - -
Bank and Other Charges:
- HDFC Bank Ltd. - -
Remuneration:
- Mr. Deepak S. Parekh - -
- Mr. Keki M. Mistry - -
- Ms. Renu Sud Karnad - -
- Mr. V. Srinivasa Rangan - -
Other Expenses:
- HDFC Sales Pvt. Ltd. - -
- HDFC Bank Ltd. - -
ASSETS:
Investments:
- HDFC Standard Life
Insurance Co. Ltd. - -
- HDFC Bank Ltd. - -
Deposits:
- HDFC Bank Ltd. - -
Bank Balances:
- HDFC Bank Ltd. - -
Sundry Debtors:
- HDFC ERGO General
Insurance Co. Ltd. - -
- HDFC Standard Life
Insurance Co. Ltd. - -
Others:
- HDFC Standard Life
Insurance Co. Ltd. - -
- HDFC ERGO General
Insurance Co. Ltd. - -
- HDFC Bank Ltd. - -
LIABILITIES:
Deposits:
- HDFC Holdings Ltd. - -
- HDFC Investments Ltd. - -
- HDFC Developers Ltd. - -
- Credila Financial
Services Pvt. Ltd. - -
Short Term Loan:
- HDFC Bank Ltd. - -
Non-Convertible Debentures:
- HDFC Standard Life
Insurance Co. Ltd. - -
- HDFC ERGO General
Insurance Co. Ltd. - -
Others:
- HDFC Standard Life
Insurance Co. Ltd. - -
- HDFC Bank Ltd. - -
25. In accordance with the Accounting Standard on Leases' (AS 19),
notified by the Companies (Accounting Standards) Rules, 2006, the following
disclosures in respect of Operating Leases are made:
(i) Income from Leases includes Rs.3,15,82,868 (Previous Year
Rs.8,65,44,228) in respect of properties and certain assets leased out by
the Corporation under Operating Leases. Out of the above, in respect of the
non-cancellable leases, the future minimum lease payments are as follows:
Period Current Year Previous Year
Rupees Rupees
Not later than one year 2,15,86,992 1,65,64,254
Later than one year but not
later than five years 5,39,85,689 3,62,67,384
Later than five years 1,04,58,141 1,88,24,653
(ii) The Corporation has acquired properties under non-cancellable
operating leases for periods ranging from 36 months to 108 months. The
total minimum lease payments for the current year, in respect thereof,
included under Rent, amount to Rs.2,55,11,961 (Previous Year
Rs.3,27,40,531). Out of the above, the Corporation has subleased a
property, the total sub-lease payments received in respect thereof included
under Other Income amount to Rs.6,90,000 (Previous Year Rs.1,00,74,150).
The future minimum lease payments in respect of the properties acquired
under non-cancellable operating leases are as follows:
Period Current Year Previous Year
Rupees Rupees
Not later than one year 1,23,18,743 2,42,00,598
Later than one year but not
later than five years - 1,18,81,500
26. In accordance with the Accounting Standard on Earnings Per Share' (AS
20), notified by the Companies (Accounting Standards) Rules, 2006 : (i) In
calculating the Basic Earnings Per Share the Profit After Tax of
Rs.3534,95,81,311 (Previous Year Rs.2826,48,98,200) has been adjusted for
amounts utilised out of Shelter Assistance Reserve of Rs.11,47,63,981
(Previous Year Rs.8,48,45,183).
Accordingly the Basic Earnings Per Share has been calculated based on the
adjusted Profit After Tax of Rs.3523,48,17,330 (Previous Year
Rs.2818,00,53,017) and the weighted average number of shares during the
year of 145,71,70,870 (Previous Year 142,61,76,790).
