TO THE MEMBERS
Your directors are pleased to present the Thirty-eighth annual report of your
Corporation with the audited accounts for the year ended March 31, 2015.
||For the year ended March 31, 2015
||For the year ended March 31, 2014
||(Rs. in crore)
||(Rs. in crore)
|Profit before Tax
|Tax Expense (net of Deferred Tax Liability (DTL) on Special Reserve)
|Profit after Tax but before DTL on Special Reserve
|DTL on Special Reserve
|Profit after Tax
|Appropriations have been made as under:
|Special Reserve No. II
|Statutory Reserve (under Section 29C of the National Housing Bank Act, 1987)
|Shelter Assistance Reserve
|Interim and Proposed Dividend (Rs. 15 per equity share of Rs. 2 each)
|Additional Tax on Interim and Proposed
|Dividend net of previous year adjustments
In March 2015, your directors declared and paid an interim dividend of Rs. 2 per equity
share of Rs. 2 each.
Your directors recommend payment of final dividend for the financial year ended March
31, 2015 of Rs. 13 per equity share of Rs. 2 each.
The total dividend for the year is Rs. 15 per equity share as against Rs. 14 per equity
share for the previous year. The dividend payout ratio for year ended March 31, 2015 will
be 47%, which was the same as in the previous year.
The demand for individual home loans remained healthy during the year, with growth
predominantly coming from Tier 1, Tier 2 and Tier 3 cities. Improved affordability due to
rising incomes and continued fiscal benefits available on home loans have encouraged more
people to avail of home loans.
The Corporation remains committed towards offering a bouquet of home loan products so
as to ensure that it addresses a wide spectrum of customers.
The Corporation has made a concerted effort to grow its rural housing portfolio. It has
developed requisite skills to assess agricultural income and has built robust legal and
technical appraisal mechanisms to cater to the rural housing finance market.
Addressing housing needs of those from the unorganised sector is another segment that
the Corporation has ventured into with the launch of HDFC Reach. Different
credit assessment and appraisal techniques are needed to cater to the self-employed and
employed customers from the unorganised sector.
Individual loan disbursements grew by 16% during the year. The average size of
individual loans stood at Rs. 23.3 lac as against Rs. 22.1 lac in the previous year.
As at March 31, 2015, the loan book stood at Rs. 2,28,181 crore as against Rs. 1,97,100
crore in the previous year. Loans sold during the preceding twelve months amounted to Rs.
8,249 crore. The growth in the individual loan book, after adding back loans sold was 23%
(17% net of loans sold). The non-individual loan book grew at 14%. The growth in the total
loan book after adding back loans sold was 20% (16% net of loans sold).
Of the total loan book, individual loans comprise 71%. Further, 78% of the incremental
growth in the loan book during the year came from individual loans.
Sale of Loans
During the year, the Corporation, under the loan assignment route sold individual loans
amounting to Rs. 8,249 crore to HDFC Bank pursuant to the buyback option embedded in the
home loan arrangement between the Corporation and HDFC Bank.
As at March 31, 2015, total loans outstanding in respect of loans sold/ assigned stood
at Rs. 25,152 crore. HDFC continues to service loans and is entitled to the residual
interest on the loans sold. The residual interest on the outstanding individual loans
sold/assigned is 1.25% per annum. The residual income on the loans sold/assigned is being
recognised over the life of the underlying loans and not on an upfront basis.
Loan pools which were rated by external rating agencies carry a rating indicating the
highest degree of safety.
During the year under review, Rs. 66,422 crore was received by way of scheduled
repayment of principal through monthly instalments as well as redemptions ahead of
schedule, as compared to Rs. 58,410 crore received last year.
During the year, the Corporation raised Rs. 3,000 crore through the issue of long-term
unsecured redeemable non-convertible subordinated debentures. The subordinated debt was
assigned the highest rating of CRISIL AAA/Stable and ICRA
AAA/Stable by CRISIL and ICRA respectively.
As at March 31, 2015, the Corporations outstanding subordinated debt stood at Rs.
