Housing Development Finance Corporation Ltd

BSE: 500010 | NSE: HDFC | ISIN: INE001A01036 
Market Cap: [Rs.Cr.] 137,335 | Face Value: [Rs.] 2
Industry: Finance - Housing

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Director's Report



Your directors are pleased to present the Thirty-sixth annual report of yourCorporation with the audited accounts for the year ended March 31, 2013.


For the year ended March 31, 2013 For the year ended March 31, 2012
(Rs in Crores) (Rs in Crores)
Profit before Tax 6,572.84 5,665.62
Tax Expense 1,724.50 1,543.00
Profit after Tax 4,848.34 4,122.62
Appropriations have been made as under:
Special Reserve No. II 775.00 730.00
General Reserve 956.62 870.87
Additional Reserve (under Section 29C of the National Housing Bank Act, 1987) 825.00 620.00
Shelter Assistance Reserve 40.00 15.00
Proposed Dividend (at Rs 12.50 per equity share of face value of Rs 2 each) 1,932.93 1,624.67
Additional Tax on Proposed Dividend 328.50 263.56
Additional Tax on Dividend (24.62) (4.66)
Dividend pertaining to Previous Year paid during the year 14.91 3.18
4,848.34 4,122.62


Your directors recommend payment of dividend for the financial year ended March 31,2013 of Rs 12.50 per equity share of face value of Rs 2 per share as against Rs 11 perequity share for the previous year.

The dividend payout ratio for the current year, inclusive of additional tax on dividendwill be 46.6% as compared to 45.8% for the previous year.

Increase in the Shareholding Limit for Foreign Institutional Investors (FIIs)

At the last annual general meeting, you had through a special resolution grantedapproval to increase the limit of shareholding by FIIs under the Portfolio InvestmentScheme from 74% to 100% of the paid-up share capital of the Corporation.

Accordingly, the Reserve Bank of India (RBI) has notified the enhanced limit forpurchase of equity shares of the Corporation by FIIs through the primary market and stockexchanges under the Portfolio Investment Scheme up to 100% of the paid-up share capital ofthe Corporation. As at March 31, 2013, the total foreign shareholding of the Corporationstood at 74%.

Conversion of Warrants

In August 2009, the Corporation had issued 1,09,53,706 Warrants with a rightexercisable by the Warrant holders to exchange each Warrant with one equity share of facevalue of Rs 10 per share, on or before August 24, 2012, at a Warrant Exercise Price of Rs3,000 per equity share.

Consequent to the sub-division of the nominal face value of the equity shares of theCorporation to Rs 2 per share, with effect from August 21, 2010, the Warrant ExercisePrice was accordingly adjusted to Rs 600 per equity share of face value of Rs 2 each, tobe paid by the Warrant holder at the time of exchange of the Warrants. Accordingly, thenumber of Warrants issued was adjusted to 5,47,68,530.

As at August 24, 2012, 5,47,43,150 Warrants had been lodged for exchange with equityshares of the Corporation, representing 99.95% of the Warrants issued. Accordingly, theCorporation issued and allotted 5,47,43,150 equity shares of Rs 2 each and realised anamount of Rs 3,284.59 crores. The said equity shares rank pari passu with theexisting equity shares of the Corporation in all respects.

The proceeds from the exchange of Warrants were utilised to replace the Zero CouponDebentures and consequently, the Corporation will not earn any additional interest incomeon the amounts raised.

25,380 Warrants which were not submitted for exchange with equity shares of theCorporation by 15 Warrant holders have lapsed and cease to be valid. Accordingly, theamounts paid towards them stands forfeited.

Lending Operations

Loan approvals during the year were Rs 1,03,260 crores as compared to Rs 90,154 croresin the previous year and loan disbursements during the year were Rs 82,452 crores asagainst Rs 71,113 crores in the previous year.

Individual loan approvals and disbursements grew by 29% and 33% respectively duringtheyear. The average size of individual loans stood at Rs 21.6 lacs as against Rs 19.5 lacsin the previous year.

Cumulative loan approvals and disbursements as at March 31, 2013 were Rs 5,66,660crores and Rs 4,56,098 crores respectively. This is in respect of 4.4 million housingunits.

Despite an increase in residential property prices during the year, the demand forindividual home loans remained buoyant, with stronggrowth coming from Tier 2 and Tier 3cities. Other enabling factors that kept the demand strong for individual home loansinclude rising disposable incomes and fiscal incentives on housing loans.

In an effort to continue to widen the bouquet of products offered, an innovativeproduct called 'TRUFIXED Home Loans' was introduced during the year. This product is aimedat customers who wish to be insulated from interest rate volatility. Underthis product, acustomer has the option to choose a fixed interest rate period ranging between 3 to 10years and post the fixed rate period, the loan automatically converts to a variable rateproduct. The product has been well received by customers.

With younger customers opting for a home loan and to help improve affordability, theCorporation offers the Telescopic Repayment Option under which customers have the optionof a loan tenor of up to 30 years.

As at March 31, 2013, the loan book stood at Rs 1,70,046 crores as against Rs 1,40,875crores in the previous year. Loans sold during the preceding twelve months amounted to Rs5,175 crores. The growth in the individual loan book, after adding back loans sold was 31%(25% net of loans sold). Non-individual loans grew by 13%. The growth in the total loanbook after adding back loans sold was 24% (21% net of loans sold).

Of the total loan book, individual loans comprise 68%. Further, 81% of the incrementalgrowth in the loan book during the year came from individual loans.

Sale of Loans

In May 2012, the RBI revised the guidelines on transfer of assets throughsecuritisation and direct assignment of cash flows. The key changes in the guidelines forthe sale of home loans included a minimum holding period of 12 months, a minimum retentionratio of 10%, no credit enhancement for loans assigned and banks purchasing the loans arerequired to undertake a detailed due diligence prior to the assignment of loans.