(ii) The reconciliation between the Basic and the Diluted Earnings Per
Share is as follows:
Particulars Current Previous
Year Year
Rupees Rupees
Basic Earnings Per Share 24.18 19.76
Effect of outstanding Stock Options and FCCBs (0.52) (0.58)
Diluted Earnings Per Share 23.66 19.18
(iii) The Basic Earnings Per Share has been computed by dividing the
adjusted Profit After Tax by the weighted average number of equity shares
for the respective periods; whereas the Diluted Earnings Per Share has been
computed by dividing the adjusted Profit After Tax by the weighted average
number of equity shares, after giving dilutive effect of the outstanding
Stock Options and FCCBs for the respective periods. The relevant details as
described above are as follows:
Particulars Current Year Previous Year
Weighted average number of
shares for computation of
Basic Earnings Per Share 145,71,70,870 142,61,76,790
Diluted effect of outstanding
Stock Options and FCCBs 3,16,06,515 4,26,61,230
Weighted average number of shares
for computation of Diluted
Earnings Per Share 148,87,77,385 146,88,38,020
27. In compliance with the Accounting Standard relating to Accounting for
Taxes on Income' (AS 22), notified by the Companies (Accounting Standards)
Rules, 2006, the Corporation has taken credit of Rs.19,00,00,000 (Previous
Year credit of Rs.1,50,00,000) in the Profit and Loss Account for the year
ended March 31, 2011 towards deferred tax asset (net) for the year, arising
on account of timing differences.
The major components of deferred tax assets and liabilities are:
Assets Liabilities
Particulars Current Previous Current Previous
Year Year Year Year
Rupees Rupees Rupees Rupees
a) Depreciation 495701777 499826208
b) Provision for
Contingencies 3898991920 2436473993
c) Provision for
Employee Benefits 187278304 160546079
d) Accrued
Redemption Loss
(net) 67522408 69130084
e) Others (net) 823258860 690956767
Total 4977051492 3357106923 495701777 499826208
Net Deferred Tax
Asset 4481349715 2857280715
28. In compliance with the Accounting Standard relating to Financial
Reporting of Interests in Joint Ventures' (AS 27), notified by the
Companies (Accounting Standards) Rules, 2006, the Corporation has interests
in the following jointly controlled entities, which are incorporated in
India:
Rs. in crores
Names of
Companies A B C D E F G
HDFC Standard
Life Insurance
Co. Ltd. 72.37 20185.11 19837.28 74.18 145.83 56.01 507.01
Previous Year 72.56 15532.92 15115.53 58.89 258.56 141.59 217.01
HDFC ERGO
General
Insurance Co.
Ltd. 74.00 1131.37 817.75 (26.71) 0.24 7.40 9.99
Previous Year 74.00 664.18 480.74 (69.87) 0.03 1.02 -
A = Percentage of Shareholding
B = Amount of Interest based on the last Audited Accounts for the year
ended March 31, 2011 - Assets
C = Amount of Interest based on the last Audited Accounts for the year
ended March 31, 2011 - Liabilities
D = Amount of Interest based on the last Audited Accounts for the year
ended March 31, 2011 - Income
E = Amount of Interest based on the last Audited Accounts for the year
ended March 31, 2011 - Expenditure
F = Amount of Interest based on the last Audited Accounts for the year
ended March 31, 2011 - Capital Commitment
G = Amount of Interest based on the last Audited Accounts for the year
ended March 31, 2011 - Contingent Liability
29. (i) Provision for Contingencies as on March 31, 2011 amounting to
Rs.1,124.37 crores (Previous Year Rs.655.57 crores) includes provisions for
non-performing assets, standard assets and all other contingencies. In
addition to the provisions against non-performing assets, vide the National
Housing Bank circular No. NHB(ND)/DRS/DIR-18-07/1336/2007 dated March 26,
2007, all housing finance companies are required to carry a general
provision at the rate of 0.40% of the total outstanding amount of non-
housing loans which are standard assets. Further, vide the National Housing
Bank circular No. NHB.HFC.DIR.2/CMD/2010 dated December 24, 2010, all
housing finance companies are required to carry a general provision (i) at
the rate of 0.20% by March 31, 2011 and at the rate of 0.40% by September
2011 on all outstanding loans other than housing loans to individuals and
(ii) at the rate of 2% on housing loans disbursed at comparatively lower
rate of interest in the initial few years after which rates are reset at
higher rates. Accordingly, the Corporation is required to carry a minimum
provision of Rs.813.53 crores (Previous Year Rs.325.29 crores) towards non-
performing assets and standard assets, as per the prudential norms of the
National Housing Bank.