6,475 crore. The debt is subordinated to present and future senior indebtedness of the
Corporation and has been assigned the highest rating by CRISIL and ICRA respectively.
Based on the balance term to maturity, as at March 31, 2015, Rs. 5,495 crore of the book
value of subordinated debt was considered as Tier II under the guidelines issued by the
National Housing Bank (NHB) for the purpose of capital adequacy computation.
Non-Convertible Debentures (NCD)
During the year, the Corporation issued NCD amounting to Rs. 26,170 crore on a private
placement basis. The Corporations NCD issues have been listed on the Wholesale Debt
Market segment of the National Stock Exchange of India Limited and the BSE Limited. The
NCD issues have been assigned the highest rating of CRISIL AAA/Stable and
ICRA AAA/ Stable. As at March 31, 2015, NCD outstanding stood at Rs. 84,183
The Corporation has been regular in making payments of principal and interest on the
NCD. The Corporation is in compliance with the provisions of the Housing Finance Companies
Issuance of Non-Convertible Debentures on Private Placement (NHB) Directions, 2014.
Term Loans from Banks, Institutions and Refinance from the National Housing Bank (NHB)
As at March 31, 2015, the total loans outstanding from banks, institutions and NHB
amounted to Rs. 26,194 crore as compared to Rs. 32,952 crore as at March 31, 2014.
HDFCs long-term and short-term bank loan facilities have been assigned the
highest rating of CARE AAA and CARE A1+ respectively by CARE
Ratings, signifying highest safety for timely servicing of debt obligations. During the
year, the Corporation has drawn NHB refinance amounting to Rs. 529 crore under the Golden
Jubilee Rural Housing Refinance Scheme and Urban Housing Fund.
Total deposits outstanding increased from Rs. 56,578 crore at the beginning of the
financial year to Rs. 66,088 crore as at March 31, 2015. The number of deposit accounts
grew from 17.5 lac to 18.1 lac.
CRISIL, a subsidiary of Standard & Poors Rating Services and ICRA, an
associate of Moodys Investors Service have for the twentieth consecutive year,
reaffirmed a rating of CRISIL FAAA/Stable and ICRA MAAA/Stable
respectively for HDFCs deposits.
These ratings represent the highest degree of safety regarding timely servicing of
financial obligations and carries the lowest credit risk.
The support of the agents and their commitment to the Corporation has been instrumental
in HDFCs deposit products continuing to be a preferred investment for households and
There has been no default in repayment of deposits or payment of interest during the
year. All the deposits accepted by the Corporation are in compliance with the requirements
of Chapter V of the Companies Act, 2013.
As of March 31, 2015, public deposits amounting to Rs. 609 crore had not been claimed
by 50,352 depositors. Since then, 12,868 depositors have claimed or renewed deposits of
Rs. 219 crore. Depositors were intimated regarding the maturity of deposits with a request
to either renew or claim their deposits. Where the deposit remains unclaimed, reminder
letters are sent to depositors periodically and follow up action is initiated through the
concerned agent or branch.
Deposits remaining unclaimed for a period of seven years from the date they became due
for payment have to be transferred to the Investor Education and Protection Fund (IEPF)
established by the central government. Accordingly, during the year, an amount of Rs. 1.43
crore has been transferred to the IEPF.
Gross non-performing loans as at March 31, 2015 amounted to Rs. 1,542 crore. This is
equivalent to 0.67% of the loan portfolio (as against 0.69% in the previous year). The
non-performing loans of the individual portfolio stood at 0.51% while that of the
non-individual portfolio stood at 1.01%.
As per NHB norms, the Corporation is required to carry a total provision of Rs. 1,703
The balance in the provision for contingencies account as at March 31, 2015 stood at
Rs. 2,034 crore of which Rs. 481 crore is on account of non-performing loans and the
balance Rs. 1,553 crore is in respect of general provisioning and other provisions. This
balance in the provision for contingencies is equivalent to 0.89% of the loan portfolio.