All the individual loans sold during the year were in accordance with the revisedguidelines. The Corporation, under the loan assignment route sold individual loansamounting to Rs 5,125 crores to HDFC Bank pursuant to the buyback option embedded in thehome loan arrangement between the Corporation and HDFC Bank.

As at March 31, 2013, total loans outstanding in respect of loans sold/ assigned stoodat Rs 16,964 crores. HDFC continues to service loans and is entitled to the residualinterest on the loans sold. The residual interest on the individual loans sold/ assignedis 1.33% per annum. The residual income on the loans sold/ assigned is being recognisedover the life of the underlying loans and not on an upfront basis.

Issues through which loans have been sold/assigned prior to the introduction of therevised guidelines continue to be rated by external rating agencies and carry a ratingindicating the highest degree of safety.


During the year under review, Rs 48,089 crores were received by way of scheduledrepayment of principal through monthly instalments as well as redemptions ahead ofschedule, as compared to Rs 42,362 crores received last year.

Resource Mobilisation

Subordinated Debt

As at March 31,2013, the Corporation's outstanding subordinated debt stood at Rs 3,475crores. The debt is subordinated to present and future senior indebtedness of theCorporation and has been assigned the highest rating by CRISIL and ICRA. Based on thebalance term to maturity, as at March 31, 2013, Rs 2,985 crores of the book value ofsubordinated debt is considered as Tier II under the guidelines issued by the NationalHousing Bank (NHB) for the purpose of capital adequacy computation. The Corporation didnot issue any subordinated debt during the year.

Non-Convertible Debentures (NCD)

During the year, the Corporation issued NCD amounting to Rs 33,180 crores on a privateplacement basis. The Corporation's NCD issues have been listed on the Wholesale DebtMarket segment of the National Stock Exchange of India Limited and the BSE Limited. TheNCD issues have been assigned the highest rating of 'CRISIL AAA' and 'ICRA AAA' by CRISILand ICRA respectively. As at March 31, 2013, NCD outstanding stood at Rs 75,984 crores.

Term Loans from Banks, Financial Institutions and Refinance from the National HousingBank (NHB)

As at March 31, 2013, the total loans outstanding from banks, financial institutionsand NHB amounted to Rs 17,824 crores as compared to Rs 40,697 crores as at March 31, 2012.The fall in the outstanding loan amount is due to a reduction in the outstanding bankloans. As the Base Rates of commercial banks remained high for most part of the financialyear under review, the Corporation reduced its exposure to bank loans and substituted itwith market borrowings and deposits.

HDFC's long-term and short-term bank loan facilities have been assigned the highestrating of 'CARE AAA' and 'CARE A1+' respectively by CARE Ratings, signifying highestsafety for timely servicing of debt obligations.

During the year, the Corporation has drawn NHB refinance amounting to Rs 627 crores, ofwhich over one-third was drawn as refinance under the Rural Housing Fund.


During the year, the Corporation witnessed a robust growth in deposits from Rs 36,293crores to Rs 51,933 crores. The depositor base too grew from 12.9 lacs to 15.6 lacsdepositors.

CRISIL and ICRA have for the eighteenth consecutive year, reaffirmed their 'CRISILFAAA' and 'ICRA MAAA' ratings respectively for HDFC's deposits. These ratings representthe highest degree of safety regarding timely servicing of financial obligations and alsocarries the lowest credit risk.

The support of the agents and their commitment to the Corporation has been instrumentalin HDFC's deposit products continuing to be a preferred investment for households andtrusts.

Unclaimed Deposits

As of March 31, 2013, public deposits amounting to Rs 270.58 crores had not beenclaimed by 28,330 depositors. Since then, 6,236 depositors have claimed or reneweddeposits of Rs 82.89 crores. Depositors were intimated regarding the maturity of depositswith a request to either renew or claim their deposits. Where the deposit remainsunclaimed, reminder letters are sent to depositors periodically and follow up action isinitiated through the concerned agent or branch.

As per the provisions of Section 205C of the Companies Act, 1956, deposits remainingunclaimed for a period of seven years from the date they became due for payment have to betransferred to the Investor Education and Protection Fund (IEPF) established by theCentral Government. Accordingly, during the year, despite repeated reminders being sent todepositors, an amount of Rs 59.19 lacs has been transferred to the IEPF. In terms of thesaid section, no claims would lie against the Corporation or the IEPF after the transfer.

Non-Performing Loans

Gross non-performing loans as at March 31, 2013 amounted to Rs 1,199 crores. This isequivalent to 0.70% of the portfolio (as against 0.74% in the previous year). This is thethirty-third consecutive quarter end at which the percentage of non-performing loans havebeen lower than the corresponding quarter in the previous year. The non-performing loansof the individual portfolio stood at 0.58% while that of the non-individual portfoliostood at 0.91%.

Based on a six months overdue basis, the non-performing loans as at March 31, 2013stood at 0.40% of the loan portfolio as against 0.44% in the previous year.

As per NHB norms, the Corporation is required to carry a total provision of Rs 1,506crores of which only Rs 387 crores is on account of non-performing assets and the balanceRs 1,119 crores is in respect of general provisioning on standard loans including DualRate Home Loans (DRHL). Thus the Corporation carries an additional provision of Rs 286crores over the regulatory requirements.

As against non-performing loans of Rs 1,199 crores, the balance in the provision forcontingencies account as at March 31, 2013 stood at Rs 1,792 crores (inclusive ofprovision for non-performing loans). This is equivalent to 1.05% of the portfolio.

