FUTURE DHFL Directors Report

Dear Members,


The Board of Directors of your Company take pleasure in presenting the standalone and consolidated reports on the operational and business performance, along with the audited financial statements for the financial year ended March 31, 2017.


KEY FINANCIALS


The financial performance of the Company for the financial year ended March 31, 2017, is summarized below:


(Rs. in crore)







































































































































































































Particulars



Standalone Consolidated



2016 - 17



2015 -16



2016-17



2015-16



Gross Income



8,857.23



7,299.99



9,615.64



7,839.92



Less : Interest



6,653.61



5,490.03



6,674.37



5,491.95



Overheads & Provisions



777.93



683.49



1,477.01



1,197.24



Depreciation



23.30



24.30



43.46



29.84



Profit Before Tax and Exceptional item



1,402.39



1,102.17



1,420.80



1,120.90



Add : Exceptional item



1,969.43



-



1,855.45



-



Profit after Exceptional item and Before Tax



3,371.82



1,102.17



3,276.25



1,120.90



Less : Provision for taxation



475.37



372.97



479.90



376.75



Profit After Tax



2,896.45



729.20



2,796.35



744 .15



Add : Net share of profit from Associates



-



-



9.95



5 .15



Add : Balance brought forward from the previous year



643.68



575.56



731.89



639.74



Net Gain on dilution of Associate



-



-



3.45



3.93



Surplus available for appropriations



3,540.13



1,304.76



3,541.64



1,392.97



Appropriations



Transferred to Statutory Reserve under Section 36(1) (viii) of the Income Tax Act, 1961 read with Section 29C of National Housing Bank Act, 1987



580.00



180.00


200.00


0.02



580.00



180.00


200.00


0.02



Transferred to General Reserve



200.00



200.00



Transferred to Debenture Redemption Reserve (DRR)



1,170.00



1,170.00



Dividend for Earlier Year



-



-



Interim Dividend(s)



31.30



175.07



31.30



175.07



Proposed Equity Dividend



-



58.36



-



58.36



Tax on Dividend



6.37



47.63



6.37



47.63



Adjustment pursuant to capital reduction scheme



-



-



270.18



-



Balance carried over to Balance Sheet



1,552.46



643.68



1,283.79



731.89



Total



3,540.13



1,304.76



3,541.64



1,392.97



Earnings Per Share



Basic (in ‘)



95.76



25.00



92.78



25.69



Diluted (in ‘)



95.44



23.10



92.47



23.73



Appropriations from Net Profit are as detailed in the table given above


TRANSFER TO RESERVES


During the financial year under review, your Company transferred Rs.200 crore to the General Reserve and Rs.580 crore to the Statutory Reserve under Section 36(1)(viii) of the Income Tax Act, 1961 read with Section 29C of National Housing Bank Act, 1987 out of the amount available for appropriation and an amount of Rs.1,552.46 crore is proposed to be retained in the Profit and Loss account.


National Housing Bank vide circular No. NHB (ND)/DRS/Policy Circular 65/2014-15 dated August 22, 2014 has clarified that deferred tax liability (contingent upon Company’s withdrawal of Section 36(1) (viii) of Income Tax Act, reserves leading to tax liability) in respect of opening balance under special reserve as at April 1, 2014 may be adjusted from free opening reserves of the Company over a period of 3 years in the ratio of 25:25:50 respectively. Accordingly, the Company has proportionately adjusted its opening reserves with an amount of Rs.83.23 crore as contingent deferred tax liability during the year and unamortized amount against the same is Nil. Deferred Tax Liability on current year special reserve has been charged to Statement of Profit & Loss amounting to Rs.39.46 crore.


PERFORMANCE


Your Company’s inception 33 years ago was based on the fundamental necessity of enabling home ownership for customers in the Lower and Middle Income [LMI] and Economically Weaker Sections (EWS) segments. A journey of over three decades and an increasing awareness at national level on the need for promoting affordable housing have together placed your Company in a strong position today. It stands tall as one of India’s largest housing finance companies, working towards its mission of reaching out to millions of customers and helping them fulfill their dreams of owning a home.


During the last financial year, the Government of India took several noteworthy steps to build a conducive environment for growth of the affordable housing sector which has created a strong momentum for your Company to fulfill its vision and goals.


Your Company has been swift and agile to leverage these growth enablers and opportunities. During the financial year under review, your Company has reported robust performance, witnessing a steady increase in revenues and profits. A key aspect of your Company’s industry position and operating performance has been its emergence as a comprehensive financial services provider and continued efforts to broaden its services bouquet with a range of loan and deposit products while also offering insurance products, third party life and general insurance, for customers within the LMI, EWS segments to help them de-risk their families and property in case of any eventualities. Being one of the few housing finance companies eligible to mobilize fixed deposits from the public, your Company extends unique fixed deposit schemes tailored to suit the financial needs of various segments.


Your Company continues to expand its extensive network across the country to reach out to every potential customer across Tier II and III towns, cities and its peripheral suburbs. The business vertical strategy adopted for the Company’s home loan and non-home loan businesses has achieved the desired objective of greater business focus and leveraging synergies. Your Company’s SME loans business continues to thrive and achieve the desired penetration in medical equipment, plant & machinery and property term loans.


Your Company has set a historic trend in the retail debt market through two public Non-Convertible Debentures issuances during the financial year 2016-17 by raising a record of Rs.14,000 crore within one month. This has repositioned your Company’s borrowing portfolio and generated a much more competitive cost of borrowing.


During the financial year under review, your Company has successfully completed the sale of its entire equity stake held in DHFL Pramerica Life Insurance Company Limited (DPLI) [representing 50% equity share capital of DPLI] to DHFL Investments Limited (DIL), a wholly owned subsidiary of the Company for a consideration of Rs.2,000.50 crore. The transaction adds Rs.1,969.43 crore to the Company’s Net Worth. This also ensures that your Company is well capitalised enabling it to pursue its aggressive and ambitious growth plans over the next few years.