The Corporation carries an additional provision of Rs. 331 crore over the regulatory
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (SARFAESI) has proved to be a useful recovery tool and the Corporation
has been able to successfully initiate recovery action under this Act.
Regulatory Guidelines /Amendments
The Corporation has complied with the Housing Finance Companies (NHB) Directions, 2010
prescribed by NHB regarding accounting standards, prudential norms for asset
classification, income recognition, provisioning, capital adequacy, credit rating,
concentration of investments and capital market exposure norms.
The Corporation creates Special Reserve through appropriation of profits in order to
avail tax deduction under Section 36 (1)(viii) of the Income Tax Act, 1961. NHB vide its
circular dated May 27, 2014, directed HFCs to create Deferred Tax Liability (DTL) on
Special Reserve as a matter of prudence. Further, vide circular dated August 22, 2014, NHB
permitted HFCs to create DTL in respect of Special Reserve outstanding as at March 31,
2014 by adjusting the same directly from the reserves over a period of three years,
starting from the financial year under review, in a phased manner, in the ratio of
25:25:50. DTL for amounts transferred to Special Reserve from the year ended March 31,
2015 onwards is to be charged to the Statement of Profit and Loss of that year.
The Corporations capital adequacy ratio (CAR) after reducing the investment in
HDFC Bank from Tier I capital stood at 16.1%. Of this, Tier I capital was 12.5% and Tier
II capital was 3.6%.
The CAR without reducing the investment in HDFC Bank from Tier I capital, while
treating it as a 100% risk weight stood at 18.5%, of which Tier I capital was 15% and Tier
II capital was 3.5%. As per the regulatory norms, the minimum requirement for the capital
adequacy ratio and Tier I capital is 12% and 6% respectively.
Codes and Standards
The Corporation has adopted various codes and standards set out by NHB including inter
alia Know Your Customer (KYC) Guidelines, Anti Money Laundering Standards, Fair
Practices Code, Model Code of Conduct for Direct Selling Agents, Guidelines for Recovery
Agents engaged by HFCs and Most Important Terms and Conditions of housing loans.
The Corporation has mechanisms in place to review and monitor adherence to these codes
and standards and ensure reporting and compliances as required.
Marketing and Distribution
During the year, efforts were concentrated on further strengthening the distribution
network. The Corporations distribution network now spans 378 outlets, which includes
103 offices of HDFCs wholly owned distribution company, HDFC Sales Private Limited
To further augment the network, HDFC covers additional locations through its outreach
programmes. HDFC has overseas offices in London, Singapore and Dubai. The Dubai office
reaches out to its customers across Middle East through its service associates based in
Kuwait, Qatar, Oman, Abu Dhabi and Saudi Arabia.
The Corporations distribution channels which include HSPL, HDFC Bank and third
party direct selling associates (DSAs) play an important role in sourcing home loans. In
value terms, HSPL, HDFC Bank and third party DSAs sourced 49%, 24% and 18% of home loans
disbursed respectively during the year.
The Corporation has distribution tie-ups with banks such as IndusInd Bank, RBL Bank and
Lakshmi Vilas Bank as well as with Sundaram Finance Limited, IIFL Limited and
Cholamandalam Distribution Services Limited. All distribution channels only source loans,
while the control over the credit, legal and technical appraisal continues to rest with
HDFC, thereby ensuring that the quality of loans disbursed is not compromised in any way
and is consistent across all distribution channels.
In order to reach out and connect more effectively with customers, the Corporation
embarked on a number of digital initiatives including a revamped website, development of a
mobile application, introduction of a live chat with non-resident Indian
customers as well as building a stronger presence on various social media platforms. The
Corporation organised an online property fair to enable customers to identify and select
Property fairs across major cities in India were organised. To cater to the Indian
diaspora, India Homes fairs were held in London, Singapore and Muscat where
developers were invited by HDFC to show case their properties.
Value Added Services and Cross Selling
HDFCs subsidiary companies have strong synergies with HDFC. This enables the
Corporation to provide property related value added services and cross sell products and
services under the HDFC brand.
