Dewan Housing Finance Corporation Ltd Directors Report.

(Report of Advisory Committee Chaired by the Administrator)

Dear Members,

The Reserve Bank of India (RBI) vide Press Release dated November 20, 2019 in exercise of the powers conferred under Section 45-1E (1) of the Reserve Bank of India Act, 1934 (RBI Act) superseded the Board of Directors of your Company on November 20, 2019 owing to governance concerns and defaults by your Company in meeting various payment obligations and the RBI appointed Mr. R. Subramaniakumar, ex-MD and CEO of Indian Overseas Bank as the Administrator of your Company under Section 45-IE (2) of the RBI Act. Thereafter, RBI vide its Press Release dated November 22, 2019, in exercise of the powers conferred under Section 45-IE 5(a) of the RBI Act, constituted a three (3) member Advisory Committee to assist the Administrator in discharge of his duties and to advise the Administrator in the operations of your Company during the Corporate Insolvency Resolution Process (CIRP). As per the framework of the Advisory Committee as approved by RBI, primary responsibility of the Advisory Committee is to guide the Administrator to undertake all steps that will maximize the value for all stakeholders of your Company through asuccessful resolution. Since the Administrator also takes over the responsibility of the Board of Directors of your Company, the Advisory Committee will support the Administrator in fulfillment of his role and responsibilities. The members of the Advisory Committee are Dr Rajiv Lai I, erstwhile Non-Executive Chairman, IDFC First Bank Ltd., Mr. N S Kannan, Managing Director and CEO, ICICI Prudential Life Insurance Co. Ltd. and Mr. NS Venkatesh, Chief Executive, Association of Mutual Funds in India.

On November 29, 2019, the RBI filed a Petition before the Honble National Company Law Tribunal, Mumbai Bench (Honble NCLT/ Adjudicating Authority) under Section 227 read with Section 239(2)(zk) of the Insolvency and Bankruptcy Code, 2016 (IBC / IBC Code / Code) read with Rules 5 and 6 of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudication Authority) Rules, 2019 (FSP Rules), to initiate CIRP against your Company. Accordingly, in terms of Rule 5(b)(i) of the FSP Rules, an interim moratorium came into effect on the date of filing of the application to initiate CIRP. Thereafter, CIRP was initiated against your Company by an Order dated December 3, 2019 of the Honble NCLT. The Honble NCLT, vide the said Order, confirmed the appointment of the Administrator to perform the functions of an Interim Resolution Professional / Resolution Professional to complete the CIRP of your Company as required under the provisions of the Code and also announced commencement of the moratorium under Section 14 of the Code with effect from November 29, 2019.

Accordingly, your Company is presently undergoing CIRP under the provisions of the Code along with the Regulations and Rules thereunder and the Administrator performing the duties of the Resolution Professional under the Code along with the Advisory Committee is presenting this Report.

In consequence of the aforesaid changes the Advisory Committee is presenting the Standalone and Consolidated Reports on the operations and business performance, along with the audited financial statements for the financial year ended March 31,2020.

KEY FINANCIALS

During the financial year 2018-19, your Company adopted Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) read with the Companies (Indian Accounting Standards) Rules, 2015. Accordingly, the financial statements for the year ended March 31, 2020 have been prepared as per the Ind AS.

The financial performance of your Company for the financial year ended March 31,2020 is summarized below:

Particulars

Standalone

Consolidated

2019-20 2018-19 2019-20 2018-19
Gross Income 9,343.12 12,902.52 9,578.85 12,911.66
Less: Finance Costs 5,725.18 9,392.85 5,736.21 9,416.91
Net loss on fair value changes 14,996.48 2,458.37 15,034.71 2,458.37
Impairment on financial instruments 6,241.13 1,084.98 6,242.13 1,008.97
Overheads & Provisions 548.91 1,080.15 548.91 1,080.27
Depreciation and amortization expense 79.41 51.15 79.41 51.15
Profit/ (Loss) before Tax (18,247.99) (1,164.98) (18,062.52) (1,104.01)
Less: Current Tax (11.33) 538.32 (11.33) 538.32
Deferred Tax (4,624.34) (667.25) (4,624.34) (658.40)
Net Profit/ (Loss) after tax (13,612.32) (1,036.05) (13,426.85) (983.93)
Add: Share of net profits of associates and joint ventures - - (28.96) 18.02
Add: Balance brought forward from the previous year 1,248.07 2,377.73 1,083.36 2,143.19
Add/(Less): Other Comprehensive Income (1.15) 0.93 (1.15) 0.07
Add/(Less): Change in accounting Policy 1.47 - 1.47 0.88
Surplus available for appropriations (12,363.93) 1,342.61 (12,372.12) 1,178.23
Appropriations
Equity Dividend (Final) - 78.41 - 78.41
Tax on Dividends - 16.13 - 16.46
Balance carried over to Balance Sheet (12,363.93) 1,248.07 (12,372.12) 1,083.36
Total (12,363.93) 1,342.61 (12,372.12) 1,178.23
Earnings Per Share
Basic (in Rs ) (433.76) (33.02) (428.77) (30.78)
Diluted (in Rs ) (433.76) (33.02) (428.77) (30.78)

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

TRANSFER TO RESERVES

During the year under review, your Company incurred a net loss of Rs 13,612.32 crore mainly on account of increased provisioning and higher impact of impairment on financial instruments and consequently, no transfers were made to the reserves out of the amount available for appropriation.

CORPORATE INSOLVENCY RESOLUTION PROCESS

The Administrator under Section 13 of the Code read with Regulation 6 of the Corporate Insolvency Resolution Process (CIRP) Regulations had issued a public announcement as prescribed in Form A on December 5, 2019 for attention of the creditors of your Company to submit their claims against your Company. The Administrator, on receipt of the claims from the creditors has prepared a list of creditors (including Financial, Operational, Workmen & Employees and Other Creditors) along with their security Interest therein pursuant to Regulation 13(2)(c) of the CIRP Regulations and such list of creditors has been made available to the stakeholders of your Company on your Companys website. The claims have been admitted based on the information available in the books of accounts and records available with your Company and the information provided by the respective creditors in this regard.

It is pertinent to note that the admission of claims is a part of the CIRP and the same are subject to revision / modification till such date they are finalized.

The Administrator after preparing the list of claims of the creditors of the claims has constituted of the Committee of Creditors (COC) of your Company u/s 21 of the Code read with Regulation 17 of the CIRP Regulations. The Committee of Creditors is comprised of financial creditors of your Company as per Section 21 of the Code read with Regulation 17 of the CIRP Regulations. The Committee of Creditors has met 6 (six) times since initiation of CIRP till the date of this Report.

The Administrator after his appointment and with the approval / ratification of Committee of Creditors of your Company, as constituted by him in accordance with Section 18(c) and 21(1) of the Code and the Regulation 17(1) of the CIRP regulations, appointed Mr. Sunil Kumar Bansal as the Chief Financial Officer (CFO) of your Company and Mr. Satya Narayan Baheti as the Company Secretary (CS) of your Company. Mr. Vaijinath M Gavarshetty was appointed as the Chief Executive Officer (CEO) of your Company by the erstwhile Board of Directors at its meeting held on September 28, 2019 on the recommendations of the erstwhile Nomination & Remuneration Committee of your Company and pursuant to the approval and recommendations of the erstwhile core committee of the lenders of your Company constituted pursuant to the Inter-Creditor Agreement executed amongst certain lenders of your Company in terms of the June 7, 2019 circular issued by RBI. While Mr. Vaijinath M Gavarshetty was appointed with effect from October 1, 2019, he assumed the office as CEO of your Company with effect from November 21, 2019. As part of the CIRP of your Company, the Administrator, Advisory Committee and the present management team have taken various initiatives to ensure ‘going concern status of your Company as required u/s 20 of the Code. Further, the Code and Regulations thereunder stipulate prior approval by the Committee of Creditors for certain actions to be taken during the process, including as provided u/s 28 of the Code. The Administrator and the Advisory Committee as set up by the RBI to assist the Administrator in discharge of his duties, exercise oversight on the operations of your Company apart from running the CIRP in accordance with the provisions of the Code and Regulations under IBC, 2016. The Administrator appointed Ernst & Young LLP and AZB Partners as Process and Legal advisors, respectively to assist him in completion of the CIRP of your Company.

