To the Members
The Directors are pleased to present the 30th Annual Report of the business and operations of the Company together with the audited accounts for the year ended March 31, 2017.
1. Financial Results
The financial performance for the FY16-17 is summarized here below:
(Rs, in Lakh)
March 31, 2017
March 31, 2016
Profit before Tax & Provisions
Less: Provision for Standard Assets
Provision for Doubtful Debts
Prior Period adjustments
Profit before Tax
(a) Provision for Tax - Current Year
(b) Deferred Taxation
Profit after Tax
Balance brought forward from previous
Transfer to Special Reserve u/s.36(1)(viii)
of the Income Tax Act, 1961
Transfer to General Reserve
Additional Reserve (u/s.29C of the NHB
Tax on Distributed Profits
Balance carried forward to balance sheet
2. Shareholders'''' Wealth
Year ended March 31, 2017
Year ended March 31, 2016
Earnings Per Share (EPS) (H)
Market Price of shares (H)
Market Capitalization (Rs,in Crore)
3. Business Performance Highlights
During the year, the company has sanctioned loans amounting to Rs,5451 Crore as compared to Rs,4418 Crore in the previous year, recording a growth of 23%. Despite slowdown in real estate market in some parts of the country, stiff competition from Banks & HFCs, the business performance of the company continued to be encouraging during 2016-17.
During the year, your Company continued to focus on retail (housing and non-housing) loan segment which constituted 99% of its total sanctions. 88% of fresh loan approvals during the year were for housing and 12% were for non-housing loans. The cumulative loan sanctions since inception of your Company stood at H26,362 Crore at the end of the FY16-17. Average ticket size of incremental housing loans and non-housing loans are Rs,18 Lakh and Rs,10 Lakh respectively.
During the year, the company has disbursed loans amounting to Rs,4,792 Crore as compared to Rs,3,923 Crore in the previous year, recording a growth of 22%. The cumulative loan disbursements from inception to the end of the FY16-17 was Rs,23,083 Crore.
c. Loans outstanding (Loan Book)
The total loan outstanding as at March 31, 2017 were Rs,13,313 Crore, recording a growth of 25% over last year (previous year Rs,10,643 Crore).
Your Company continues to grow in the high-yielding non-housing loan segment. During the year, non-housing loan portfolio has increased from H1,262 Crore to Rs,1,529 Crore indicating a growth rate of 21%, which constitutes 11.86% of total portfolio.
d. Non-Performing Asset (NPA)
Your directors are pleased to report that the Gross NPA of your Company as on March 31, 2017 was contained at Rs,27.91 Crore (previous year Rs,19.76 Crore). The net NPA as on the date continued to be Nil, with the NPA Provision Coverage Ratio at 100% for the 8th year in succession. The gross NPA percentage as on March 31, 2017 stood at 0.21% compared to 0.19% as on March 31, 2016, one of the lowest in the industry.
During the year under review, your Company could make a cash recovery of Rs,4.08 Crore (previous year Rs,3.32 Crore) in respect of accounts which were Non Performing Assets as on March 31, 2016. Recovery in written-off accounts during FY16-17 was Rs,0.37 Crore.
Your Directors are happy to inform that during the year under review, your Company recorded an Operating Profit of Rs,388.38 Crore (previous year Rs,273.27 Crore), Profit Before Tax (PBT) of Rs,370.17 Crore (previous year Rs,253.86 Crore) and Profit After Tax (PAT) of Rs,235.26 Crore (previous year H157.11 Crore) registering a Year-on-Year increase of 42%, 46% and 50%, respectively. During the year Company has made provisions for standard assets amounting to Rs,10.65 Crore (previous year Rs,14.00 Crore), provisions for Non-performing assets amounting to Rs,8.15 Crore (previous year Rs,5.41 Crore), provisions for Taxation and Deferred Tax Liability amounting to Rs,134.91 Crore (previous year Rs,96.76 Crore).
Your Company has been paying dividends continuously. Your directors, after giving due consideration to Capital Adequacy requirements, projected business plan for the year, deferred tax liability and the dividend policy, are happy to recommend a dividend of H10 per equity share (100%) for the second successive year, for the financial year ended March 31, 2017. The amount of dividend recommended for payment for the year under review is Rs,26.62 Crore The tax on dividends u/s.115-O of the Income Tax Act, 1961, at about 20.36% (Rs,5.42 Crore), is being paid to the Government by your Company.
4. Expansion of Branch Network
During the FY16-17, 10 new branches and 20 satellite offices were opened by CFHL while 4 top performing satellite offices were upgraded to full-fledged branches. Further, CFHL introduced the concept of ''''Affordable Housing Loan Centers’ (AHLCs) to exclusively provide smaller ticket size Loans under CLSS (PMAY), Urban Housing (LUH) and Rural Housing schemes. Under this initiative, the first tranche of 10 AHLCs were opened in Q4 by upgrading existing satellite offices. As at the end of FY16-17, CFHL has an expanded network of 170 outlets spread across 19 states comprising 124 branches, 10 AHLCs and 36 Satellite Offices. CFHL became the first HFC to start exclusive Affordable Housing Loan centre’s in sync with the ''''Housing for all’ initiative by the Government.
During the FY17-18, CFHL has plans to open 12 branches and 10 SOs. CFHL will also open 20 more AHLCs, taking the number of such exclusive outlets for Affordable Housing Loans to 30, to mark 30th year of CFHL’s commitment to promote home ownership.
The Registered Office and all the branches have good ambience, spacious premises and other facilities to enhance service quality and visibility in the market.
5. Technology Initiatives
All the branches and the Registered Office are linked through a core-banking platform (Integrated Business Suite) under the Application Service Provider (ASP) Model. The Company is also in the process of a tie-up with BSNL for a higher bandwidth MPLS lines.