Standalone


During the financial year ended March 31, 2017 and March 31, 2016, your Company made total loan disbursements of Rs.28,581.90 crore and Rs.24,202.22 crore, respectively. As on March 31, 2017 and March 31, 2016, the Gross NPAs as a percentage of the outstanding loans were 0.94% and 0.93%, respectively. The net NPAs as a percentage of the outstanding loans were 0.58% in both the financial years 2016 and 2017, which are substantially lower than industry benchmarks.


Your Company’s strong marketing and distribution network has its presence across 348 locations throughout India as of March 31, 2017. Besides, your Company has its presence through its international representative offices in London and Dubai. This year’s total income was Rs.8,857.23 crore as against Rs.7,299.99 crore during the previous financial year and total expenditure was Rs.7,454.84 crore, compared to Rs.6,197.82 crore during the previous financial year. Your Company’s


Assets under Management (AUM) stood at Rs.83,559.92 crore as on March 31, 2017, as against Rs.69,523.88 crore in the previous financial year.


For the financial year under review, the Profit before exceptional item and taxes stood at Rs.1,402.39 crore as against Rs.1,102.17 crore in the previous financial year and Profit after Tax is at Rs.2,896.45 crore as against Rs.729.20 crore in the previous financial year.


During the financial year under review, your Company has reported an exceptional profit of Rs.1,969.43 crore which primarily represents sale of the Company’s entire equity stake held in DHFL Pramerica Life Insurance Company Limited. The Profit after this exceptional item and before taxes for the current financial year was Rs.3,371.82 crore


Consolidated


During the financial year under review, your Company’s total revenue on consolidated basis stood at Rs.9,615.64 crore, higher than 22.65% in the previous financial year. The overall operational expenses for the financial year under review was Rs.8,194.84 crore, as against Rs.6,719.02 crore in the previous year. Operating profit before tax and exceptional item improved to Rs.1,420.80 crore as compared to Rs.1,120.90 crore in previous financial year 2015-16. During the financial year under review, your Company has reported an exceptional profit of Rs.1,855.45 crore on sale of its entire equity stake in DHFL Pramerica Life Insurance Company Limited. The year’s Profit after Tax attributable to the Company stands at Rs.2,806.30 crore, as against Rs.749.30 crore in the previous financial year.


MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY


There are no material changes and commitments, affecting the financial position of your Company, which have occurred between the end of the financial year of the Company, i.e. March 31, 2017 and the date of this Board’s report i.e. May 3, 2017.


DIVIDEND


Your Directors at their meeting held on October 17, 2016 had declared interim dividend for the financial year 2016-17 of Rs.1/- per equity share on 31,30,28,058 fully paid up equity shares of Rs.10/- each of the Company. The Board of Directors at their meeting held on May 3, 2017 have recommended a final dividend of Rs.3/- per equity share for the financial year ended March 31, 2017 in terms of the Dividend Distribution Policy approved by the Board of Directors of the Company. Therefore, the total dividend for the financial year 2016-17 aggregates to Rs.4/- per equity share.


The final dividend payable shall be subject to the approval of the Members of the Company at the ensuing Annual General Meeting which is scheduled to be held on Friday, July 21, 2017. The total outgo on account of dividend (excluding dividend tax) will be Rs.125.25 crore, for the current financial year 2016-17, as against Rs.233.45 crore in the previous financial year.


TRANSFER OF AMOUNT TO INVESTOR EDUCATION & PROTECTION FUND (IEPF)


Pursuant to the provisions of Sections 124 and 125 of the Companies Act, 2013, (erstwhile Sections 205A & 205C of the Companies Act, 1956) read with Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 and amendments thereof, the amounts pertaining to dividends/ deposits that remained unclaimed and unpaid for a period of seven years from the date it became first due for payment, have been transferred from time to time, to respective Investor Education and Protection Fund (IEPF) on the due dates and all relevant compliances have been done by the Company and no claims in this respect shall lie against the Company.


Pursuant to the provisions of erstwhile Investor Education and Protection Fund (Uploading of information regarding Unpaid and Unclaimed amounts lying with companies) Rules, 2012, the Company has uploaded the details of unclaimed amounts lying with the Company as on July 20, 2016 (i.e. date of last AGM) on the website of the Company (www.dhfl.com) and also filed with the Ministry of Corporate Affairs. Further as per Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, details of unclaimed amounts lying with the Company as on March 31, 2017 was filed with the Ministry of Corporate Affairs.


Unpaid /Unclaimed Dividend


During the financial year under review, your Company has transferred unclaimed final dividend of Rs.0.06 crore pertaining to the financial year 2008-09 to the Investor Education and Protection Fund (IEPF) established by the Central Government after the expiry of seven years from the date of transfer to unpaid dividend account.


Unclaimed Deposits


During the financial year under review, an amount of Rs.0.12 crore was transferred to the Investor Education and Protection Fund (IEPF) established by the Central Government, being the amount of deposits along with interest thereon, that remained unclaimed and unpaid for a period of seven years from the date it became first due for payment.


Pursuant to Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, [IEPF Rules] your Company had initiated the actions as laid down under the IEPF Rules and accordingly the communication letters were sent to all the shareholders of the Company whose dividend had remained unclaimed for past seven years and a public notice in this regard was also published in English and Marathi newspapers.


Members and Depositors of the Company are requested to claim their unclaimed dividend/deposit, if any, and for the purpose may correspond with the Company Secretary or the Registrar and Share Transfer Agent. Members and Depositors of the Company are requested to note that any dividend/ deposit remaining unclaimed/unpaid for a period of more than seven (7) years, will be transferred to the IEPF, as per the provisions of Companies Act. Members to further note that as per the provisions of Section 124 of the Companies Act, 2013 read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules 2016, the shares in respect of which the dividend has not been claimed for seven (7) consecutive years shall be transferred to the IEPF.


LENDING OPERATIONS


The sanctions and disbursements of housing and other loans, during the financial year ended March 31, 2017, were Rs.39,846.28 crore and Rs.28,581.90 crore respectively, as against Rs.37,608.13 crore and Rs.24,202.22 crore, respectively, in the previous financial year. The Company’s cumulative loan disbursement since inception was Rs.1,31,415.84 crore.