(ii) Movement in Provision for Contingencies Account during the year is as
under:
Rs. in crores
Particulars Current Year Previous Year
Opening Balance 655.57 621.52
Additions during the year 512.00 58.00
Utilised during the year-
towards loans write offs,
Diminution in Value of
Investments etc. (43.20) (23.95)
Closing Balance 1,124.37 655.57
30. Under Employees Stock Option Scheme - 2008 (ESOS-08), the Corporation
had on November 25, 2008, granted 57,90,000 stock options at an exercise
price of Rs.1,350.60 per option representing 57,90,000 equity shares of
Rs.10 each to the employees and directors of the Corporation. The said
price was determined in accordance with the pricing formula approved by the
shareholders i.e. at the latest available closing price on the stock
exchange having higher trading volume, prior to grant of options.
In terms of ESOS-08, the options would vest over a period of 1-3 years from
the date of grant, but not later than November 24, 2011, depending upon
option grantee completing continuous service of three years with the
Corporation. Accordingly, during the year 1,09,685 options (Previous Year
55,51,237 options) were vested and 1,545 options (Previous Year 3,650
options) were lapsed after vesting. The options can be exercised over a
period of five years from the date of respective vesting.
Under Employees Stock Option Scheme - 2007 (ESOS-07), the Corporation had
on September 12, 2007, granted 54,56,835 stock options at an exercise price
of Rs.2,149 per option representing 54,56,835 equity shares of Rs.10 each
to the employees and directors of the Corporation. The said price was
determined in accordance with the pricing formula approved by the
shareholders i.e. at the latest available closing price on the stock
exchange having higher trading volume, prior to grant of options.
In terms of ESOS-07, the options would vest over a period of 1-3 years from
the date of grant, but not later than September 11, 2010, depending upon
option grantee completing continuous service of three years with the
Corporation. Accordingly, during the year 44,983 options (Previous Year
96,541 options) were vested and 3,573 options (Previous Year 76,569
options) were lapsed after vesting. The options can be exercised over a
period of five years from the date of respective vesting.
Under Employees Stock Option Scheme - 2005 (ESOS-05), the Corporation had
on October 25, 2005, granted 74,73,621 stock options at an exercise price
of Rs.912.90 per option representing 74,73,621 equity shares of Rs.10 each
to the employees and directors of the Corporation. The said price was
determined in accordance with the pricing formula approved by the
shareholders i.e. at the latest available closing price on the stock
exchange having higher trading volume, prior to grant of options.
In terms of ESOS-05, the options would vest over a period of 2-3 years from
the date of grant, but not later than October 24, 2008, depending upon
option grantee completing continuous service of three years with the
Corporation. All the options have been vested in the earlier years. In the
current year Nil option (Previous Year 16,388 options) were lapsed after
vesting. The options can be exercised over a period of five years from the
date of respective vesting. With effect from August 21, 2010, the nominal
face value of equity shares of the Corporation was sub-divided from Rs.10
per share to Rs.2 per share. Accordingly, each option exercised after
August 21, 2010 is entitled to 5 equity shares of Rs.2 each.
Method used for accounting for share based payment plan:
The Corporation has used intrinsic value method to account for the
compensation cost of stock options to employees of the Corporation.
Intrinsic value is the amount by which the quoted market price of the
underlying share exceeds the exercise price of the option. Since the
options under ESOS-08, ESOS-07 and ESOS-05 were granted at the market
price, the intrinsic value of the option is Nil. Consequently the
accounting value of the option (compensation cost) is also Nil.