All DRHL had converted into floating rate loans linked to HDFC's Retail Prime LendingRate with effect from April 1, 2012. As per NHB guidelines, the Corporation was mandatedto carry a higher provisioning of 2% on standard DRHL up to one year after the interestrates were re-set. Accordingly, with effect from April 1, 2013, the Corporation will nolonger need to maintain a higher provisioning on these loans.

The Securitisation and Reconstruction of Financial Assets and Enforcement of SecurityInterest Act, 2002 (SARFAESI) has proved to be a useful recovery tool and the Corporationhas been able to successfully initiate recovery action under this Act in the case ofwilful individual and corporate defaulters.

Regulatory Guidelines/Amendments

HDFC has complied with the Housing Finance Companies (NHB) Directions, 2010 prescribedby NHB regarding accounting standards, prudential norms for asset classification, incomerecognition, provisioning, capital adequacy, credit rating, concentration of investmentsand capital market exposure norms.

HDFC's capital adequacy ratio stood at 16.35% of the risk weighted assets, as againstthe minimum requirement of 12%. Tier I capital was 13.85% as against a minimum requirementof 6%.

In December 2012, the RBI issued guidelines on External Commercial Borrowings (ECB) forlow cost affordable housing projects. As per the notification, Housing Finance Companies(HFC) can avail of ECB for on-lending to prospective owners of low cost affordable housingunits under the approval route. The Corporation had in January 2013, made an applicationto raise funds under this scheme, which is awaiting regulatory approval.

Codes and Standards

NHB has issued comprehensive Know Your Customer (KYC) Guidelines and Anti MoneyLaundering Standards in the context of recommendations made by the Financial Action TaskForce on Anti Money Laundering Standards and on Combating Financing of TerrorismStandards. During the year, the board reviewed and approved the amendments to theCorporation's KYC and Prevention of Money Laundering Policy as stipulated by NHB. TheCorporation has adhered to the compliance requirements in terms of the said policyrelating to monitoring and reporting of cash/ suspicious transactions.

The Fair Practices Code framed by NHB seeks to promote good and fair practices bysetting minimum standards in dealing with customers, increase transparency so customershave a better understanding of what they can reasonably expect of the services beingoffered, encourage market forces through competition to achieve higher operatingstandards, promote fair and cordial relationships between customers and the HFC and fosterconfidence in the housing finance sector. The Corporation has put in place a mechanism tomonitor and review adherence to the Fair Practices Code as approved by the Board ofDirectors.

The Corporation has adopted the Model Code of Conduct for Direct Selling Agents andGuidelines for Recovery Agents engaged by HFCs as stipulated by NHB and duly approved bythe Board of Directors.

The Corporation has formulated and adopted a Share Dealing Code in accordance with themodel code of conduct as prescribed under the SEBI (Prohibition of Insider Trading)Regulations, 1992, as amended. The code is applicable to all directors, employees andtheir dependents. The said persons are restricted from dealing in the securities of theCorporation during the 'restricted trading periods' notified by the Corporation, from timeto time. During the year, the code was amended to enforce higher standards of compliancerelating to insider trading norms.

Marketing and Distribution

During the year, efforts were concentrated on further strengthening the distributionnetwork. The Corporation's distribution network now spans 331 outlets, which includes 81offices of HDFC's wholly owned distribution company, HDFC Sales Private Limited (HSPL). Tofurther augment the network, HDFC covers over 90 additional locations through its outreachprogrammes. HDFC has overseas offices in London, Singapore and Dubai. The Dubai officereaches out to its customers across Middle East through its service associates based inKuwait, Qatar, Oman, Sharjah, Abu Dhabi and Saudi Arabia.

HDFC's reach and presence is also enhanced by its distribution channels, which includeHSPL, HDFC Bank and a few third party direct selling associates (DSAs). Besides local andregional DSAs, tie-ups with some banks and distribution houses have enhanced incrementalbusiness. Prominent banks with whom the Corporation has distribution tie-ups includeIndusInd Bank and Ratnakar Bank. These channels only source loans, while the control overthe credit, legal and technical appraisal continues to rest with HDFC, thereby ensuringthat the quality of loans disbursed is not compromised in any way and is consistent acrossall distribution channels.

Various online facilities such as e-approval for prospective customers, accountingfacilities for existing customers and HDFC's mobile site has helped improve customerservice. The Corporation also uses various online platforms to source home loan leads.

The Corporation organised property fairs across major cities in the country as well asorganised events for developers to showcase their properties to the Indian diaspora inoverseas locations like London, Singapore and the Middle East.

Cross Selling and Distribution of Financial Products and Services

HDFC's subsidiary companies have strong synergies with HDFC and hence efforts arechannelled into cross selling so as to offer customers a wide range of financial productsand services underthe 'HDFC brand.

HDFC and HSPL are Composite Corporate Agents for HDFC Standard Life Insurance CompanyLimited (HDFC Life) and HDFC ERGO General Insurance Company Limited (HDFC ERGO). Inaddition, the distribution networks of HDFC and HSPL are used by Credila FinancialServices Private Limited, which offers education loans. Property related services offeredby HDFC Realty Limited and HDFC Real Estate Destination (HDFCRED.com) also supplement theCorporation's distribution network.

International Housing Finance Initiatives

HDFC's expertise in housing finance is well regarded and therefore a number of existingand new housing finance companies are keen to tap

HDFC for training, strategic input and technical assistance in housing finance.

During the year, senior executives of the Corporation were invited to Indonesia andTanzania for training assignments and consultancy services in housing finance. TheInternational Finance Corporation under its technical assistance projects commissioned ateam from the Corporation to undertake a feasibility study for the establishment of aprimary mortgage institution in Rwanda.

In July 2012, the Frankfurt School of Finance & Management and HDFC jointlyorganised the fifth 'Housing Finance Summer Academy' in Germany, which is a coursethat aims to provide housing finance solutions for emerging markets through a combinationof academic knowledge and practical experience.