HDFC Realty Limited, a property advisory company, has a presence in 23 locations across
India and helps individuals and corporate institutions to buy, sell or lease real estate.
HDFCRED.com, an on-line real estate search engine assists potential home buyers in
identifying properties and provides leads for potential home loan customers.
HDFC and HSPL are Composite Corporate Agents for HDFC Standard Life Insurance Company
Limited (HDFC Life) and HDFC ERGO General Insurance Company Limited (HDFC ERGO).
International Housing Finance Initiatives
HDFCs expertise in housing finance is well regarded and therefore a number of
existing and new housing finance companies are keen to tap the Corporation for training
and technical assistance in housing finance.
The Frankfurt School of Finance & Management and HDFC jointly organised the seventh
Housing Finance Summer Academy in Germany, which is a course that aims
solutionsto provide housing finance for emerging markets through a combination of academic
knowledge and practical experience.
The Corporation remains committed to sharing its expertise in countries which have
nascent mortgage markets. The Corporation continues to lend its support to housing finance
players in Bangladesh, Sri Lanka, Maldives and Indonesia. Currently, the Corporation is in
the process of setting up a greenfield housing finance company in Tanzania, along with
International Finance Corporation (IFC) and three local based investors.
With a perspective of developing the capital markets to facilitate access to long-term
funding for housing finance, the Corporation participated in the first international
conference on capital markets in East Africa. The conference was held in Rwanda and was
co-hosted by the Rwanda government and IFC.
Corporate Social Responsibility
In accordance with the provisions of Section 135 of the Companies Act, 2013 and rules
framed there under, the Corporation has a Corporate Social Responsibility (CSR) Committee
of Directors comprising Mr. Deepak S. Parekh (Chairman), Mr. D. N. Ghosh (independent
director) and the whole-time directors.
The role of the committee is to review the CSR policy, indicate activities to be
undertaken by the Corporation towards CSR and formulate a transparent monitoring mechanism
to ensure implementation of projects and activities undertaken by the Corporation towards
The Corporation contributed directly and through H T Parekh Foundation to identified
social sectors such as education, health and sanitation, community development, child
welfare and livelihood and supporting differently abled persons.
During the year, the Corporation supported educational initiatives such as primary and
secondary school education (rural and urban), girl child education, scholarships,
alternate educational programmes, special education and teacher training and vocational
skills training for underprivileged children. In the healthcare sector, the Corporation
has been a strong supporter of institutions that work towards the prevention, treatment,
rehabilitation and palliation for cancer patients and also for community based hospitals
serving the rural population. Recognising health related risks attached to poor
sanitation, the Corporation associated with organisations focusing on urban slum
The Corporation supports initiatives towards the health, safety, nutrition and
development of orphaned and underprivileged children.
Additionally, assistance was provided to institutions educating children with physical
and mental disabilities to improve their livelihood. The Corporation also supported
organisations promoting environmental preservation and Indian athletes competing at an
Further details on the prescribed CSR spend under Section 135 of the Companies Act,
2013 and the amount committed and disbursed during the year under review are provided in
the Annual Report on CSR activities annexed to this report.
Human Resource Development
The Corporation recognises that training and continuous upgradation of skill sets are
essential to ensure a high calibre workforce. During the year, new recruits participated
in an induction programme at the Centre for Housing Finance, which is the
Corporations training centre in Lonavla. Other in-house training programmes were
conducted on subjects like Know Your Customer, Credit Fraud Risk and Mitigation,
Disbursement Processes, Rural Housing and Appraisal Techniques for Customers from the
Unorganised Sector. Training was also imparted in specialised fields of legal and credit
risk management. Staff members were nominated for a variety of external training
programmes in India and overseas.
Awards and Recognitions
During the year, some of the awards received by the Corporation included:
The Dun & Bradstreet- Corporate Awards, 2014 in the FIs / NBFCs / Financial
Best Home Loan by CNBC Awaaz Real Estate Awards, 2014;
Best Loan Finance Bank and Best Overall Bank for Real Estate in India at the
Euromoney Real Estate Awards, 2014.