Movement in the options under ESOS-08, ESOS-07 and ESOS-05:
ESOS-08
Particulars Options Options
Current Previous
Year Year
Outstanding at the beginning
of the year 51,08,334 57,89,650
Exercised during the year 18,73,663 6,16,398
Lapsed during the year 4,963 64,918
Outstanding at the end of
the year 32,29,708 51,08,334
Unvested at the end of
the year 64,042 1,77,145
Exercisable at the end
of year 31,65,666 49,31,189
Weighted average price
per option Rs.1,350.60
ESOS-07
Particulars Options Options
Current Previous
Year Year
Outstanding at the beginning
of the year 50,55,801 53,11,118
Exercised during the year 6,29,782 1,75,350
Lapsed during the year 4,773 79,967
Outstanding at the end of
the year 44,21,246 50,55,801
Unvested at the end of the year - 46,183
Exercisable at the end of year 44,21,246 50,09,618
Weighted average price per
option Rs.2,149.00
ESOS-05
Particulars Options Options
Current Previous
Year Year
Outstanding at the beginning
of the year 16,68,226 29,21,425
Exercised during the year 9,32,650 12,36,811
Lapsed during the year - 16,388
Outstanding at the end of the
year 7,35,576 16,68,226
Unvested at the end of the
year - -
Exercisable at the end of year 7,35,576 16,68,226
Weighted average price per option Rs.912.90
Fair Value Methodology:
The fair value of options used to compute proforma net income and earnings
per equity share have been estimated on the date of grant using Black-
Scholes model.
The key assumptions used in Black-Scholes model for calculating fair value
under ESOS-08, ESOS-07 and ESOS-05 as on the date of grant viz. November
25, 2008, September 12, 2007 and October 25, 2005, are as follows:
Particulars ESOS-08 ESOS-07 ESOS-05
Risk-free interest rate (p.a.) 6.94% 7.70% 6.38%
Expected life Upto 2 years Upto 2 years 2 to 3 years
Expected volatility of share
price 29% 19% 30%
Expected growth in dividend
(p.a.) 20% 20% 20%
The weighted average fair
value, as on the date of
grant (per Stock Option) Rs.238.79 Rs.307.28 Rs.105.50
Had the compensation cost for the stock options granted under ESOS-08,
ESOS-07 and ESOS-05 been determined based on fair value approach, the
Corporation's net profit and earnings per share would have been as per the
pro forma amounts indicated below:
Rs. in crores
Particulars Current Year Previous Year
Net profit (as reported) 3,534.96 2,826.49
Less: Stock-based compensation
expense determined under fair
value based method, net of tax:
[Gross Rs.Nil (Previous Year
Rs.89.80 crores)] (pro forma) - 59.28
Net profit (pro forma) 3,534.96 2,767.21
Less: Amounts utilised out of
Shelter Assistance Reserve 11.48 8.48
Net Profit considered for
computing EPS (pro forma) 3,523.48 2,758.73
Basic earnings per share (as
reported) 24.18 19.76
Basic earnings per share (pro
forma) 24.18 19.34
Diluted earnings per share
(as reported) 23.66 19.18
Diluted earnings per share
(pro forma) 23.66 18.78
31. The Corporation has not remitted any amount in foreign currencies on
account of dividends during the year and does not have information as to
the extent to which remittances, if any, in foreign currencies on account
of dividends have been made by/on behalf of non-resident shareholders. The
particulars of dividends payable to non-resident shareholders (including
Foreign Institutional Investors) are as under:
Particulars Current Year Previous Year
Annual Annual
Year to which the dividend relates 2009-10 2008-09
Number of non-resident shareholders 2,950 2,735
Number of shares held by them of
face value of Rs.10 each 21,39,06,451 21,35,32,073
Gross amount of dividend Rs.770,06,32,236 Rs.640,59,62,190
32. (i) Additional Tax on dividend 2009-10, Rs.1,06,60,197, pertains to the
shortfall of dividend tax of the subsidiary companies of the Corporation on
the dividend paid to the Corporation as per Section 115 (O)(1A) of the
Income Tax Act, 1961. [Previous Year credit taken Rs.15,16,32,924 pertains
to the dividend tax paid by the subsidiary companies of the Corporation on
dividend paid to the Corporation.]
(ii) In respect of equity shares issued pursuant to Employee Stock Option
Schemes and conversion of FCCBs, the Corporation paid dividend of
Rs.13,82,78,916 for the year 2009-10 (Rs.31,93,320 for the year 2008-09)
and tax on dividend of Rs.2,29,66,399 (Previous Year Rs.5,42,705) as
approved by the shareholders at the Annual General Meeting held on July 14,
2010.
33. Figures for the previous year have been regrouped wherever necessary.
SIGNIFICANT ACCOUNTING POLICIES:
1. ACCOUNTING CONVENTION:
These accounts have been prepared in accordance with historical cost
convention, applicable Accounting Standards notified by the Companies
(Accounting Standards) Rules, 2006 and relevant provisions of the Companies
Act, 1956 and the guidelines issued by the National Housing Bank.