In November2012, HDFC conducted its own international training programme 'HousingFinance Management' at its training centre, Centre for Housing Finance, located atLonavla, India. Participants from different countries across Asia and Africa attended aweek-long residential training programme.

Shelter Assistance Reserve (SAR)

HDFC partners and supports worthwhile projects undertaken by development associationsand non-government organisations through the SAR. During the year, the Corporationdisbursed Rs 9.13 crores from the SAR, covering over 180 partner organisations spreadacross the country.

Corpus contributions were made towards the Marrow Donor Registry, Tata Medical Centre,Maithri

Education & Charitable Trust and the Foundation for Promotion of Sports &Games, amongst several others. The SAR was also utilised towards supporting the purchaseof medical equipment for a blood bank in Pune, towards a school for impoverished childrenin Tripura and supporting rural development initiatives in Boudh and Kandhamal in Odisha.HDFC also supported The Bombay Community Public Trust, The Light of Life Trust and IndianAssociation for Promotion of Adoption & Child Welfare.

The Corporation extended grant support to The Pestalozzi Children's Village Society inDehradun by providing scholarships to deserving students, the Wildlife Conservation Trustfor their 'Save the Tiger' campaign, Masoom, which runs night schools in Mumbai and toSaksham Trust towards educational programmes for visually impaired children in New Delhi.

H T Parekh Foundation

2011 marked the birth centenary year of late Shri H. T. Parekh, founder chairman of theCorporation. To commemorate his enormous contribution to the development of housingfinance and other financial services in India, the board approved the proposal to set upthe H T Parekh Foundation. Shri H. T. Parekh was associated with several philanthropiccauses and welfare organisations during his lifetime.

During the year, the Corporation incorporated the H T Parekh Foundation as a not forprofit company licensed under Section 25 of the Companies Act, 1956. Some of the keyobjectives of the foundation include undertaking welfare activities for the socially andeconomically disadvantaged, provision of education and medical services and assisting inthe preservation and conservation of India's rich heritage. Subject to the receipt ofrequisite approvals, the Corporation has committed to contribute an amount of upto Rs 200crores to fund the charitable activities of the foundation over a period of 3 financialyears. During the year, the Corporation infused an amount of Rs 10 crores as equitycapital to enable the foundation to commence its activities.

Training and Human Resource Management

During the year, the Corporation continued its emphasis on competency developmentprogrammes. These programmes entail competency mapping, wherein employees' strengths anddevelopment needs are assessed and worked upon. The template developed for competencymapping is used as a leadership development tool.

A number of in-house programmes were conducted to enhance functional knowledge offrontline as well as back office executives across the country. Other internal programmesincluded developing in-house trainers, leadership programmes for senior managers and teambuilding programmes. Staff members also participated in a number of external conferenceson an array of subjects including affordable housing, taxation, business analytics,capital markets, risk management, fraud detection and forensic accounting.

Building Service and Productivity Excellence

In order to raise the bar on customer service, it is important to constantly assess andevaluate the service delivery mechanism. In this context, during the year, the Corporationembarked on a project called 'Customer Relationship Enhancement through SystemTransformation' (CREST).

CREST is a business process re-engineering initiative, with the aim of making adifference in the service delivery process and bringing about a greater degree ofefficiency with the Corporation's channel partners and its customers.

CREST entails a significant upgrade in the loan appraisal and processing system. Itinvolves process standardisation, centralisation and adoption of new technology. The aimis to increase business growth through improved productivity levels, better customerservice and cost efficiencies. The new process is being rolled out in a phased manneracross all branches.

Rural Housing

Being a leading housing finance provider, the Corporation has felt the need to addressthe demand for rural housing. Over the past four years, the Corporation has developed amore focused strategy on rural housing. The Corporation's rural housing finance portfoliohas grown steadily and consists of housing loans to progressive farmers who derive theirincome from agriculture or allied activities and loans to salaried/self employed personsfor properties in rural areas. The Corporation has appraisal systems to assess incomesfrom agriculture and has put in place a strong legal and technical framework for ruralhome loans. The Corporation will continue its efforts to identify potential rural areas,where development is taking place and customers have clear and marketable title deeds.

Property Related Services

The Corporation strongly believes that it must endeavour to offer a range of valueadded services and property related solutions to its customers. HDFC Realty Limited andHDFC RED are examples of such support services offered.

HDFC Realty Limited is a property advisory company which helps individuals andcorporate institutions to buy, sell or lease real estate. During the year, the companyclosed more than 2,000 residential transactions, resulting in a 70% growth in billingsfrom brokerage operations. The company continued to strengthen its presence in metrocities like Mumbai and the National Capital Region (NCR), whilst also focusing onexpanding to new cities like Coimbatore and Cuttack, amongst others. Currently, HDFCRealty has a presence across 24 locations in India.

HDFCRED.com, the on-line real estate search engine assists potential home buyers inshort listing properties that suit their requirements. The portal gives HDFC an advantageto touch base with potential home loan customers at a very early stage of the buyingcycle. HDFC RED has expanded its foothold to 23 cities across India, showcasing over 9,900projects.

Education Initiatives

HDFC Education and Development Services Private Limited (HEADS) is the Corporation'swholly owned subsidiary which focuses on the education sector. During the year, HEADSfocused on graduate employment programmes in the states of Andhra Pradesh and Gujarat forcreating entry level talent for the financial and IT services sectors. These programmeswere well received by students and HEADS plans to scale up such programmes in otherstates.

HEADS is also working towards setting up flagship K-12 schools. In order to develop theinfrastructure for the schools, the company is working on both, land ownership structuresand long-term lease arrangements.