In order to improve operational efficiency, your Company embarked on technology initiatives like the introduction of Online Application Module in the Company’s website to receive applications online, mobile website, customer portal in the website to access account statements/certificates at customers’ end, missed call facility to borrowers for their information about outstanding balances in their loan accounts, SMS alerts to remind borrowers of loan installments/new schemes. Your Company has introduced online money transfer and customer portal to facilitate its borrowers to view their statement of account(s), generate certificates, product information and branch location.
6. Customer-Friendly Initiatives
The transparent, ethical, equitable practices adopted towards all customer segments is the hallmark of your Company. With the launch of customer portal, the company has taken a step in the direction of enabling the customer to get easy access to their account related information such as IT certificate, EMI payment details, balance outstanding etc., at the click of a button. Your Company’s website provides all the major information on the products and applicable charges. The Fair Practice Code (FPC) and Most Important Terms and Conditions (MITC) are made available on the website as per NHBs directions. The distinctive referral scheme wherein customers are benefited from the refund of their processing fees, upon referring new customers to the Company, is also one of our unique customer friendly initiatives. Emphasis continues to be placed on the reduction of the turnaround time (TAT) in sanctioning and disbursing loans at all levels in order to benefit the customers.
7. Financial Resources
a. Refinance from National Housing Bank (NHB) and borrowings from Banks
During the year, your Company had availed fresh refinance amounting to Rs,441.21 Crore (previous year Rs,630.64 Crore) under the NHB refinance scheme. The cumulative NHB borrowings as on March 31, 2017 were Rs,3,375.03 Crore (previous year Rs,3,535.04 Crore), with the overall cost of borrowing (including the loans under Rural Housing and Urban Housing Schemes) of 8.23% p.a. as on March 31, 2017.
Borrowings from Banks
Your Company progressively reduced its dependence on bank borrowings. During the year, borrowings were diversified through a combination of short-term and long-term loans considering the asset liability management position to derive the maximum benefit of competitive interest rates. The lenders included HUDCO, State Bank of India, Bank of Baroda, HDFC Bank and Oriental Bank of Commerce apart from Canara Bank, the principal bankers to the Company. The aggregate bank borrowings (term loans plus overdraft) at the end of the financial year stood at Rs,2,247.65 Crore (previous year Rs,2,536.58 Crore); the overall borrowings are within regulatory ceiling of 16 times of net owned funds.
The overall cost of borrowings (average) was 9.09% p.a. as on March 31, 2017. During the year, the long-term ''''rating’ for term loans for your Company was ''''[ICRA]AAA’ (pronounced ICRA triple A) by ICRA Ltd., these ratings assumed to possess the highest degree of safety with regard to the timely servicing of financial obligations.
(i) Secured Non-Convertible Debentures
In its continuing efforts to reduce fund costs, your Company issued Secured Redeemable Non-Convertible Non-Cumulative Taxable Debentures (SRNCD) aggregating Rs,1,862 Crore (previous year Rs,1,540 Crore) in different tranches through private placement with a coupon rate range of 7.57% to 8.55%. The debentures were secured by way of a floating charge on the assets i.e., loan receivables specifically earmarked for the purpose in favour of the Debenture Trustees. Most investors in these debentures comprised major insurance companies, public sector banks, corporate and investors of repute, indicating their safety perception in your Company’s fundamentals and prospects.
The tenure of debentures is range bound for two to five years. The interest on these debentures was serviced regularly. The aggregate borrowings by way of Secured NCDs as on March 31, 2017 was Rs,3,602 Crore (previous year Rs,2,090 Crore) while the overall cost was 8.57% p.a.
The debentures were rated ''''[CARE] AAA’ by CARE, ''''IND AAA’ by India Ratings and Research Pvt. Ltd (FITCH), and ''''[ICRA] AAA’ by ICRA Limited. These debentures were listed on the Wholesale Debt Market (WDM) segment of the National Stock Exchange of India Limited.
Your Company plans to raise Nonconvertible Debentures up to a maximum Rs,6,000 Crore subject to cost benefit and asset liability management requirements and with the approval of members at ensuing Annual General Meeting.
(ii) Unsecured Non-Convertible Debentures
During FY14-15, your Company had issued 8.94% Unsecured Non-Convertible Debentures in the nature of Tier II Bonds aggregating Rs,100 Crore for a tenure of 10 years. These debentures are subordinated to present and future senior indebtedness of the Company and qualify as Tier II Capital under the National Housing Bank (NHB) guidelines for assessing Capital Adequacy Requirements. These Tier II Bonds were rated ''''IND AAA’ long-term rating by India Rating & Research Pvt Limited (FITCH), ''''[CARE] AAA’ by Credit Analysis & Research Ltd., (CARE) and ''''[ICRA] AAA’ by ICRA Ltd. Your Company has serviced the interest on the above debentures on the due date.
c. Commercial Paper
Your Company mobilizes funds through commercial paper (CP). The outstanding at the end of the March 2017 was Rs,2,320.62 Crore (previous year Rs,961.37 Crore). The effective cost of funds was 7.43% p.a. The CP issue by your Company was rated at the maximum [ICRA] A1 rating by ICRA Ltd., indicating, ''''Instruments with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations’.
During the year your Company accepted deposits of Rs,149.93 Crore (Previous year Rs,67.66 Crore). The outstanding balance of deposits (including interest accrued, but not due) as of March 31, 2017 was Rs,226.65 Crore (previous year Rs,220.97 Crore). The rate of interest on public deposits ranged from 7.50% to 8.10%, while the overall cost (average) of deposits was 8.83% p.a. as on March 31, 2017.