Securitisation / Assignment of Loans


During the financial year under review, your Company has sold/ assigned multiple pools of housing loans aggregating to Rs.3,609.15 crore and other non-housing loans aggregating to Rs.1,388.83 crore. Your Company will, however, continue to collect the EMIs receivable from the borrowers, on behalf of the acquirer of the loans and remit the same to the latter after retaining its portion in terms of the individual agreements.


During the financial year under review, your Company has also securitized, housing loan contracts amounting to Rs.885.68 crore, by way of Senior Series A1 Pass Through Certificate (PTCs) issued by SPVs. These PTCs have been granted the highest rating of AAA (SO) by the external credit rating agencies involved in the process.


Your Company has subscribed to an amount of Rs.37.31 crore in these Senior A1 Pass Through Certificates (PTCs), in compliance with the Minimum Retention Requirement (MRR) prescribed by RBI in its Guidelines on Securitization issued in 2012. In addition, your Company has provided Cash Collateral in the form of First Loss Credit Facility (FLCF) as a line of defense for Senior A1 PTC Holders, for a cumulative amount of Rs.68.48 crore, as specified by the respective rating agencies.


Your Company has securitized a pool of home loan contracts with a Mortgage Guarantee extended by India Mortgage Guarantee Corporation Pvt. Ltd (IMGC). The guarantee from IMGC helps in mitigating credit losses. IMGCs role as a First Loss Provider also helps your Company in maintaining an optimum level of Cash Collateral.


Buyout of Home loan pools


During the financial year under review, your Company has purchased home loan pools in two tranches for a cumulative amount of Rs.308.63 crore. This buyout complies with the Reserve Bank of India’s norms on Securitization, specific to Direct Assignment transactions, in terms of Minimum Holding Period (MHP) and Minimum Retention Requirement (MRR).


Loan Book


As at March 31, 2017, the loan book stood at Rs.72,096.18 crore, as against Rs.61,775.02 crore in the previous financial year.


SHARE CAPITAL


(A) Authorized Share Capital


During the financial year under review, pursuant to the approval of the Members of the Company on February 20, 2017, the Authorized share capital was reclassified. The Authorized share capital of the Company as at March 31, 2017 stands at Rs.828,00,00,000 (Rupees Eight Hundred Twenty Eight Crore only) divided into (i) 57,80,00,000 (Fifty Seven Crore Eighty Lakh only) equity shares of Rs.10/- (Rupees Ten only) each aggregating to Rs.578,00,00,000 (Rupees Five Hundred Seventy Eight Crore only); and (ii) 25,00,000 (Twenty Five Lakh only) non-convertible redeemable cumulative preference shares of Rs.1,000/- (Rupees One Thousand only) each aggregating to Rs.250,00,00,000 (Rupees Two Hundred Fifty Crore only).


(B) Issued and Paid-up Share Capital


(1) Equity


The Issued and paid up equity share capital of the Company as at March 31, 2017 was Rs.313.15 crore divided into 31,31,52,205 equity shares of Rs.10/each as compared to Rs.291.80 crore divided into 29,17,97,988 equity shares of Rs.10/- each as at March 31, 2016. The increase was mainly on account of issuance and allotment of following equity shares:


(a) 2,12,30,070 (Two crore Twelve lakh Thirty thousand and Seventy) equity shares of face value Rs.10/- each to Wadhawan Global Capital


Private Limited (WGCPL), a promoter group entity owing to conversion of warrants allotted during the previous financial year, upon receipt of balance 75% of the total consideration amount i.e. Rs.375 Crore as per the applicable provisions of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended and applicable provisions of the Companies Act, 2013, including rules made thereunder.


(b) 1,24,147 equity shares of Rs.10/- each, upon exercise of options (employee stock appreciation rights) by the eligible employees of the Company pursuant to Dewan Housing Finance Corporation Limited-Employee Stock Appreciation Rights Plan 2015.


Your Company has neither issued any shares with differential voting rights nor any Sweat Equity shares, during the financial year under review.


(2) Preference Share Capital


During the financial year under review, the Members of the Company on February 20, 2017, approved the issuance of Non- Convertible Redeemable Cumulative Preference Shares amounting to Rs.750 crore (including the premium amount of Rs.500 crore), by way of a special resolution passed through Postal Ballot. However, no preference shares were issued by the Company, during the financial year 2016-17.


RESOURCE MOBILISATION


Your Company’s borrowing policy is under the control of the Board. The Company has vide special resolution passed by means of postal ballot on June 12, 2014, under Section 180(1)(c) of the Companies Act, 2013, authorized the Board of Directors to borrow money upon such terms and conditions as the Board may think fit in excess of the aggregate of paid up share capital and free reserves of the Company upto an amount of Rs.1,00,000 crore and the total amount so borrowed shall remain within the limits as prescribed by National Housing Bank.


Your Company continued to use a variety of funding sources to optimize funding costs, protect interest margins and maintain a diverse portfolio which further strengthened its funding stability and liquidity needs. Your Company continued to keep tight control over the cost of borrowings through negotiations with lenders and thus, raised resources at competitive rates from its lenders while ensuring proper asset liability match.


The twin NCD issuances have not only established a strong yield curve for your Company’s financial instruments in the market but has also repositioned its borrowing portfolio into a more balanced mix of bank borrowings (41.90%), debt market instruments (41.80%), deposits (8.40%), National Housing Bank (4.00%) and External Commercial Borrowings (3.90%) and a better maturity profile.


The weighted average borrowing cost as at March 31, 2017 was 8.83% as against 9.67% in the previous year.