Awards and Recognitions

During the year, the Corporation was awarded the 'Leading Housing Finance Company' byCNBC TV18 at the India Best Bank and Financial Institution Awards, 2012. The Corporationwas also adjudged the 'Best Home Loan Provider' by Outlook Money Awards, 2012. This is thesecond consecutive year that the Corporation has won this award. The Corporation wasranked amongst India's best companies to work for by Great Place to Work Institute,2012.

Subsidiary Companies

The Government of India, Ministry of Corporate Affairs vide General Circular No. 2/2011dated February 8, 2011, had granted general exemption to companies from the requirement ofattaching to their annual report, balance sheet, statement of profit and loss and thereport of the directors and auditors in respect of their subsidiary companies as requiredunder Section 212(8) of the Companies Act, 1956, subject to fulfilling certain conditions.

The Board of Directors has passed the necessary resolutions granting the requisiteapprovals for not attaching to the annual report of the Corporation, a copy of the balancesheet, statement of profit and loss, reports of the directors and auditors of thefollowing 16 subsidiary companies of the Corporation: HDFC Developers Limited, HDFCInvestments Limited, HDFC Holdings Limited, HDFC Asset Management Company Limited, HDFCTrustee Company Limited, HDFC Realty Limited, HDFC Standard Life Insurance CompanyLimited, HDFC ERGO General Insurance Company Limited, GRUH Finance Limited, HDFC SalesPrivate Limited, HDFC Ventures Trustee Company Limited, HDFC Venture Capital Limited, HDFCProperty Ventures Limited, Credila Financial Services Private Limited, HDFC Education andDevelopment Services Private Limited and H T Parekh Foundation and the following step-downsubsidiary companies: HDFC Asset Management Company (Singapore) Pte. Limited, HDFC PensionManagement Company Limited, Griha Investments, Mauritius and Griha Pte. Limited, Singapore-have not been attached to the balance sheet of the Corporation for the financial yearended March 31, 2013.

The annual report of the Corporation, the annual accounts and the related documents ofthe Corporation's subsidiary companies are posted on the website of the Corporation, www.hdfc.com. Shareholders who wish to have a copy of the annual accounts and detailedinformation on any subsidiary company can download the same from the website or may writeto the Corporation for the same. Further, the said documents shall be available forinspection by the shareholders at the registered office of the Corporation.

The Corporation has not made any loans or advances in the nature of loans to any of itssubsidiary or associate company or companies in which its directors are deemed to beinterested, other than in the ordinary course of business.

Review of Key Subsidiary and Associate Companies

HDFC Bank Limited (HDFC Bank)

HDFC and HDFC Bank continue to maintain an arm's length relationship in accordance withthe regulatory framework. Both organisations, however, capitalise on the strong synergiesthrough a system of referrals, special arrangements and cross selling in order toeffectively provide a wide range of products and services underthe HDFC brand name.

As at March 31, 2013, net advances of HDFC Bank stood at Rs 2,39,721 crores - anincrease of 23% over the previous year. Total deposits stood at Rs 2,96,247 crores - anincrease of 20%. As at March 31, 2013, HDFC Bank's distribution network includes 3,062branches and 10,743 ATMs in 1,845 cities as against 2,544 branches and 8,913 ATMs in 1,399cities as of March 31, 2012.

For the year ended March 31, 2013, HDFC Bank reported a profit after tax of Rs 6,726crores as against Rs 5,167 crores in the previous year, representing an increase of 30%.For the year ended March 31, 2013, HDFC Bank recommended a dividend of Rs 5.5 per share offace value of Rs 2 each as against Rs 4.30 per share for the previous year. During theyear the Corporation received a dividend of Rs 169 crores from HDFC Bank.

HDFC together with its wholly owned subsidiaries, HDFC Investments Limited and HDFCHoldings Limited holds 22.8% of the equity share capital of HDFC Bank.

HDFC Standard Life Insurance Company Limited (HDFC Life)

Gross premium income of HDFC Life for the year ended March 31, 2013 stood at Rs 11,323crores as compared to Rs 10,202 crores in the previous year. The sum assured in force atthe end of FY 2013 was Rs 2,01,858 crores as compared to Rs 1,38,718 crores in theprevious year, representing a growth of 46%.

The company has a portfolio of 32 retail products and 10 group products coveringsaving,investment, protection and retirement needs of the customers, alongwith 10 optional riderbenefits.

HDFC Life's distribution network includes 450 branches, covering 961 cities. Inaddition, the company has 95,000 financial consultants, 3 large bancassurance partners and10 pan-India brokers and corporate agency tie-ups. In FY 2013, HDFC Life ranked number 2,for the second consecutive year, among private sector life insurers in terms of marketshare based on the weighted received premium of individual business.

HDFC Life has reported a profit of Rs 451.48 crores for the year ended March 31, 2013as against Rs 271.02 crores in the previous year. The back book is generating sufficientprofits to offset the new business strain incurred in writing of new policies. Thesolvency ratio of the company was 217% as at March 31, 2013 as against the minimumregulatory requirement of 150%.

HDFC holds 72.4% of the equity share capital in HDFC Life.

HDFC Asset Management Company Limited (HDFC-AMC)

HDFC and Standard Life Investment Limited are the co-sponsors of HDFC Mutual Fund.

As at March 31, 2013, HDFC-AMC managed 42 debt, equity, exchange traded fund and fundof fund schemes of HDFC Mutual Fund. The average assets under management during the monthof March 2013 stood at Rs 1,02,142 crores (which is inclusive of average assets underdiscretionary portfolio management/ advisory services). HDFC Mutual Fund has been rankedfirst in the industry on the basis of Average Assets under Management. The number ofinvestor accounts stood at 49 lacs as at March 31, 2013. HDFC-AMC has over 130 investorservice centres across the country.