As on March 31, 2017, a sum of H\Rs,20.09 Crore relating to 1,020 accounts of public deposits (Rs,17.06 Crore as on March 31, 2016 relating to 1,106 accounts) remained unclaimed/overdue. Of this amount, a sum of Rs,2.29 Crore relating to 140 accounts (previous year Rs,2.20 Crore relating to 239 accounts) were claimed and renewed/settled up to May 15, 2017. Your Company has not defaulted in repayment of deposits or interest during the year. The Company has complied with the requirements under Chapter V of the Companies Act, 2013 to the extent applicable.
During the year, the deposit schemes of your Company are rated ''''MAAA’ (pronounced as M Triple A) by ICRA Ltd., indicating ''''highest credit-quality’ and that the rated deposit programme carried the lowest credit risk. Your Company, being a housing finance Company registered with National Housing Bank (NHB), has complied with the Directions/Guidelines issued by the NHB with regard to deposit acceptance and renewal. Your Company is exempted from the applicability of the Companies (Acceptance of Deposits) Rules 2014.
e. Mortgage-backed securities
Your Company did not opt for any securitization during the year under review or during the previous year. There were no securitized assets outstanding as on March 31, 2017.
8. Compliance with Directions/ Guidelines of National Housing Bank (NHB) and other statutes
Your Company adhered to the prudential guidelines for non-performing assets (NPAs) as per the National Housing Bank (NHB) Directions 2010, as amended from time to time. Your Company complied with the guidelines and directions issued by NHB on withdrawal of pre-closure charges for all loans. The Guidelines/ norms for asset classification of credit/ investments, credit rating, acceptance of deposits, Fair Practices Code (FPC), Most Important Terms and Conditions (MITC), Customer Complaints Redressal Mechanism, Know Your Customer (KYC), Anti-Money Laundering (AML) Guidelines, Asset Liability Management, Capital Adequacy Ratio (CAR) norms, Customer Redressal Mechanism and other related instructions, issued by the National Housing Bank (NHB) were implemented in letter and spirit with an explicit notification on the website of your Company.
As per the National Housing Bank Circulars NHB.HFC.DIR.4/CMD/2012 dated January 19, 2012 and NHB.HFC. DIR.9/CMD/2013 dated September 6,
2013, your Company has made a general provision @:
(i) 1% of Standard Assets in respect of Commercial Real Estates other than Residential Housing,
(ii) 0.75% of Standard Assets in respect of Commercial Real Estate -Residential Housing, and
(iii) 0.40% of the total outstanding amount of loans, which are Standard Assets other than (i) and (ii) above.
Loans to individuals for third dwelling unit onwards are treated as Commercial Real Estate (CRE) exposure. A provision of Rs,10.65 Crore was made in the books as on March 31, 2017 and the cumulative provision in that regard stood at Rs,62.65 Crore as on the above date. The recognition of income and provision for all assets was made in the books as per the Guidelines on Prudential Norms applicable as of March 31, 2017.
Your Company this year has carved out Rs,22.50 Crore from current year P&L and Rs,37.00 Crore from General Reserves towards Deferred Tax Liability (DTL) as per NHB guidelines NHB(ND)/DRS/ Pol.62/2014 dated May 27, 2014 and NHB(ND)/DRS/Pol.65/2014 dated August 22, 2014 and ensured full compliance of regulatory guidelines. Amount which is proposed to be transferred to reserves is given in detail in Note no. 3 of Notes forming part of the financial statements.
During the year the NHB has issued 3 new directions viz.,
(1) Housing Finance Companies -Auditor’s Report (National Housing Bank) Directions, 2016
(2) Housing Finance Companies -Approval of Acquisition or Transfer of Control (National Housing Bank) Directions, 2016
(3) Housing Finance Companies -Corporate Governance (National Housing Bank) Directions, 2016
Your Company has taken steps to comply with the requirements of all the applicable provisions of the above Directions for FY16-17. In terms of the CG Directions, the Company has given the "Related party transaction policy" as Annexure 7 to this Report.
The NHB had conducted Audit of 201415 during the previous year and raised an issue on the procedure followed by the Company since beginning on valuation of Government Security under HTM Category (Held to Maturity) invested for SLR purpose. Since there is no change in regulations/procedures during the period, the matter has been represented by the Company and a final decision is awaited. These facts have been disclosed in the Notes to accounts.
Your Company has complied with the Accounting Standards issued by the ICAI, New Delhi, and other related statutory Guidelines/Directions as applicable to the Company from time to time. Compliance of all Regulatory guidelines of NHB/other statutes are periodically reviewed at Audit Committee/Board.
9. Compliance under the Companies Act, 2013
Your Company has complied with the requirements of the applicable provisions of the Companies Act, 2013 and related Rules during the FY 16-17. In accordance with Sec 134 (3) (a) of the said Act, an extract of the Annual Return in the prescribed format is appended as Annexure 4 to this Report.
During FY 16-17 Canara bank, Promoters of the Company had disinvested 35,80,849 (13.45%) equity shares of the Company and the shareholding of the Bank as on March 31, 2017 stood at 30%. The disinvested portion of 13.45% was purchased by M/s. Caladium Investments Pte. Ltd., Singapore, an affiliate of GIC, Singapore’s Sovereign Wealth Fund.
10. Capital Adequacy
The Capital Adequacy Ratio (CAR) of your Company as at March 31, 2017 was 18.50% (previous year 20.69%), well above the Regulatory benchmark of 12% prescribed by the National Housing Bank (NHB).
Depreciation was calculated on the Written Down Value Method based on useful life, in the manner prescribed in Schedule II to the Companies Act, 2013.