The Board of Directors of the Corporation was selected as one of the Five Best
Boards for the second consecutive year in a study conducted by The Economic Times
and Hay Group on Indias Best Boards 2014.
In accordance with the provisions of Section 136 of the Companies Act, 2013, the annual
report of the Corporation, the annual financial statements and the related documents of
the Corporations subsidiary companies are placed on the website of the Corporation,
Shareholders may download the annual financial statements and detailed information on
subsidiary companies from the Corporations website or may write to the Corporation
for the same. Further, the documents shall be available for inspection by the shareholders
at the registered office of the Corporation.
During the year under review, Magnum Foundations Private Limited was acquired as an
associate by a subsidiary of the Corporation. There were no new subsidiary or joint
venture companies incorporated during the year. H T Parekh Foundation ceased to be a
subsidiary of the Corporation during the year.
The Corporation has not made any loans or advances in the nature of loans to any of its
subsidiary or associate company or companies in which its directors are deemed to be
interested, 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 arms length relationship in accordance
with the regulatory framework. Both organisations, however, capitalise on the strong
synergies through a system of referrals, special arrangements and cross selling in order
to effectively provide a wide range of products and services under the HDFC
As at March 31, 2015, advances of HDFC Bank stood at Rs. 365,495 crore an increase of
21% over the previous year. Total deposits stood at Rs. 450,796 crore an increase
of 23%. As at March 31, 2015, HDFC Banks distribution network includes 4,014
branches and 11,766 ATMs in 2,464 locations.
For the year ended March 31, 2015, HDFC Bank reported a profit tax of Rs. 10,216 crore
as against Rs. 8,478 crore in the previous year, representing an increase of 21%.
HDFC Bank has recommended a dividend of Rs. 8 per share of Rs. 2 each as against Rs.
6.85 per share for the previous year. HDFC together with its wholly owned subsidiaries,
HDFC Investments Limited and HDFC Holdings Limited holds 21.7% 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, 2015 stood at Rs. 14,830
crore as compared to Rs. 12,063 crore in the previous year. The sum assured in force at
the end of FY 2015 was Rs. 3,66,755 crore as compared to Rs. 2,72,697 crore in the
previous year, representing a growth of 34%.
The Company has a portfolio of 24 retail products and 7 group products covering saving,
investment, protection and retirement needs of its customers, along with 9 optional rider
HDFC Lifes distribution network includes 414 branches, covering 1,000 locations
and a liaison office in Dubai. In addition, the company has 86,000 financial consultants,
4 bancassurance partners and 9 pan-India brokers and corporate agency tie-ups. In FY 2015,
HDFC Life ranked third among private sector life insurers in terms of market share based
on the weighted received premium of individual business.
During the year, the Corporation sold 0.95% of the total issued and paid-up share
capital of HDFC Life to Azim Premji Trust.
HDFC Life has reported a profit after tax of Rs. 786 crore for the year ended March 31,
2015 as against Rs. 725 crore in the previous year. The back book is generating sufficient
profits to offset the new business strain incurred in writing of new policies.
The new business margin for individual business stood at 22.5% (based on loaded
acquisition expenses). The post overrun margins (after considering the impact of the
acquisition overrun) was 17.5% (PY 16.1%). At the company level, the post overrun margin
was 18.5% for the year ended March 31, 2015.
As at March 31, 2015, the Market Consistent Embedded Value stood at Rs. 8,805 crore
(previous year Rs. 6,992 crore).
During the year, HDFC Life paid an interim dividend of Rs. 0.70 per equity share of Rs.
10 each. The solvency ratio of the company was 196% as at March 31, 2015 as against the
minimum regulatory requirement of 150%.
HDFC holds 70.7% of the equity share capital in HDFC Life.