For the year ended March 31, 2013, HDFC-AMC reported a profit after tax of Rs 318.75crores as against Rs 269.14 crores in the previous year.

HDFC holds 59.8% of the equity share capital of HDFC-AMC.

HDFC ERGO General Insurance Company Limited (HDFC ERGO)

During the year, HDFC ERGO continued to retain its market ranking as the fourth largestprivate sector player in the general insurance industry. Further, the company continued tobe the largest player in the personal accident line of business.

The company offers a complete range of insurance products like motor, health, travel,home and personal accident in the retail segment and customised products like property,marine, aviation and liability insurance in the corporate segment. The company continuesto leverage on the HDFC group's distribution capability to drive its growth and on thetechnical capability of ERGO in the field of general insurance. The company has a balancedportfolio mix with the retail segmentaccountingfor 58% of the business.

The gross direct premium of the company increased by 33% to Rs 2,491 crores as againstRs 1,874 crores in the previous year. During the year, the company achieved a profitbefore tax of Rs 248.3 crores as against Rs 141.9 crores in the previous year beforeconsidering the losses from the Indian Motor Third Party Insurance Pool (IMTPIP) and theIndian Motor Third Party Declined Risk Insurance Pool (IMTDRIP). The losses from IMTPIPand IMTDRIP were Rs 66.4 crores (previous year Rs 181.6 crores). Thus the profit beforetax including the pool losses amounted to Rs 181.9 crores (previous year loss of Rs 39.7crores). The overall profit after tax for the year stood at Rs 154.5 crores as against aloss of Rs 39.7 crores in the previous year.

The combined ratio stood at 91.6% and the solvency ratio of the company was 161% as atMarch 31, 2013 as against the minimum regulatory requirement of 140%.

HDFC holds 73.9% of the equity share capital of HDFC ERGO.

HDFC Property Funds

HDFCVenture Capital Limited (HVCL) is the investment manager to HDFC Property Fund, aregistered venture capital fund with the Securities and Exchange Board of India (SEBI).

HDFC Property Fund currently has two schemes. The first scheme is HDFC India RealEstate Fund (HI-REF), with a corpus of Rs 1,000 crores, which has been fully invested andhas made several profitable exits. The term of the scheme was to have ended on June 17,2012, however, the scheme has been extended by a period of one year. As at March 31, 2013,the balance corpus stood at Rs 379 crores and exits are being made for the balanceinvestments of the scheme.

The second scheme, HDFC IT Corridor Fund has a corpus of Rs 464.40 crores. This schemehas invested the entire corpus in rental income yielding commercial properties spreadacross four major cities in India. The term of this scheme was to have ended on June 28,2012, however, it has been extended by a period of one year. As at March 31, 2013, thebalance corpus stood at Rs 409.26 crores and exits are being explored for investments ofthe scheme.

HDFC holds 80.5% of the equity share capital of HVCL.

HDFC Property Ventures Limited (HPVL) provides investment advisory services to Indianand overseas asset management companies (AMCs). Such AMCs in turn manage and advise Indianand offshore private equity funds. During the year, HPVL made a profit after tax of Rs3.05 crores.

HDFC holds 100% of the equityshare capital of HPVL.

GRUH Finance Limited (GRUH)

GRUH is a housing finance company with a retail network of 134 offices spread across 7states. During the year, GRUH disbursed loans amounting to Rs 2,174 crores as compared toRs 1,487 crores in the previous year - an increase of 46%. As at March 31, 2013, the loanportfolio stood at Rs 5,438 crores, recording a growth of 34% over the previous year. Theaverage size of loans stood at Rs 7.36 lacs.

For the year ended March 31, 2013,

GRUH reported a profit after tax of Rs 145.88 crores as compared to Rs 120.34 crores inthe previous year - an increase of 21%.

HDFC's holding in GRUH currently stands at 59.7%.

HDFC Sales Private Limited (HSPL)

HDFC Sales Private Limited (HSPL) continues to strengthen the Corporation's marketingand sales efforts by providinga dedicated sales force to sell home loans and otherfinancial products.

HSPL has a presence in 81 locations. During the year under review, HSPL sourced loansaccounting for 46% of individual loans disbursed by HDFC.

HSPL is a wholly owned subsidiary of HDFC.

Credila Financial Services Private Limited (Credila)

Credila is India's first dedicated education loan company, providing loans to studentspursuing higher education in India and abroad. As on March 31, 2013, Credila hadcumulatively disbursed Rs 892 crores to 10,700 customers. The average loan amountdisbursed is Rs 8.3 lacs.

In addition to having its own offices and sourcing applications through the web,Credila capitalises on HDFC's distribution network to source and market education loans.

The Reserve Bank of India has categorised education loans as 'priority sector' lending.Credila's borrowers are entitled to income tax exemption under Section 80E of the IncomeTax Act, 1961.

HDFC holds 89.1% of the share holding in Credila on a fully diluted basis.

Particulars of Employees

HDFC had 1,833 employees as of March 31, 2013. During the year, 13 employees employedthroughout the year were in receipt of remuneration of Rs 60 lacs or more per annum.

In accordance with the provisions of Section 217(2A) of the Companies Act, 1956 and therules framed there under, the names and other particulars of employees are set out in theannexto the Directors' Report. In terms of the provisions of Section 219(l)(b)(iv) of theCompanies Act, 1956, the Directors' Report is being sent to all the shareholders of theCorporation excluding the annex. Any shareholder interested in obtaininga copy of the saidannex may write to the Corporation.

Employees Stock Option Scheme (ESOS)

Presently, stock options granted to the employees operate under the following schemes:ES0S-05, ESOS-07, ESOS-08 and ESOS-11. There has been no variation in the terms of theoptions granted under any of these schemes.