Your Company’s total borrowings amounted to Rs.81,341.24 crore as at March 31, 2017, as against Rs.61,103.66 crore in the previous year. The Company’s Asset-Liability Committee (ALCO), set-up in line with the guidelines issued by NHB, monitors asset-liability mismatches to ensure that there are no imbalances or excessive concentrations on either side of the Balance Sheet. The ALCO lays down policies and quantitative limits that involve assessment of various types of risks and shifts in assets and liabilities to manage such risks and ensures that the liquidity and interest-rate risks are contained within the limits laid down by the Board. Your Company continued to raise longer tenor borrowings in the financial year 2016-17, as well. Another strategy adopted to keep a balanced ALM was to enter into strategic partnership with banks that are keen on good quality assets and assign long tenor receivables to them at mutually beneficial terms.


Public Issue of Non-Convertible Debentures [NCDs]


During the financial year under review, your Company made its maiden public issue of Secured Redeemable Non-Convertible Debentures of Rs.4,000 crore which was subscribed 18.65 times of the base issue size of Rs.1000 crore setting a benchmark in the capital markets. Your Company also made a follow on public issue of Secured Redeemable Non-Convertible Debentures of Rs.10,000 crore which was also subscribed to the extent of 6.34 times of the base issue size of Rs.2,000 crore. The proceeds of the aforesaid issuances were utilized for the purpose for which they were raised, largely towards business purposes, pre-payment/repayment of high cost borrowings. The outstanding balance of these Debentures as on March 31, 2017 amounts to Rs.14,000 crore.


Non-Convertible Debentures [NCDs] issued on private placement basis


During the financial year under review, your Company continued to issue Non-Convertible Debentures on private placement basis pursuant to the special resolutions passed by the Members of the Company and Policy for private placement of Non-Convertible Debentures (NCDs) of the Company formulated as per the guidelines issued by National Housing Bank.


Non-Convertible Secured Redeemable Debentures


During the financial year under review, your Company issued Secured Redeemable Non-Convertible Debentures on private placement basis amounting to Rs.2,550.90 crore to banks and financial institutions. The outstanding balance of these Debentures including accrued premium on zero coupon NCDs as on March 31, 2017 amounts to Rs.14,829.52 crore. The proceeds of the aforesaid issues were utilized for making disbursement to meet the housing finance requirements of the borrowers, as well as for general corporate purposes.


Non- Convertible Subordinated Unsecured Debentures


During the financial year under review, your Company raised Rs.400 crore through issue of Non- Convertible Subordinated Unsecured Debentures on private placement basis. As at March 31, 2017, your Company’s outstanding subordinated debts were Rs.1,506.80 crore. The debt is subordinated to present and future senior indebtedness of your Company.


Non- Convertible Perpetual Unsecured Debentures


During the financial year under review, your Company has raised Rs.475 crore through issuance of Non-Convertible Perpetual Unsecured Debentures. The outstanding as at March 31, 2017, amounts to Rs.660.70 crore.


Debenture Trustee Agreement(s) were executed in favour of Catalyst Trusteeship Limited (formerly known as GDA Trusteeship Limited) for twin Public issues of NCDs. Debenture Trustee Agreement(s) were executed in favour of Catalyst Trusteeship Limited (formerly known as GDA Trusteeship Limited) and IDBI Trusteeship Services Limited for NCDs issued on private placement basis.


During the financial year under review, the interest on Non Convertible Debentures issued by way of public issue and on private placement basis were paid by the Company on their respective due dates and there were no instances of any interest amount which were not claimed by the investors or not paid by the Company after the date on which the same became due for payment.


Your Company being Housing Finance Company is exempted from the requirement of creating Debenture Redemption Reserve (DRR) in case of privately placed debentures. Therefore no DRR has been created for the Debenture issued by the Company on private placement basis. However as per the relevant provisions of Companies Act, 2013 and Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulation, 2008, your Company has created a Debenture Redemption Reserve (DRR) for Secured Redeemable Non Convertible Debentures issued by way of Public issue. As at March 31, 2017 DRR stands at Rs.1,170 crore.


Disclosure under Housing Finance Companies issuance of Non-Convertible Debentures on Private Placement Basis (NHB) Directions, 2014


During the financial year under review, the Non-Convertible Debentures issued on private placement basis, were paid/ redeemed by the Company on their respective due dates and there were no such instances of any Non-Convertible Debentures which have not been claimed by the investors or not paid by the Company after the date on which the Non-Convertible Debentures became due for redemption.


Loans from Banks


As part of its liability management, your Company endeavors to diversify its resource base in order to achieve an appropriate maturity structure and minimize the weighted average cost of borrowed funds. Your Company continued to leverage on its long term relationship with banks and thus tied up fund based working capital limit to Rs.12,545 crore as at the end of financial year. Your Company also raised additional term loans from banks to the extent of Rs.8,975 crore during the financial year 2016-17 at competitive rates available in the market and continued its focus on domestic sources.


However, the twin Public issue of NCDs have helped your Company to diversify its borrowing profile and reduce dependency on wholesale borrowings particularly from banks. The share of bank borrowings in the total borrowings in the current financial year came down to 41.90% from 52.70% in the previous financial year.


Deposits


Your Company being a deposit accepting Housing Finance Company, registered with National Housing Bank(NHB), is governed by the provisions of the Housing Finance Companies (NHB) Directions, 2010, as amended and other directions, regulations and circulars issued by NHB.


Retail fixed deposits form an integral source of funding for your Company and the Company has taken several initiatives to make these deposits available throughout the country. As a result, the fixed deposit portfolio of your Company has seen a robust growth during the financial year 2017. The total deposits grew by 34.22% to Rs.6,768.65 crore as on March 31, 2017. During the financial year under review, your Company added 32,928 new deposit accounts taking the total number of depositor accounts to 2,65,156. This is a significant testimony of increasing customer confidence in your Company.


As of March 31, 2017, 10,183 depositors who did not claim the deposits (along with interest due thereon) were aggregating to Rs.76.74 crore. Depositors have been intimated regarding the maturity of their deposits, with a request to either renew or claim their matured deposits. Fixed Deposits accepted by the Company are secured appropriately to the extent of floating charge on approved securities and bank deposits created by way of Trust Deed, as per the directions/ guidelines issued by the National Housing Bank.