HDFC Asset Management Company Limited (HDFC-AMC)
As at March 31, 2015, HDFC-AMC managed 55 debt, equity, gold exchange traded fund and
fund of fund schemes of HDFC Mutual Fund. The average assets under management for the
month of March 2015 stood at Rs. 1,67,161 crore (which is inclusive of average assets
under discretionary portfolio management/ advisory services). HDFC Mutual Fund has been
ranked first in the industry on the basis of quarterly average assets under management for
the year ended March 31, 2015.
The number of investor accounts was in excess of 52 lac as at March 31, 2015. HDFC-AMC
has 141 investor service centres across the country.
For the year ended March 31, 2015, HDFC-AMC reported a profit of Rs. 416 crore as
against Rs. 358 crore in the previous year. HDFC holds 59.8% of the equity share capital
HDFC ERGO General Insurance Company Limited (HDFC ERGO)
HDFC ERGO continued to retain its market ranking as the fourth largest private sector
player in the general insurance industry. Further, the company continued to be 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 continues
to leverage on the HDFC groups distribution capability to drive its growth and on
the technical capability of ERGO in the field Company has a balanced portfolio mix with
the retail segment accounting for 59% of the business.
The gross written premium (excluding motor and declined risk pool) of the Company
increased by 9% to Rs. 3,256 crore as against Rs. 2,978 crore in the previous year.
The profit before tax of the Company for the year stood at Rs. 141 crore as against Rs.
224 crore in the previous year. Lower profits during the year under review was mainly on
account of the impact of natural catastrophes such as the Jammu & Kashmir floods,
Cyclone Hudhud and Cyclone Phailin and due to a change in the depreciation policy,
aligning it with the Companies Act, 2013. For the year ended March 31, 2015, the profit
after tax stood at Rs. 104 crore. aftertax
During the year, HDFC ERGO paid an interim dividend of Rs. 0.75 per equity share of Rs.
10 each as against Rs. 0.50 per equity share in the previous year. The combined ratio as
at March 31, 2015 stood at 108.6% (after motor and declined risk pool losses). The
solvency ratio of the company was 165% as at March 31, 2015 as against the minimum
regulatory requirement of 150%.
HDFC holds 73.6% of the equity share capital of HDFC ERGO.
HDFC Property Funds
HDFC Venture Capital Limited (HVCL) is the investment manager to HDFC Property Fund, a
registered venture capital fund with the Securities and Exchange Board of India (SEBI).
HDFC Property Fund has two schemes -- the first scheme is HDFC India Real Estate Fund
(HI-REF), which had an initial corpus of Rs. 1,000 crore. HI-REF has, as on date
distributed of general insurance. The the entire investment corpus and also profits to its
investors. HI-REF is in the midst of concluding final the balance portfolio. The second
scheme was HDFC IT Corridor Fund, a Rs. 464 crore rent yielding portfolio. This scheme has
been fully exited.
HDFC Property Ventures Limited (HPVL) provides investment advisory services to Indian
and overseas asset management companies (AMCs). Such AMCs in turn manage and advise Indian
and offshore private equity funds.
HDFC holds 80.5% of the equity share capital of HVCL and 100% of the equity share
capital of HPVL.
The Corporation has sponsored two off shore funds -- HIREF International LLC and HIREF
International Fund II Pte Ltd. HIREF International LLC was launched in 2007 and has a
corpus of USD 800 million. Exits have commenced and the fund is in the process of exiting
the balance investments. HIREF International Fund II Pte Ltd. had its second and final
closing in April 2015 with a total corpus of USD 321 million.
GRUH Finance Limited (GRUH)
GRUH is a housing finance company with a retail network of 154 offices spread across 8
states. During the year, GRUH disbursed loans amounting to Rs. 3,121 crore as compared to
Rs. 2,577 crore in the previous year an increase of 21%. As at March 31, 2015, the loan
portfolio stood at Rs. 8,915 crore, recording a growth of 27% over the previous year. The
gross non-performing loans stood at 0.28% of the total loans outstanding and the net non
performing loans are nil. The average size of loans disbursed during the year was Rs. 8.4
As at March 31, 2015, the capital adequacy ratio stood at 15.4