ESOS-05, ESOS-07 and ESOS-08 (Schemes)

No fresh options were either granted or vested under these Schemes. During the year, anaggregate of 29,38,799 options of Rs 10 each were exercised. Pursuant thereto theCorporation received Rs 551.97 crores as exercise consideration (excluding tax), of whichRs 2.94 crores was towards share capital and Rs 549.03 crorestowards securities premium.In all 1,46,93,995 equity shares of Rs 2 each were allotted to the concerned employees. Inaccordance with the provisions of ESOS-05, the last date for exercise of the options wasOctober 24, 2012.

During the year, 12,922 options lapsed, while options in force as on March 31, 2013stood at 34,27,390.


At the 34th annual general meeting held on July 8, 2011, you had approved the issue of58,67,546 stock options representing 2,93,37,730 equity shares of Rs 2 each to theemployees and directors of the Corporation. The Nomination & Compensation Committee ofthe Corporation at its meeting held on May 23, 2012, granted the said options togetherwith options lapsed under previous schemes (aggregating 2,34,929 options). In theaggregate, 61,02,475 stock options of Rs 10 each were granted representing 3,05,12,375equity shares of Rs 2 each at an exercise price of Rs 635.50 per equity share underESOS-11.

The said price was determined in accordance with the pricing formula approved by youi.e. at the latest available closing price of the equity share of the Corporation on theNSE, prior to the meeting of the Nomination & Compensation Committee at which theoptions were granted. The options granted will vest over a period of 1 to 3 years from thedate of grant, depending upon the option grantee completing a continuous service of threeyears with the Corporation. The options are exercisable over a period of five years fromthe date of respective vesting. None of the options granted have vested during the year(and consequently, no options have been exercised). As at March 31, 2013, 31,200 optionshave lapsed and 60,71,275 options are in force. Under ESOS-11, 20,86,000 options have beengranted to 83 senior management employees, in the grades of deputy general manager andabove up to and including the Managing Director and the Vice Chairman & ChiefExecutive Officer. The minimum number of options granted to any of these employees was6,000.

No employee was granted options equal to or in excess of 1% of the total issued andpaid-up share capital of the Corporation as on the date of grant.

Fair value

Since options were granted at the market price, the intrinsic value of the option isnil. Consequently, the accounting value of the option (compensation cost) was also nil.However, if the fair value of the options using the Black-Scholes model was used,considering the assumptions made at the time of the grant, the compensation cost (net)would have been higher and the profit after tax would have been lesser by Rs 157.93 croresand the basicand diluted Earnings PerShare (EPS) would have been Rs 30.80 and Rs 30.42respectively.

The key assumptions used in Black-Scholes model for calculating the fair value underESOS-11, as on the date of grant, are (a) risk-free interest rate: 8.06% (b) expectedlife: up to 2 years (c) expected volatility of share price: 15% and (d) expected growth individend: 20%. The market price of the equity share on the date of grant ranged from Rs629.10 to Rs 643.45.

All the options were granted at an exercise price of Rs 635.50 per share and hence theweighted average exercise price is Rs 635.50 per share. The weighted average fair value ofthe option granted under ESOS-11 (using the Black-Scholes model) works out to Rs 474.56per option of the face value Rs 10 i.e. Rs 94.91 per share of the face value of Rs 2 each.

The diluted EPS is Rs 31.45 as against a basic EPS of Rs 31.84.

Unclaimed Dividend

As at March 31, 2013, dividend amounting to Rs 11.61 crores had not been claimed byshareholders of the Corporation. The Corporation has been periodically intimating theconcerned shareholders requesting them to encash their dividend before it becomes due fortransfer to the IEPF. The Corporation continues to take various initiatives to reduce thequantum of unclaimed dividend.

As per the provisions of Section 205C of the Companies Act, 1956, unclaimed dividendamounting to Rs 52.39 lacs for FY 2004-05 was transferred to the IEPF on September 7,2012. Further, the unclaimed dividend in respect of FY 2005-06 must be claimed byshareholders by August 24, 2013, failing which it will be transferred to the IEPF within aperiod of 30 days from the said date. In terms of said section, no claim would lie againstthe Corporation or the IEPF after the transfer.

In terms of the IEPF (Uploading of information regarding unpaid and unclaimed amountslying with companies) Rules, 2012, which was notified on May 10, 2012, the Corporation hasmade the relevant disclosures to the Ministry of Corporate Affairs (MCA) regardingunclaimed dividends and unclaimed matured deposits, along with interest accrued thereon.The Corporation has uploaded the prescribed information on www.iepf.gov.in and www.hdfc.com.

Unclaimed Shares

Details on unclaimed shares is provided in the section on 'Shareholders' Information'in the annual report.

Particulars Regarding Conservation of Energy, Technology Absorption and ForeignExchange Earnings and Outgo The particulars regarding foreign exchange earnings andexpenditure appear as Item Nos. 25.1 and 26.3 in the Notes to the Accounts. Since HDFCdoes not own any manufacturing facility, the other particulars relating to conservation ofenergy and technology absorption as stipulated in the Companies (Disclosure of Particularsin the Report of the Board of Directors) Rules, 1988, are not applicable.


In accordance with the provisions of the Companies Act, 1956 and the Articles ofAssociation of the Corporation, Mr. Deepak S. Parekh, Mr. Keshub Mahindra, Mr. D. M.Sukthankar and Mr. Nasser Munjee are liable to retire by rotation at the ensuing AGM. Theyare eligible for re-appointment.

Necessary resolutions for the re-appointment of the aforesaid directors have beenincluded in the notice convening the ensuing AGM.