Your Company sends appropriate reminders to the depositors after the due date of maturity to claim their unclaimed repayment amount of deposits alongwith the interest due thereon.


Refinance from National Housing Bank (NHB)


During the financial year under review, your Company has been granted a sanction amounting to Rs.700 crore under the NHB’s refinancing schemes for HFCs. In the financial year 2016-17, your Company availed Rs.2,200 crore refinance from NHB which included Rs.1,500 crore sanctioned during the previous financial year.


Commercial Papers


As at March 31, 2017, Commercial Papers outstanding amount stood at Rs.2,995 crore.


External Commercial Borrowings (ECBs)


During the financial year under review, your Company has availed External Commercial Borrowings (ECBs) amounting to Rs.1,007.59 crore under two different facilities - (a) an ECB facility of USD 130mn (Rs.874.15 crore) in the form of a syndicated loan facility, (b) an ECB of USD 20mn (Rs.133.44 crore) from DEG-Deutsche Investitions- und Entwicklungsgesellschaft mbH, Germany. The ECBs were raised under the Low Cost Affordable Housing Scheme of the Reserve Bank of India (RBI). Both the subject ECBs have a maturity of five years. According to the provisions of the RBI guidelines, these borrowings have been swapped into rupees for the entire maturity by way of principal only swaps.


In terms of ECB Master Circular guidelines issued by RBI, the proceeds of the subject ECBs have been utilised for financing the prospective owners of low cost affordable housing units. Low cost affordable housing units have been defined as units where the property cost is up to Rs.30 lakh, the loan amount is capped at Rs.25 lakh and the carpet area does not exceed 60 square metres.


SECURITY COVERAGE FOR THE BORROWINGS


The security details of the aforesaid secured borrowings made by the Company are mentioned at Note No. 6 in the Notes to accounts forming part of the audited (standalone) financial statements for the financial year ended March 31, 2017.


CREDIT RATINGS


The Company’s borrowings enjoy the following Credit Ratings:




































































Nature of



Rating / Outlook



Borrowing



CARE



Brickworks



ICRA



CRISIL



Short-Term Debt / Commercial Paper



ICRA A1



CRISIL A1



Public (fixed) deposits/ Short Term Deposits



CARE AAA (FD); Stable



BWR FAAA; Stable



CRISIL A1



Subordinated


debt



CARE AA ; Stable



BWR AAA; Stable



-



-



NCDs



CARE AAA; Stable



BWR AAA; Stable



IPDIs



CARE AA; Stable



BWR AA ; Stable



-



-



Long-term bank loans



CARE AAA; Stable



-



-



-



Structured


obligations



CARE AAA(SO)



-



ICRA


AAA(SO)



CRISIL


AAA(SO)



PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS


Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013, apart from the loans made, guarantee given or security provided by the Company in the ordinary course of business are given in the Notes to accounts forming part of the audited (standalone) financial statements for the financial year ended March 31, 2017.


CAPITAL ADEQUACY


As required under Housing Finance Companies (NHB) Directions, 2010, [NHB Directions, 2010] your Company is presently required to maintain a minimum capital adequacy of 12% on a stand-alone basis. The following table sets out the Company’s Capital Adequacy Ratios as at March 31, 2015,2016 and 2017:























Particulars



As on March, 31



2017



2016



2015



Capital Adequacy Ratio



19.12%



16.74%



16.56%



The Capital Adequacy Ratio (CAR) of your Company was at 19.12% as on March 31, 2017, as compared to the regulatory requirement of 12%.


In addition, the NHB Directions, 2010 also requires that your Company transfers minimum 20% of its annual profits to a reserve fund, which the Company has duly complied with.


NON-PERFORMING ASSETS AND PROVISIONS FOR CONTINGENCY


Your Company adhered to the prudential guidelines for Non Performing Assets (NPAs), under the NHB Directions, 2010, as amended from time to time. The Company did not recognize income on such NPAs and further created provisions for contingencies on standard as well as non-performing housing loans and property loans, in accordance with the NHB Directions, 2010. The Company has also made additional provisions to meet unforeseen contingencies. The following table set forth Company’s gross NPAs, net NPAs, cumulative provisions and write-offs for the periods indicated:


(Rs. in crore)



















































Particulars



As of March 31



2017



2016



2015



Gross Non-Performing Assets



678.45



573.07



485.05



% of Gross NPA to Total Loan Portfolio



0.94%



0.93%



0.95%



Net Non-Performing Assets



419.43



361.02



345.95



% of Net NPA to Total Loan Portfolio



0.58%



0.58%



0.68%



Total cumulative provision- loans and other assets



714.19



583.02



430.15



Write-off



87.49



21.46



6.20



Recovery & Collections


The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI Act) has proved to be a useful recovery tool and the Company has been able to successfully initiate recovery action under the provisions of this Act, against the defaulting borrowers. The Company has taken physical possession of the secured assets of some of the defaulters and the same are being auctioned as per the process laid down under the SARFAESI Act and the rules framed thereunder.


In order to prevent frauds in loan cases by mortgaging the same property with multiple lenders, the Government of India has set up Central Registry of Securitization Asset Reconstruction and Security Interest of India (CERSAI) under Section 20 of the SARFAESI Act. Your Company has been filing requisite particulars of mortgaged properties with CERSAI as per the prevailing guidelines issued by CERSAI.


INVESTMENTS


The Investment Committee constituted by the Board of Directors is responsible for approving investments in line with the policy and limits as set out by the Board. The investment policy is reviewed and revised in line with the market conditions and business requirements from time to time. The decisions to buy and sell upto the approved limit delegated by the Board are taken by the Chairman & Managing Director, who is assisted by Senior Executives of the Company. The investment function is carried out primarily to support the core business of housing finance to ensure adequate levels of liquidity and to maintain investment in approved securities in respect of public deposits raised as per the norms of National Housing Bank. Considering the time lag between raising of resources and its deployment, the surplus funds are generally being parked with liquid fund schemes of mutual funds, bonds and short term deposits with banks. During the financial year under review, your Company earned Rs.470.88 crore by way of income from mutual funds & other treasury operations and Rs.236.59 crore by way of interest on bonds (including SLR bonds) and deposits placed with banks.