12. Deferred Tax Liability (DTL)
Vide Circular NHB (ND)/DRS/Pol.62/2014 dated May 27, 2014, the National Housing Bank (NHB) directed Housing Finance Companies (HFCs) to provide for deferred tax liability with respect to the balance in the Special Reserve created under Section 36(1)(viii) of the Income Tax Act, 1961 as on March 31, 2014 and permitted to adjust the same from retained earnings. Further, Vide Circular NHB(ND)/DRS/Pol.65/2014 dated August 22, 2014, NHB permitted HFCs to adjust the Deferred Tax Liability in a phased manner over three years in the ratio of 25:25:50 starting from FY14-15. Accordingly the Company has to adjust the DTL of Rs,7,399.96 Lakh in three years. The Company has transferred the third and final tranche of 50% being Rs,3700 Lakh in this year ending March 31, 2017 from the General Reserves to DTL (Rs,3700 Lakh transferred in the previous two years). Further, Deferred Tax Liability (net) of Rs,1,977.65 Lakh (previous year Rs,1,675.56 Lakh) was charged to the Statement of Profit & Loss, on account of various components of asset & liabilities including Special Reserve appropriated during the current year.
13. Recovery Action under Securitization & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Sarfaesi Act)
During the year, your Company initiated action against 188 defaulting borrowers under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest ("SARFAESI") Act, 2002 and recovered H8.94 Crore (previous year H2.66 Crore) from borrowers of Non-Performing accounts. By way of seized assets, your
Company has recovered Rs,3.80 Crore (previous year RS,1.09 Crore). During the year, Company recovered RS,0.37 Crore in written off accounts (previous year RS,0.74 Crore). During the year, your Company negotiated one-time settlement (OTS) with eligible NPA borrowers as per its recovery policy and recovered RS,16.75 Lakh (previous year RS,86.08 Lakh).
14. Listing of Securities
The equity shares of the Company are continued to be listed on the BSE Limited (BSE), Mumbai, and the National Stock Exchange of India Ltd. (NSE), Mumbai. The listing fee payable to these Stock Exchanges were paid before the due dates. The Securities & Exchange Board of India, vide its letter dated December 26, 2014 bearing No. WTM/ RKA/MRD/165/2014, granted an exit to the Bengaluru Stock Exchange Ltd., (BgSE)., Bengaluru.
Listing Agreement: The Securities Exchange Board of India (SEBI), has notified the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 on September 2, 2015 with the aim to consolidate and streamline the provisions of Listing Agreements for different segments of capital to ensure better enforceability. The Regulations were effective from December 1, 2015. Accordingly, as per the requirements, your Company entered into Listing Agreements with the National Stock Exchange of India Ltd and BSE Limited within the prescribed period. Smt. Veena G Kamath, ACS, is the Compliance Officer of the Company from FY 16-17 (Shri K S Sathyaprakash, FCS, was the Compliance Officer of the Company up to 31/05/2016). The Board of Directors has authorized the Company Secretary and the Chief Financial Officer, severally, for reporting disclosure of material events, if any, in terms of Regulation 30 of the said Regulations.
Dividend distribution policy is given as Annexure 8 as required under SEBI amended LODR Regulations.
15. Human Resources Development
The total number of employees of your Company was 626 (471 regular and 155 on contract) as on March 31, 2017 as against 553 (395 regular and 158 on contract) as at the end of the previous year. Attrition rate stood at about 3.50% for regular employees, which is far below the industry level.
To upgrade knowledge/skill of the employees, some employees were deputed for training programmes/ seminars organized by the National Housing Bank and other reputed institutions. During the year, training in credit, information technology, human relations, finance, taxation, marketing, fraud prevention and other topics of importance were imparted to employees and executives. Your Company has put in place a series of HR measures including promotions, appropriate employee recognition and reward schemes. Industrial relations in your Company continued to be cordial during the year.
Particulars of Employees:
During FY16-17, your Company had not employed anyone with a remuneration of H102 Lakh or more per annum nor had employed for a part of the year with a remuneration of H8.5 Lakh or more. The ratio of remuneration of each Director to the median of employees remuneration and such other details as required under Sec 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, are furnished below:
i. The ratio of the remuneration of Managing Director to the median remuneration of the employees (regular employees) of the Company for the FY16-17 was 3.18 : 1 (Non-executive directors and Independent Directors are eligible for sitting fee only)
ii. The percentage increase in remuneration in the financial year under the head Managing Director was 24%, of which part terminal benefits of the earlier Managing Director is also included (the remuneration of Managing Director is as per the Service Regulations of Canara Bank in terms of the resolution passed by the members at the General Meeting for appointment in the Company).
The Chief Financial Officer and the Company Secretary are employees of the Company and the percentage increase in their remuneration was 16.06% and 7.15% respectively.
iii. The percentage increase in the median remuneration of employees in the financial year is 23.84%.
iv. Apart from 471 permanent employees on the rolls of the Company, there were 155 employees on contract as on March 31, 2017.
v. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration: Average % increase in remuneration of the employees as well as that of Managerial remuneration was around 10% during the period under review.
The Company affirms that the remuneration is as per the remuneration policy of the Company.
The Company has a Policy on "Prevention of Sexual Harassment of Women at Workplace" and matters connected therewith or incidental thereto covering all the aspects as contained under the "The Sexual Harassment of Women at Workplace (Prohibition, Prevention and Redressal) Act, 2013". During FY16-17 no cases of sexual harassment were reported. The Company has laid down a Code of Conduct for Prevention of Insider Trading, in accordance with the requirements under the Securities and Exchange Board of India (Prevention of Insider Trading) Regulations, 2015 and Companies Act, 2013, with a view to regulate trading in Securities of the Company by its directors, designated persons and employees. The same is made available on the website of the Company.