The preparation of financial statements requires the Management to make
estimates and assumptions considered in the reported amounts of assets and
liabilities (including contingent liabilities) as of the date of the
financial statements and the reported income and expenses during the
reporting period. Management believes that the estimates used in
preparation of the financial statements are prudent and reasonable. Future
results could differ from these estimates.
2. SYSTEM OF ACCOUNTING:
The Corporation adopts the accrual concept in the preparation of the
accounts.
The Balance Sheet and the Profit and Loss account of the Corporation are
prepared in accordance with the provisions contained in Section 211 of the
Companies Act 1956, read with Schedule VI thereto and the approvals granted
under the section by the Company Law Board.
3. INFLATION:
Assets and liabilities are recorded at historical cost to the Corporation.
These costs are not adjusted to reflect the changing value in the
purchasing power of money.
4. INTEREST ON HOUSING LOANS:
Repayment of housing loans is generally by way of Equated Monthly
Instalments (EMIs) comprising principal and interest. EMIs commence once
the entire loan is disbursed. Pending commencement of EMIs, pre-EMI
interest is payable every month. Interest on loans is computed either on an
annual rest or on a monthly rest basis.
5. INCOME FROM LEASES:
Lease rental income in respect of leases is recognised in accordance with
the Accounting Standard on Leases' (AS 19) notified by the Companies
(Accounting Standards) Rules, 2006.
6. INCOME FROM INVESTMENTS:
The gain/loss on account of Investments in Preference Shares,
Debentures/Bonds and Government Securities held as long-term investments
and acquired at a discount/premium, is recognised over the life of the
security on a pro-rata basis.
7. BROKERAGE AND SERVICE CHARGES ON DEPOSITS:
Brokerage, other than incentive brokerage, and service charges on deposits
are amortised over the period of the deposit. Incentive brokerage, which is
payable to agents who achieve certain collection targets, is charged to the
Profit and Loss Account.
8. TRANSLATION OF FOREIGN CURRENCY:
Assets and liabilities in foreign currencies are converted at the rates of
exchange prevailing at the year-end, where not covered by forward
contracts. Wherever the Corporation has entered into a forward contract or
an instrument that is, in substance, a forward exchange contract, the
difference between the forward rate and the exchange rate on the date of
the transaction is recognised as income or expense over the life of the
contract. Cross currency swaps and other derivatives have been fair valued
at the year end. The net loss on translation of assets and liabilities in
foreign currencies and fair value of derivatives is debited to Profit and
Loss Account.
9. INVESTMENTS:
Investments are capitalised at cost inclusive of brokerage and stamp
charges and are classified into two categories, viz. Current or Long Term.
Provision for diminution in the value of investments is made in accordance
with the guidelines issued by the National Housing Bank and the Accounting
Standard on Accounting for Investments' (AS 13) notified by the Companies
(Accounting Standards) Rules, 2006, and is recognised through the Provision
for Contingencies Account. The investment in properties is net of provision
for depreciation.
10. FIXED ASSETS:
Fixed Assets are capitalised at cost inclusive of legal and/or installation
expenses. Leased Assets are accounted in accordance with the Accounting
Standard on Leases' (AS 19) notified by the Companies (Accounting
Standards) Rules, 2006.
11. INTANGIBLE ASSETS:
Intangible Assets comprising of system software are stated at cost of
acquisition, including any cost attributable for bringing the same to its
working condition, less accumulated amortisation. Any expenses on such
software for support and maintenance payable annually are charged to
revenue account.
12. DEPRECIATION AND AMORTISATION:
Fixed Assets:
Depreciation on all Fixed Assets other than Leased Assets and Leasehold
Improvements, is provided for the full year in respect of assets acquired
during the year. No depreciation is provided in the year of sale.
In respect of Leased Assets and Leasehold Improvements depreciation is
provided on a pro-rata basis from the date of installation / acquisition.