As per National Housing Bank guidelines, Housing Finance Companies are required to maintain Statutory Liquid Ratio (SLR) in respect of public deposits raised. Currently the SLR requirement is 12.50% of the public deposits. As at March 31, 2017, your Company has invested Rs.425.30 crore (book value - gross) in approved securities comprising of government securities, government guaranteed (State and Central) bonds, State Development Loans and by way of bank deposits for Rs.430.84 crore. It is being maintained within the limits prescribed by National Housing Bank.


SUBSIDIARIES, JOINT VENTURE AND ASSOCIATE COMPANIES


As on March 31, 2017, your Company has two wholly owned subsidiaries, three joint venture(s) and four associate companies. The Board of Directors reviewed the affairs of all the subsidiaries, joint venture(s) and associate companies.


Pursuant to the provisions of Section 129(3) of the Companies Act, 2013, your Company has prepared Consolidated Financial Statements of the Company which forms part of this Annual Report. Further, a Statement containing salient features of financial statements of the subsidiaries, joint venture entities and associate Companies in the prescribed format AOC-1, pursuant to the provisions of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014,which forms part of this Board’s report as “Annexure - 1”. The Statement also provides details of performance and financial position of each of these companies.


In accordance with the provisions of Section 136 of the Companies Act, 2013 read with the applicable rules, the audited standalone financial statements, the consolidated financial statements and related information of the Company and the audited accounts of the subsidiary/ies, joint venture entities and associate companies, are available on the Company’s website i.e. www.dhfl.com. These documents shall also be available for inspection till the date of the ensuing Annual General Meeting during the business hours, i.e.between 10.00 a.m. to 5.00 p.m. on all working days (except Saturday) at the Registered Office of the Company.


Highlights of Performance of Subsidiaries


DHFL Advisory & Investments Private Limited (DAIPL)


DHFL Advisory & Investments Private Limited was incorporated as a wholly owned subsidiary of the Company in the previous financial year. During the financial year under review, DAIPL made an investment of Rs.300 crore and acquired 32.88% stake in the equity share capital of the joint venture entity i.e. DHFL Pramerica Asset Managers Private Limited.


The main object of DAIPL is , inter-alia, to carry on the business of providing all kinds of advisory/consultancy services and fee based intermediation activities and it earned an advisory fees of Rs.0.05 crore during the financial year ended March 31, 2017.


DHFL Investments Limited (DIL)


During the financial year under review, your Company incorporated DHFL Investments Limited as its wholly owned subsidiary. The Company made an investment of Rs.100.05 crore in DIL by way of subscription to 10,00,50,000 equity shares of Rs.10/- each.


During the financial year under review, pursuant to receipt of all the regulatory approvals, your Company on March 31,2017 sold its entire stake in DHFL Pramerica Life Insurance Company Limited (“DPLI”) (representing 50% of the paid up equity share capital of DPLI) to DIL at a fair market value of Rs.2000.50 crore as determined by an internationally reputed actuarial consultant. In order to fund the acquisition, DIL also raised a sum of Rs.1,901 crore from Wadhawan Global Capital Private Limited [“WGC”] (promoter group entity) by way of issue of Compulsorily Convertible Debentures [CCDs] convertible into equal number of equity shares of DIL after the expiry of 100 months from the date on which the CCDs were issued and mandatorily to be converted after the expiry of 110 months.


Highlights of Performance of Joint Ventures


DHFL Pramerica Life Insurance Company Limited


Your Company had acquired 50% equity stake in DHFL Pramerica Life Insurance Company Limited (erstwhile DLF Pramerica Life Insurance Company Limited) (“DPLI”) , a life insurance Company registered with Insurance Regulatory and Development Authority of India, from DLF Limited in December, 2013, and entered into a joint venture with Prudential International Insurance Holdings Limited (“Prudential”). The Company’s investment in DPLI (including the original cost of acquisition) was approximately Rs.31,06,89,296 (Rupees Thirty One Crore Six lakh Eighty Nine Thousand Two Hundred and Ninety Six only). In order to unlock the value of the Company’s investment in DPLI, with the approval of Board of Directors, the Members of the Company and relevant regulatory authorities, the entire equity stake held in DPLI was sold to DIL, a wholly owned subsidiary, at fair market value of Rs.2,000.50 crore determined by internationally reputed actuarial consultant. Your Company earned a profit of Rs.1,969.43 crore on the DPLI stake sale.


As at March 31, 2017, the net worth of DPLI stood at Rs.853.04 crore and its Profit before tax grew by 21% at Rs.70.42 crore for financial year 2017 as against Rs.58.36 crore for financial year 2016. The Assets under Management of DPLI stood at Rs.2,707.4 crore as at March 31, 2017 as against Rs.2,071.6 crore as at March 31, 2016. DPLI has presence in 28 states.


DHFL Pramerica Asset Managers Private Limited & DHFL Pramerica Trustees Private Limited


During the previous financial year, your Company had entered into a joint venture with PGLH of Delaware, (a wholly-owned indirect subsidiary of Prudential Financial Inc.) pursuant to which it acquired 50% of the equity share capital of DHFL Pramerica Asset Managers Private Limited (formerly known as Pramerica Asset Managers Private Limited, hereinafter referred to as “DPAMPL”) the Asset Management Company of DHFL Pramerica Mutual Fund (formerly known as Pramerica Mutual Fund, hereinafter referred to as “DPMF”) and DHFL Pramerica Trustees Private Limited (formerly known as Pramerica Trustees Private Limited, hereinafter referred to as “DPTPL”), the Trustee of DPMF. Your Company is registered with Association of Mutual Funds in India (AMFI) vide registration No. ARN - 101515 as AMFI registered Mutual Fund Advisor and undertakes the distribution of mutual fund products of DPAMPL.