16. Transfer of Unclaimed and Unpaid Dividend/ Deposit Amounts to the Investor Education and Protection Fund (IEPF)
In terms of (section 125 of the Companies Act, 2013 only section 125 (8) to (11) notified by MCA on September 05, 2016) the amounts (dividend, deposits etc., with interest) that remained unclaimed and unpaid for more than 7 years from the date they first became due for payment, should be transferred to IEPF.
As an investor-friendly measure, your Company has been intimating the respective shareholders / depositors / investors to encash their dividend warrant/renew matured deposits or lodge their claim for payment of due, if any, from time to time and claims made are settled. As per the statutory requirements, unclaimed deposits/ other dues for the previous seven years as of the date of the Annual General Meeting are made available on the website of MCA-IEPF as well as on the Company’s website.
In order to receive prompt payment of dividend, the members/investors are requested to demat the shares held in physical mode, register bank account particulars, opt for ECS facility, register nomination and intimate change of address, if any, to the Company/ Depository Participants promptly.
a. Unclaimed dividends
As at March 31, 2017, dividends aggregating to H124.18 Lakh (previous year H98.34 Lakh) relating to dividends declared for the years FY09-10 to FY15-16 (of which H34.28 Lakh related to dividend for the year 2016), had not been claimed by shareholders. As an investor friendly measure, your Company has intimated shareholders to lodge their claims and related particulars were provided in the annual reports each year as well as on the website of your Company.
The dividend pertaining to 2008-09, which remained unclaimed/unpaid amounting to H5.41 Lakh (in respect of 1,824 shareholders), was transferred to IEPF on October 3, 2016, after the settlement of claims by members received in response to the individual reminder letters sent by your Company to the respective members.
The dividend pertaining to 2009-10 remaining unclaimed and unpaid, amounting to H6.98 Lakh (in respect of 2,062 shareholders) as on March 31, 2017, would be transferred to IEPF during August 2017 after settlement of the claims received up to the date of completion of seven years i.e. on August 25, 2017.
b. Unclaimed deposits
As required under Section 125 of the Companies Act, 2013 (corresponding Section 205C of the Companies Act, 1956), the unclaimed and unpaid deposits together with interest for the year 2008-09 amounting to H0.72 Lakh (previous year H3.62 Lakh) that remained unclaimed and unpaid for a period of 7 years were transferred to IEPF during the year under review.
c. Transfer of shares to IEPF Demat account
Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and refund) Rules, 2016 was notified by the Ministry of Corporate Affairs (MCA) on September 05, 2016. As per Rule 6 of the said Rules, the shares, in respect of which dividend amounts have not been paid or claimed for 7 consecutive years, are required to be transferred to ''''IEPF Suspense Account (CFHL)
On verification of records of unclaimed dividend amounts from 2003 to 2009, which have already been transferred to IEPF on lapse of 7 years (during 2010 to 2016 respectively), 430 shareholders have not claimed dividend for consecutive 7 years and their shares are liable to be transferred to IEPF.
In terms of the above Rules, two reminders dated September 24, 2016 and December 02, 2016 were sent by the Company to all the shareholders who have not claimed their dividends for a consecutive period of 7 years, informing that their shares will be transferred to IEPF suspense account on December 25, 2016, if they do not place their claim for unclaimed dividend amounts before the Company.
In the meantime, the action was stayed due to a General Circular No.15/2016 dated December 07, 2016 issued by the MCA informing that revised notifications will be issued.
Further, the MCA issued a revised notification dated February 28, 2017 extending the period for transfer, of unclaimed shares to IEPF Demat Account, up to May 31, 2017. The Company has sent a third reminder dated April 13, 2017 in this regard to 389 shareholders who have not claimed their dividend amounts for a consecutive period of 7 years, informing the said due date for transfer of shares to IEPF Demat account. Your Company has provided the IEPF Rules, the paper notifications issued and a list of the shareholders, whose shares will be transferred to IEPF in the Investor Page of the website of the Company.
17. Particulars regarding conservation of energy, technology absorption and foreign exchange earnings and expenditure
Since your Company is a housing finance Company and does not own any manufacturing facility, the requirement relating to providing the particulars relating to conservation of energy and technology absorption as per Sec 134
(3) (m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules 2014, are not applicable.
Your Directors are pleased to inform that Solar Power systems and power saving lamps have been installed in 16 branches so far as a measure for conservation of energy. Your Company has installed Solar-UPS in some of its branches.
As a part of Save Green efforts and leverage of technology, a lot of paper work at branches and the Registered Office has been reduced (also refer para 5).
During the year, your Company did not earn any income or incur any expenditure in foreign currency/exchange other than payment of Dividend to NRIs on repatriation basis to an extent of H26.73 Lakh through authorized dealers.
18. Directors & Key Managerial Personnel Appointments / Reappointments:
The Board of Directors made the following appointments/ re-appointments based on the recommendations of the Nomination and Remuneration Committee:
(1) Shri S K Hota, General manager of Canara Bank was appointed as the Managing Director with effect from May 19, 2016. His appointment was approved by the members at the 29th Annual General Meeting of the Company held on July 20, 2016.
(2) Shri Naganathan Ganesan, FCA, was appointed as an Additional Director (Independent Director) with effect from September 07, 2016.
(3) Shri Thallapaka Venkateswara Rao, Independent Director, has been re-appointed by the Board as an Independent Director for a period of one year from the conclusion of the ensuing Annual General Meeting up to the conclusion of the Annual General Meeting of the Company of the year 2018.
(4) Shri Kokkarne Natarajan Prithviraj, Independent Director, has been re-appointed by the Board as an Independent Director for a period of one year from the conclusion of the ensuing Annual General Meeting up to the conclusion of the Annual General Meeting of the Company of the year 2018.