All the directors of the Corporation have confirmed that they are not disqualified frombeing appointed as directors in terms of Section 274(1) (g) of the Companies Act, 1956.

Dr. S. A. Dave is the Corporation's nominee director on the board of HDFC Life. This isin accordance with Clause 49 of the listing agreements, which requires the Corporation tonominate at least one of its independent directors on the board of HDFC Life, which is amaterial unlisted Indian subsidiary company of the Corporation.


Messrs Deloitte Haskins & Sells, Chartered Accountants, having registration number117366W, statutory auditors of the Corporation and branch auditors to audit the accountsat the Corporation's branches in India and offices in London and Singapore hold officeuntil the conclusion of the ensuing AGM and are eligible for appointment.

The Corporation has received a confirmation from Messrs Deloitte Haskins & Sells tothe effect that their appointment, if made, would be within the limits prescribed underSection 224(1B) of the Companies Act, 1956.

Messrs PKF, Chartered Accountants, having registration number 10 issued by the Ministryof Economy, U.A.E. was appointed as the branch auditors to audit the accounts of theCorporation's branch office in Dubai. Their term expires at the end of the ensuing AGM andthey are eligible for appointment.

Directors' Responsibility Statement

In accordance with the provisions of Section 217(2AA) of the Companies Act, 1956 andbased on the information provided by the management, your directors state that:

i. In the preparation of annual accounts, the applicable accounting standards have beenfollowed;

ii. Accounting policies selected were applied consistently. Reasonable and prudentjudgements and estimates were made so as to give a true and fair view of the state ofaffairs of the Corporation as at the end of March 31, 2013 and of the profit of theCorporation for the year ended on that date;

iii. Proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act, 1956 forsafeguarding the assets of the Corporation and for preventing and detecting frauds andother irregularities;

iv. The annual accounts of the Corporation have been prepared on a going concern basis.

Management Discussion and Analysis Report, Report of the Directors on CorporateGovernance and Business Responsibility Report

In accordance with Clause 49 of the listingagreements, the Management Discussion andAnalysis Report and the Report of the Directors on Corporate Governance form part of thisreport.

SEBI vide Circular No. CIR/CFD/

DIL/8/2012 dated August 13, 2012, has mandated the inclusion of a BusinessResponsibility Report(BRR) as part of the Annual Report for the top 100 listed companiesbased on their market capitalisation on the BSE Limited and National Stock Exchange ofIndia Limited as at March 31, 2012. Accordingly, your Corporation has prepared a BRR andthe same has been uploaded on its website. Members who wish to receive a physical copy ofthe BRR are requested to write to the Corporation.


The Corporation would like to acknowledge the role of all itsstakeholders-shareholders, borrowers, channel partners, depositors, key partners andlenders for their continued support to the Corporation.

The directors appreciate the guidance received from various regulatory authoritiesincluding NHB, RBI, SEBI, MCA, Registrar of Companies, Financial Intelligence Unit(India), Foreign Investment Promotion Board, the Stock Exchanges and the Depositories.

Your directors value the professionalism of all the employees of the Corporation whohave relentlessly worked in challenging environments and whose efforts have stood theCorporation in good stead.

On behalf of the Board of Directors
May 8, 2013 Chairman

Peer Comparison

Company Market Cap
(Rs. in Cr.)
H D F C 137,334.67 26.04 5.49 13.70 22.0 11.8 6.77
LIC Housing Fin. 13,597.79 10.77 2.10 10.69 16.8 10.6 10.26
GRUH Finance 5,968.65 35.86 9.83 13.40 33.3 12.4 9.97
Dewan Housing 2,886.24 4.94 0.89 8.72 17.2 13.1 9.71
Repco Home Fin 2,340.32 22.02 3.69 0.00 17.1 11.4 5.92
GIC Housing Fin 641.62 7.19 1.17 9.06 16.2 10.9 7.22
Can Fin Homes 482.85 6.79 1.23 10.61 14.6 10.8 7.89
India Home 55.58 89.12 5.20 148.49 2.9 3.7 0.04
SRG Housing 37.77 59.18 3.02 15.72 7.4 10.6 0.62
Sahara Housing 31.61 13.40 1.08 9.77 7.1 9.4 4.85
Coral India Fin. 28.44 3.26 0.50 0.65 30.4 36.6 0.00
SBI Home Finance 23.03 0.00 -0.07 0.00 0.0 0.0 0.00
Intl. Housg.Fin. 11.96 0.00 0.68 0.00 0.0 0.0 0.00
Manraj Hsg.Fin. 8.00 12.90 0.89 7.84 8.0 13.6 0.63
Ind Bank Housing 6.00 0.00 -0.07 0.00 0.0 0.0 0.00

Futures & Options Quote

Expiry Date
882.95 9.15  (1.1%)
Instrument: FUTSTK
Expiry Date: 24 Apr 2014
Open Price: 875.00
Average Price: 877.77
No. of Contracts Traded: 3,894,500
Open Interest: 5,358,000
Underlying: HDFC
Market Lot: 500
Previous Close: 882.95
Day’s High | Low: 884.80 | 867.60
Turnover (Cr.): 341.85
Open Int. Change: 205,000.00 (4.0% )
View detailed F& O quotes >>

Key Information

Key Executives:

Deepak S Parekh , Chairman  

B S Mehta , Director  

D M Sukthankar , Director  

D N Ghosh , Director  

Company Head Office / Quarters:
Ramon House H T Parekh Marg,
169 Backbay Reclamation,
Phone : 91-22-22836255/22820282
Fax : 91-22-22046758/22046834
E-mail : investorcare@hdfc.com
Web : http://www.hdfc.com
H D F C Ltd
Tel Rasayan Bhavan
Tilak Road Extention
Khodadad Circ. Dadar
Mumbai - 400 014

Fund Holding


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