During the financial year under review, consequent to the approval of Hon’ble High Court of Bombay, DPAMPL reduced and consolidated its issued, subscribed and paid up share capital pursuant to the relevant provisions of the Companies Act, 2013.


As at March 31, 2017, your Company holds 50% equity stake in DPAMPL (directly 17.12% and 32.88% through its wholly owned subsidiary, DAIPL) and DPTPL, respectively.


As on March 31, 2017, the net worth of DPAMPL stood at Rs.130.40 crore with a Profit before tax of Rs.7.65 crore for financial year 2017 as against a loss of Rs.32.62 crore for financial year 2016 and its year to date average Assets under Management grew by 20% being in line with the industry growth rate of 26%. DPAMPL has presence in 8 states.


Highlights of Performance of Associate Companies


Aadhar Housing Finance Limited (Aadhar)


Aadhar Housing Finance Limited, a housing finance company registered with National Housing Bank (NHB) with equity participation from International Finance Corporation (IFC), a member of the World Bank group, focuses on providing home loans to the needy in the backward regions of the country.


During the financial year under review, your Company did not subscribe to rights issue made by Aadhar, which resulted in proportionate dilution of the existing shareholding percentage of the Company in Aadhar. As a result, as on March 31, 2017 the percentage of shareholding of your Company in Aadhar stood at 12.37% of the paid-up equity share capital.


As at March 31, 2017 the net worth of Aadhar stood at Rs.224.41 crore and its Profit before tax grew by 112.93% at Rs.61.68 crore for financial year 2017 as against Rs.28.96 crore for financial year 2016. The Assets under Management of Aadhar stood at Rs.3,183.83 crore as at March 31, 2017 as against Rs.1,811.39 crore as at March, 31, 2016. Aadhar has presence in 13 states.


DHFL Vysya Housing Finance Limited (DHFL Vysya)


DHFL Vysya, a housing finance company registered with National Housing Bank (NHB) caters to the lower and middle income segment mostly in the southern regions of the country and in two states in the northern region. As on March 31, 2017 the percentage of shareholding of your Company stood at 9.47% of the paid-up equity share capital of DHFL Vysya.


As at March 31, 2017, the net worth of DHFL Vysya stood at Rs.153.73 crore and its Profit before tax decreased by 10.62% at Rs.35.76 crore for financial year 2017 as against Rs.40.01 crore for financial year 2016. The Assets under Management of DHFL Vysya stood at Rs.1,807.60 crore as at March 31, 2017 as against Rs.1,467.57 crore as at March 31, 2016. DHFL Vysya has presence in 7 states.


The Board of Directors of DHFL Vysya and Aadhar respectively, have approved the scheme of amalgamation of DHFL Vysya (Transferee) and Aadhar (Transferor), pursuant to which both the entities have filed their respective applications for seeking approval for amalgamation in terms of the applicable provisions of Companies Act, 2013 with National Company Law Tribunal.


Avanse Financial Services Limited (Avanse)


Avanse Financial Services Limited, a non-banking financial company registered with Reserve Bank of India is education Loan Company, which kindles and supports aspirations of higher education in India & overseas and also provides education institution loan.


As on March 31, 2017 the percentage of shareholding of your Company stood at 36.78% of the paid-up equity share capital of Avanse.


As at March 31, 2017 the net worth of Avanse stood at Rs.140.25 crore and its Profit before tax grew by 121.71% at Rs.5.72 crore for financial year 2017 as against Rs.2.58 crore for financial year 2016. The Assets under Management of Avanse stood at Rs.982.25 crore as at March 31, 2017 as against Rs.529.63 crore as at March 31, 2016. Avanse has presence in 13 Locations.


DHFL Ventures Trustee Company Private Limited (DHFL Ventures)


DHFL Ventures is a Company which acts as a trustee company of venture capital funds and alternative investment funds.


During the financial year under review, your Company has transferred its entire equity stake held in DHFL Ventures to its wholly owned subsidiary i.e. DHFL Investments Limited at face value.


As at March 31, 2017 the net worth of DHFL Ventures stood at Rs.0.054 crore and its Profit before tax was Rs.0.02 crore for financial year 2017. The total assets of DHFL Ventures stood at Rs.0.08 crore as at March 31, 2017 as against Rs.0.072 crore as at March 31, 2016.


INFORMATION TECHNOLOGY


Your Company’s technology transformation programme (Tech2.0) in association with IBM is a journey towards digital transformation to enhance customer and employee experience. In addition, your Company is exploring advanced technological solutions in the areas of data analytics, mobility and cloud.


This programme will help your Company to align its technology landscape to meet its evolving business needs, improve its customer centricity and will enable faster decision making through automation and analytics.


HUMAN RESOURCES


Your Company today is a valued employer brand with a compelling employee value proposition. Your Company consistently focuses on talent acquisition and retention to ensure sustainable growth. Your Company’s initiatives are aligned with its overall mission and strategy. It has adopted new technologies and has implemented employee-centric policies and practices to strike a balance between business needs and individual aspirations.


Your Company significantly invests in professional development and provides career development opportunities for its employees. A robust development framework and a blend of classrooms with on-line and on-the-job training, aligned to the Company’s business objectives and career path of individuals, provides the employees with opportunities to excel in their work and be well equipped for future roles.


The leadership competency framework enables your Company to identify potential leaders; and ensures that your Company has a ready talent pool to take up next level leadership roles.


To meet its ever-growing need for talent, especially in Tier II and Tier III towns, cities and its peripheral suburbs, your Company has also tied-up with leading academic institutions to offer skill development programmes and employment opportunities for deserving candidates with the Company. While these initiatives provides your Company with good talent, it also helps it to give back to society in the form of generating more employment.


Your Company has put in place an open, transparent, and meritocratic culture that helps talent perform, grow, and stay in the Company. Your Company works on the belief that every great workplace is marked by synergistic and gender diverse teams and a diverse workplace is benefitted with improved business performance, better corporate governance and stronger brand image.