The directors had filed their consent(s) and declarations that they are not disqualified to become directors in terms of the provisions of Companies Act, 2013 and related Rules. The directors have intimated to the Company that they are not holding any shares or taken any loan(s) from the Company. The proposals relating to the appointment and re-appointment of directors will be placed for approval by members at the ensuing Annual General Meeting.
The particulars of directors including their profile are provided in the Report of Directors on Corporate Governance forming part of this Annual Report. Further, the agenda relating to appointments / re-appointments of Directors are provided in the Notice of the 30th Annual General Meeting of the Company seeking approval from the members. The particulars relating to the Directors and all other relevant information are provided in the explanatory statement forming part of the said Notice for the information of members.
Retirement by rotation:
In terms of Section 152 and all other applicable provisions of the Companies Act, 2013, and the Articles of Association of the Company, Smt. P
V Bharathi, Director, retires by rotation at the ensuing Annual General Meeting and being eligible, offers herself for re-appointment. The particulars relating to Smt. P V Bharathi, Director are provided in the Report of the Directors on Corporate Governance. Your Directors recommend the reappointment of Smt. P V Bharathi as a Director.
The agenda relating to re-appointment of Smt. P V Bharathi, Director, forms part of the notice convening the ensuing Annual General Meeting and all other relevant information as per SEBI Regulations are also provided in the explanatory statement.
Shri C Ilango, Managing Director of the Company had submitted his resignation with effect from May 18, 2016 (after office hours) consequent to his repatriation to Canara Bank.
19. Meetings of the Board
During the year, nine meetings of the Board of Directors were held and the related details, including that of various committees constituted by the Board, are made available in the Report of Directors on Corporate Governance forming part of the annual report placed before the members.
Your Company has complied with all the requirements as applicable under Companies Act, 2013 and related rules, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and also HFCs Corporate Governance (NHB) Directions, 2016, in relation to the Board of Directors and the Committees of the Board.
Committees of the Board
Currently the Board has six Committees viz. the Audit Committee, the Nomination and Remuneration Committee, the Corporate Social Responsibility Committee, the Stakeholders Relationship Committee, the Risk Management Committee and the Management Committee. A detailed note on the composition of the Board and its Committees and other related particulars are provided in the Report of Directors on Corporate Governance forming part of this Annual Report.
20. Directors'''' Responsibility Statement
In accordance with the provisions of Section 134(3)(c) read with Section 134(5) of the Companies Act, 2013, and based on the information provided by the Management, the Board of Directors report that:
a) in the preparation of annual accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any;
b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;
c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) the Directors have prepared the annual accounts on a going concern basis;
e) the Directors, in the case of a listed Company, have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively and
f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
The Independent Directors have given declarations to the Company in terms of with Section 149(7) of the Companies Act, 2013, that they meet the criteria of independence as provided in Section149(6).
Code of Conduct
In terms of Regulation 26(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, all the members of the Board and Senior Management Personnel have affirmed compliance with the Code of Conduct of Board of Directors and Senior
Management for the FY16-17. As required under Schedule V (D) of the said Regulations, a declaration signed by the Managing Director & Chief Executive Officer of the Company stating that the members of the Board and the Senior Management Personnel have affirmed compliance of their respective Codes of Conduct, is enclosed to this Report as Annexure 2.
21. Nomination and Remuneration Committee (NRC) Policy
Your Company has constituted a Nomination and Remuneration Committee (NRC) of the Board in terms of Section 134(3)(e) of the Act, Regulation 19 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 and Para 3(II) of NHB Corporate Governance (National Housing Bank) Directions, 2016, consisting of 3 Directors. This Committee identifies persons who are qualified to become Directors of the Company. The appointment, renewal, reappointment, re-categorization and/ or removal of the Directors so identified, including extension or continuation of the term of appointment, will be recommended by the NRC to the Board. This Committee has also laid down the criteria to identify persons who may be appointed to the senior management of the Company. The NRC has formulated the criteria for determining qualifications, positive attributes and independence of a Director, carrying out evaluation of every Director’s performance. The NRC Policy of the Company covering all the above aspects is made available on the official website of the Company at http://www.canfinhomes.com/Aboutus/ Corporate Governance documents(path).
The Board ensures the annual evaluation of its own performance and that of its Committees and individual directors through the meeting of independent directors, the NRC and evaluation by each of the directors independently.
22. Corporate Social Responsibility (CSR) Policy
Your Company constituted a Corporate Social Responsibility (CSR) Committee of the Board as prescribed under Section 135 of the Companies Act 2013 and has put the CSR policy in place. The Company has focused in promoting education including special education and employment in enhancing vocation skills especially among children. The company also focuses on women empowerment by Promoting gender equality, setting up homes and hostels for women and orphans; setting up old age homes, day care centre’s, livelihood enhancement projects for the elderly & the differently abled. Reducing inequalities faced by socially and economically backward groups and contribution to Prime Minister’s National Relief Fund also forms part of its CSR activities.
The activities undertaken by the Company under CSR initiative is on Pan India basis and the projects are executed by our branches in those areas. The total amount to be spent under the CSR initiatives for FY16-17 was H402 Lakh (previous year H372 Lakh), out of which projects sanctioned under CSR activities was H392 Lakh. The disbursements/ amount spent on the approved projects during 2016-17 is H436 Lakh which includes H155 Lakh of previous sanctions that are carried over. The unspent amount of H18 Lakh (H8 Lakh pertaining to FY15-16 and H10 Lakh to FY16-17) is carried forward as per provisions of Companies Act with the aim to go in for granular details/ appropriate projects before spending in FY17-18. A summary of CSR details as on March 31, 2017 is given below:
No. of Beneficiaries
Amount in Rupees
Construction of Schools
Desks & benches/ Tables/ Almirah/ Green Board/ Chairs/ School Bags/ Books
Drinking water facility/ supply of other articles of necessity etc.