Depreciation on Buildings, Computers, Leased Assets and Leasehold
Improvements, is calculated as per the straight-line method; and on other
assets as per the reducing balance method. All assets except Computers and
Leased Assets are depreciated at rates specified by the Companies Act,
1956. Depreciation on Computers is calculated at the rate of 25 per cent
per annum. Depreciation in respect of finance leases is provided on the
straight line method over the primary period of lease or over the specified
period, as defined under Section 205(5)(a) of the Companies Act, 1956,
whichever is shorter. Depreciation in respect of Leasehold Improvements is
provided on the straight-line method over the primary period of the lease.
Intangible Assets:
Capitalised software is amortised over a period of four years on a
straight-line basis.
13. INVESTMENT IN PROPERTIES:
Depreciation on Investment in properties is provided on a pro-rata basis
from the date of acquisition.
14. PROVISION FOR CONTINGENCIES:
The Corporation's policy is to carry adequate amounts in the Provision for
Contingencies account to cover the principal amount outstanding in respect
of all non-performing assets, standard assets as also all other
contingencies. All loans and other credit exposures where the instalments
are overdue for Ninety days and more are classified as non-performing
assets in accordance with the prudential norms prescribed by the National
Housing Bank. The provisioning policy of the Corporation covers the minimum
provisioning required as per the NHB guidelines.
15. EMPLOYEE BENEFITS:
Provident Fund and Superannuation Fund Contributions:
The Corporation's contributions paid / payable during the year towards
Provident Fund and Superannuation Fund are charged in the Profit and Loss
Account every year. These funds and the schemes thereunder are recognised
by the Income-tax authorities and administered by various trustees.
Gratuity and Post Retirement Pension:
The net present value of the Corporation's obligation towards gratuity to
employees and post retirement pension scheme for whole time Directors is
actuarially determined based on the projected unit credit method, except in
the case of Dubai branch where the provision for gratuity is made in
accordance with the prevalent local laws. Actuarial gains and losses are
immediately recognised in the Profit and Loss Account.
Other Employee Benefits:
Compensated absences in the form of short term benefits are determined on
an undiscounted basis and recognised over the period of service, which
entitles the employees to such benefits. Any such benefits which are long
term in nature are actuarially determined.
16. INCOME-TAX:
The accounting treatment for income-tax in respect of the Company's income
is based on the Accounting Standard 22 on Accounting for Taxes on Income'
as notified by the Companies (Accounting Standards) Rules, 2006. The
provision made for income-tax in the accounts comprises both, the current
tax and the deferred tax. The deferred tax assets and liabilities for the
year, arising on account of timing differences, are recognised in the
Profit and Loss Account and the cumulative effect thereof is reflected in
the Balance Sheet.
Deferred tax is measured based on the tax rates and the tax laws enacted or
substantively enacted at the Balance Sheet date. Deferred tax asset is
recognised only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax asset can be realised. In situations where the Company has
unabsorbed depreciation or carried forward losses, deferred tax assets are
recognised only if there is virtual certainty supported by convincing
evidence that the same can be realised against future taxable profits.
17. SECURITISED ASSETS:
Derecognition of securitised assets in the books of the Corporation,
recognition of gain or loss arising on securitisation and accounting for
credit enhancement provided by the Corporation is based on the Guidance
Note on Accounting for Securitisation issued by the Institute of Chartered
Accountants of India.
Securitised assets are derecognised in the books of the Corporation based
on the principle of surrender of control over the assets. Credit
Enhancement provided by the Corporation by way of investments in
subordinate Class B Pass Through Certificates is included under Investments
in Pass Through Certificates in Schedule 5.
As per our report attached.
For Deloitte Haskins & Sells
Chartered Accountants
P.R. Ramesh
Partner
Deepak S. Parekh
Chairman
Keki M. Mistry
Vice Chairman & Chief Executive Officer
Renu Sud Karnad
Managing Director
Directors:
Keshub Mahindra
S.B. Patel
B.S. Mehta
D.N. Ghosh
S.A. Dave
R.S. Tarneja
N.M. Munjee
J.J. Irani
Bimal Jalan
D.M. Sukthankar
V. Srinivasa Rangan Girish V. Koliyote
Executive Director Company Secretary
Place: MUMBAI
Dated: May 10, 2011
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