In an ongoing effort to being one of the most preferred employers in the financial services space, your Company will continue to significantly invest in employee engagement, talent and leadership development, and best-in-class processes and policies. The overriding objective is to foster a culture of excellence and ownership.


Learning and Development


Your Company’s Learning & Development Team (L&D Team) is responsible for providing learning solutions to every role within the Company by designing comprehensive training framework to match the dynamic and ever evolving business trends.


Your Company has created stronger depth and focus in its skill building efforts. It has been able to support professional development and empower employees to deliver improved quality of service through its training intervention and motivating them to perform with renewed vigor and enthusiasm. Teaching expertise has been nurtured in-house, in the form of dedicated trainers, facilitators, content developers as well as subject matter experts from business teams.


During the financial year under review, training was imparted to 2,745 on roll employees and 1,741 off roll employees, covering a wide range of functional areas including sales skill development programs, credit analytical skills, appraisal techniques, fraud & risk management. “Organization Orientation” the exclusive monthly induction program for the new recruits is conducted to give an overall view of the Company’s vision and mission. Similarly, programs based on soft skills and monitoring techniques were also conducted and 953 employees were covered.


In keeping with its importance and in compliance with National Housing Bank norms, trainings on KYC & AML Policies were also imparted at all levels within the organization. External training programs and cross functional exposures were utilized to provide an extra edge to employees for continuous and better performance through learning and job experience. To leverage the internal strength of L&D Team, only 2.33% of trainings were fully outsourced.


Your Company has partnered with the best in class leadership trainers of the country for corporate breakthrough workshop for key position holders and business managers. To study the impact of training, your Company engages leading trainers from the industry to benchmark Company’s skills and for analyzing the same with focus on measuring and improving employee engagement and learning quotient. Taking concrete steps based on the study findings is helping the organization in building a stronger and more engaged workforce. Customer focus remains at the core of all L&D initiatives.


Your Company’s Human Resources initiatives and L&D systems are designed to ensure an active employee engagement process, leading to better organizational capability and vitality for maintaining a competitive edge and in pursuing its ambitious growth plans.


EMPLOYEE REMUNERATION


(A) The ratio of the remuneration of each director to the median employee’s remuneration and other details in terms of Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules,2014 as amended by the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2016, forms part of this Board’s report as “Annexure-2”.


(B) The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended by the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2016 forms part of this Board’s report. However, as per first proviso to Section 136(1) of the Act and second proviso of Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Report and Financial Statements are being sent to the Members of the Company excluding the said statement. Any Member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.


EMPLOYEES STOCK OPTION SCHEME (ESOS)/ EMPLOYEE STOCK APPRECIATION RIGHTS (ESARS)


Your Company has formulated employee stock option schemes /employee stock appreciation rights plan with an intent to reward the employees of the Company for their performance and to motivate them to contribute to the growth and profitability of the Company. The Company also intends to use these schemes/ plan to retain talent working with the Company.


Your Company has with the approval of Nomination and Remuneration Committee of the Board of Directors and pursuant to the special resolution passed by the Members of the Company at the Annual General Meeting held on July 23, 2007, formulated three employee stock option schemes, ESOS - 2008, ESOS - 2009 - Plan II and ESOS - 2009- Plan III. The said stock option schemes are in compliance with the provisions of Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (SEBI SBEB Regulations). The ESOP 2009 Plan II lapsed on November 25, 2015.


During the financial year 2014-15, the Members of the Company, approved “Dewan Housing Finance Corporation Limited - Employee Stock Appreciation Rights Plan 2015” (DHFL ESAR 2015) in accordance with the provisions of SEBI SBEB Regulations and issuance of stock appreciation rights (‘ESARs’) through DHFL ESAR 2015, exercisable into not more than 51,46,023 fully paid up equity shares in the aggregate having face value of Rs.10/- each. Pursuant to the subject approval, the Nomination and Remuneration Committee on March 21, 2015 approved Grant I of 15,50,100 ESARs under DHFL ESAR 2015 to the eligible employees of the Company conferring upon them a right to receive equity shares equivalent to the appreciation in the value of the shares of the Company. Consequent to the bonus shares issued by the Company in the ratio of 1:1 during the previous financial year the total number of ESARs also increased in the same ratio.


During the financial year under review, the Company has allotted from time to time 1,24,147 equity shares of Rs.10/each on exercise of 3,47,200 ESARs, to the eligible employees under Grant I of DHFL ESAR 2015.


During the financial year under review, Nomination and Remuneration Committee on November 17, 2016 approved Grant II of 20,81,545 ESARs under DHFL ESAR 2015 to the eligible employees of the Company conferring upon them a right to receive equity shares equivalent to the appreciation in the value of the shares of the Company


The Company’s Nomination and Remuneration Committee of the Board of Directors, inter-alia, administers and monitors the Employee Stock Option Schemes/ Employee Stock Appreciation Rights Plans of the Company, in accordance with SEBI SBEB Regulations. There has been no variation in the terms of the options/ESARs granted under any of these schemes/plan.


The Company has received a certificate from its auditors confirming that the Stock Options Schemes/ Employee Stock Appreciation Rights Plan have been implemented in accordance with SEBI SBEB Regulations and is as per the respective resolutions passed by the Members of the Company. The said certificate would be placed at the ensuing annual general meeting for the inspection by the Members of the Company. The applicable disclosures as stipulated under SEBI SBEB Regulations, for the financial year 2016-17, forms part of this Board’s report as “Annexure-3” and in terms of Regulation 14 of SEBI SBEB Regulations the said details are also available on the website of the Company at the URL: http://www.dhfl.com/investors/esos-esar-disclosures/


DISCLOSURE UNDER SUB-SECTION (3) OF SECTION 134 OF COMPANIES ACT, 2013, READ WITH RULE 8(3) OF THE COMPANIES (ACCOUNTS) RULES, 2014


A. Conservation of

CIN: U67190WB2003PTC096617. Trading in Commodities is done through our Group Company Dynamic Commodities Pvt. Ltd. The company is also engaged in Proprietory Trading apart from Client Business.
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