Repair and Renovation of schools
Electrical & Electronic Items
Contribution to Pradhan Mantri National Relief Fund
The Annual Report on CSR activities including brief contents are provided as an Annexure 6 to this report.
23. Risk Management Policy
Your Company has constituted a Risk Management Committee with two directors and a senior executive of the Company. In terms of Section 134(3)(n) of the Act, your directors wish to state that your Company has drawn and implemented a Risk Management Policy including identification of elements of risks, if any, which may threaten the existence of your Company. The above policy is being reviewed/re-visited once a year or at such other intervals as deemed necessary for modifications and revisions, if any.
24. Audit and Internal Control
Your Company strengthened existing internal control systems for loan reviews at periodical intervals and introduced measures for minimizing operational risks commensurate with the nature of its business and size of operations. Further, your Company has reviewed delegation of authorities and streamlined standard operating procedures for all areas of its business/ operations/ functions, strengthened the Offsite Transaction Monitoring System (OTMS) to track transactions/early-warning signals across all branches by introducing innovative monitoring tools.
The National Housing Bank conducts inspection of your Company on an annual basis. During the year, the NHB conducted credit inspection of your Company in December 2016 for the position as at March 2016. The compliance on the observations were submitted within the prescribed time to the NHB, which were reviewed by the Audit Committee and the Board.
Your Company has also put in place a well- defined policy on Risk Based Internal Audit (RBIA) and as per the said policy, all the 120 branches that became due for audit, were audited in the FY16-17.
Apart from the RBIA Audit, considering the volume of business, branches are also subjected to quarterly/ half yearly internal audit by empanelled audit firms. The Audit Committee reviewed the audit reports/remarks/ observations and replies/ compliances including the compliance of KYC norms.
25. Secretarial Audit
The Secretarial Audit for FY16-17 was conducted as required U/s.204 of the Companies Act 2013, by S. Kedarnath and Associates, a firm of Company Secretaries in Practice. In terms of Section 204(3) of the Act, your Directors are pleased to inform that there was no qualification or observation or other remarks made by the said Company Secretaries in their Secretarial Audit Report. The Secretarial Audit Report issued by the Practicing Company Secretaries is enclosed to the report of Directors (Annexure 3) in terms of Section 134(3) (f) read with Section 204(1) of the Act.
Loans, Guarantees or Investments:
There are no particulars of loans, guarantees or investments made during the year in terms of Section 186(1) and 186(2) of the Act requiring disclosure to be made in the report of Directors as required under Section 134(3)(g) of the Act. In terms of Section 186(11)(a) the requirement relating to the disclosure is not applicable to a loan made, guarantee given or security provided by a housing finance Company.
Related Party Transactions:
The particulars of contracts or arrangements with the ''''Related Parties’ referred to in sub-section (1) of Section 188 of the Act are furnished in Note No.30 of the Notes forming part of the financial statements for FY16-17, forming a part of the Annual Report. The particulars of Related Party Transactions as required u/s sec 134(3)(p) and 134(3)(n) in the prescribed format is attached to this Report as Annexure 5.
M/s K P Rao & Co., Chartered Accountants, Bengaluru, Statutory Auditors of your Company (Firm Registration No.003135S) appointed by the members at the 29th Annual General Meeting (AGM) of your Company held on July 20, 2016 and other 53 firms of branch auditors who were appointed by the Board based on the approval of the members at the above AGM, to hold office from the conclusion of the said meeting until the conclusion of the ensuing AGM of your Company, would retire at the ensuing AGM. Considering the applicability of the Companies (Audit and Auditors) Rules, 2014, M/s K P Rao & Co, are not eligible for reappointment as Statutory Auditors for your Company for the FY17-18 as they have completed 3 years from the applicability of the Companies (Audit and Auditors) Rules, 2014.
Your Directors recommend the appointment of M/s. Varma & Varma, Chartered Accountants (Firm Regn. No. 004532S) as the Statutory Auditors. The resolutions seeking approval of the members for appointment of Statutory Auditors and fixation of their remuneration and authorization to the Board of Directors for appointment of Branch Auditors and fixation of their remuneration are included in the notice convening the ensuing Annual General Meeting. The above said appointment attracts the provisions of Section 139,142, 143 and all other applicable provisions, if any, of the Companies Act, 2013 and Rules. Your Company has obtained the consent and a certificate from the statutory auditors under section 139 of the Companies Act, 2013 to the effect that their re-appointment, if made, would be in accordance with the conditions as may be prescribed. The statutory auditors have also confirmed that they hold a valid certificate issued by the ''''Peer Review Board’ of The Institute of Chartered Accountants of India.
Statutory Auditors Report
In terms of Section 134(4) and 134(3)(ca) of the Act, your Directors are pleased to inform that, as in the previous years, there is no qualification, reservation or adverse remark or disclaimer made by the statutory auditors of the Company in their audit report for the financial year FY16-17.
The Board has adopted policies and procedures for ensuring the orderly and efficient conduct of its Business, adherence to its polices, safeguarding its assets, prevention and detection of frauds/errors, accuracy and completeness of the accounting records and timely preparation of reliable financial disclosures. M/s K P Rao & Co, the Statutory Auditors of the Company have audited the Internal Financial Controls over the Financial Reporting of the Company and submitted a Report, which forms part of the Auditors’ Report, placed before the members together with the Financial Statements for FY16-17.
Your Directors wish to inform that there are no material changes and commitments, other than what is reported in the financial statements, affecting the financial position of your Company, which occurred between the end of the financial year to which the financial statements relate and the date of this report. Your Directors also wish to inform that there were no significant and material orders passed by the Regulators/Courts/Tribunals impacting the going concern status and Company’s operations in future.
On January 18, 2016, the Press Information Bureau, Government of India, Ministry of Corporate Affairs (MCA) issued a note outlining the road map for implementation of Indian Accounting Standards converged with IFRS (Ind AS) for Scheduled Commercial Banks (excluding RRBs), Insurance Companies and NBFCs. Companies having Net worth of more than H500 Crore shall comply with the Indian Accounting Standards (Ind AS) for financial statements for accounting period beginning from April 1, 2018 onwards with comparatives for the period ending March 31, 2018 or thereafter.
The applicability of the said notification on your Company is with effect from FY18-19 onwards and necessary steps have been taken for smooth implementation INDIAN ACCOUNTING STANDARDS (IND AS).
27. Management Discussion and Analysis Report
In terms of Regulation 34(2) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Management Discussion and Analysis Report forms part of this Annual Report.
28. Corporate Governance
As required under the Companies Act, 2013, Regulation 34 read with Schedule
V of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 and Housing Finance Companies
- Corporate Governance (National Housing Bank) Directions, 2016, the ''''Report of Directors on Corporate Governance’ for the year FY16-17 is placed in this Annual Report.
The said Report covers in detail the Corporate Governance Philosophy of the Company, Board Diversity, Directors appointment and remuneration, declaration by Independent Directors, Board evaluation, familiarization programme, vigil mechanism etc.
Business Responsibility Report:
The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, mandates inclusion of Business Responsibility Report (BRR) in the prescribed format, as a part of the Annual Report for top 500 listed entities based on the market capitalization. In compliance with the said Regulations, the BRR is provided as a part of this Report.
In terms of Regulation 17(10) of the SEBI (Listing Obligations & Disclosure Requirement) Regulations, 2015 read with the SEBI Circular No. SEBI/HO/CFD/ CMD/CIR/P/2017/004 dated January 5, 2017, your Company has put in place the ''''Board and Director’s Evaluation Policy’ laying down a framework for evaluation of the Board, its Committees and of the individual directors with defined attributes for evaluation. The results of the evaluation exercise will be shared with the Board in subsequent Board Meeting(s), including listing of the identified strengths, areas of improvement and actions to be taken, if any.
29. Save Green Efforts
In recognition and support to the green initiative taken by the Ministry of Corporate Affairs (MCA), Government of India, your Company is sending AGM notices, annual reports, correspondence with the stakeholders etc. to the respective e-mail IDs of stakeholders. As a step towards paperless banking, initiatives taken by your Company include ECS facility for repayment of loans, streamlining the systems and procedures for reporting by the branches and at the Registered Office through Integrated Business Suite (IBS), networking of branches with the Registered Office, harnessing solar energy for lighting and computer operations in its 16 branches and the like. The usage of the paper is minimized.
As in the previous years, we are publishing only the statutory disclosures in the print version of the Annual Report. Electronic copies of the Annual Report, Annual General Meeting Notices, and such other notices are being sent to all members whose e-mail address are registered with the Company/Depository participants. For members who have not registered their e-mail address and to those who specifically request for physical copies, the same is sent in the permitted mode.
30. Outlook for 2017-18
In tune with the Government’s mission to provide "Housing For All By 2022", your Company has geared itself to provide home loans under Credit Link Subsidy Scheme (CLSS) for the Low Income Group (LIG) and Middle Income Group (MIG) segment under Pradhan Mantri Awas Yojana (PMAY), which is likely to give a fillip to the aspirations of persons desirous of owning a home. We have also introduced 2 new products ''''New Gruhalakshmi Rural Housing Scheme (new GRHS)’ and ''''New Loan For Urban Housing’ (New LUH) with low interest rates to compete with the best rates prevailing in the market. The real estate scenario is expected to improve and credit off take is also expected to emerge stronger in the current year. Implementation of Real Estate Regulation Act (RERA) in most of the states of the country is expected to bring a disciplined growth boosting the confidence level of new home buyers.
For the FY17-18, your Company is targeting a loan book size of H17,000 Crore by March’ 18. Lending to the salaried class will continue to be our mainstay. The prime focus of your Company would be growth with quality, duly ensuring enhancement of operations, increasing the Non Housing Loan (NHL) portfolio, further improvement in the asset quality and reduction of cost.
The performance of the Company is keenly viewed by our shareholders, stake-holders, customers, banks, peer groups and the general public. The onus of maintaining the high standards is a formidable challenge, however your Company is confident of meeting the same.
Your Directors would like to thank Canara Bank for continuous support.
Your Directors would like to acknowledge the role of all its stakeholders viz., shareholders, debenture holders, CP holders, depositors, bankers, lenders, borrowers, merchant bankers, Debenture Trustees and all others for their continued support to your Company and the confidence and faith that they have always reposed in your Company.
Your Directors acknowledge and appreciate the guidance and support extended by all the Regulatory authorities including National Housing Bank (NHB), Securities Exchange Board of India (SEBI), Ministry of Corporate Affairs (MCA), Registrar of Companies, Karnataka, the Stock Exchanges and the NSDL and CDSL.
Your Directors thank the Rating Agencies ICRA, CARE, India Ratings & Research Ltd., (FITCH), the Registrars Share Transfer Agents, Debenture Trustees and Trustees of public deposits of your Company, Government(s), local/ statutory authorities, and all others for their whole-hearted support during the year and look forward to their continued support in the years ahead.
Your Directors value the professionalism of all the employees who have proved themselves in a challenging environment and whose efforts have stood the Company in good stead and taken it to present level.
For and on behalf of the Board of Directors
Place: Bengaluru K N Prithviraj
Date : May 15, 2017 Chairman