The present management under the guidance of the Administrator has undertaken various initiatives recently including efforts to strengthen the policies and processes, functioning of the IT System; loan/security documentation, legal, internal audit, internal financial controls and updating risk control matrices, information security, operational and credit management risk and fraud risk management, through in-house resources and engagement of external professional experts/consultants. The management team has also initiated steps for comprehensive compliance of various applicable rules and regulations within your Company. The improvement process is a continuous effort and the same has been extended due to the operational issues arising out of the COVID-19 pandemic and the resultant lockdown.

These initiatives will strengthen your Companys overall governance structure and control environment. On conclusion and implementation of all such initiatives, it is expected that the operational efficiency will improve and operational issues will get addressed.

The Administrator acting as the Resolution Professional under the provisions of the Code has appointed a Transaction Avoidance Auditor (referred as “TAA”) - Grant Thornton India LLP to ascertain if your Company has entered into transactions as specified in terms of provisions of the Code specifically u/s 43, 45, 50, 66 of the Code.

As per the terms of the order issued to the TAA, the three (3) reports are required to be submitted by the TAA -

(a) Report 1: Transaction Audit Report for preferential, undervalued, intent to defraud, fraudulent and wrongful trading and extortionate credit transactions to be conducted within the relevant time period as prescribed under the Insolvency and Bankruptcy Code, 2016

Transactions to be conducted in accordance with the following time periods.

i. Transactions made with any person within the period of 1 year preceding the insolvency commencement date; and

ii. Transactions made with a related party within the period of 2 years preceding the insolvency commencement date.

(b) Report 2: Transaction audit report for

i. Preferential, undervalued and extortionate credit transactions to be conducted in accordance with the following time periods

a) Transaction made with any person within the period of 3 years preceding the insolvency commencement date; and

b) Transaction made with a related party within the period of 5 years preceding the insolvency commencement date.

ii. Transactions with intent to defraud and fraudulent and wrongful trading.

(c) Report 3: Report as stipulated under scope of work identify and review irregular accounts from the angle of possible fraud. Further, specifically review the underlying documents and security made available and its enforceability in the aforesaid scope of work.

The Administrator on the advise of the Advisory Committee and in consultation with the process advisors and legal advisors will file necessary applications before the Honble NCLT as and when reports under the above sections are submitted by the TAA. First of such filing was done on August 30, 2020, with the Honble NCLT based on the TAA Report received in the regard and application prepared by the legal advisors. The disclosure in relation to said filing as approved by the Advisory Committee on the advise of the legal advisors and the process advisors and submitted by your Company to the stock exchanges pursuant to the provisions of Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI Listing Regulations) is annexed at “Annexure - 1 ” to this Report. Further, the Statutory Auditor has expressed their concern in this matter in para 4 of the Audit Report, issued with a Disclaimer of Opinion, for the Financial Year ended March 31, 2020.

PERFORMANCE

While in major part of the financial year under review the business of your Company was minuscule at a low level, by February 2020 the retail lending operations were recommenced primarily to cater to the Lower and Middle Income segment, however, the same also got impacted due to the COVID-19 pandemic and consequent extended lock-down.

RBI on June 7, 2019 had issued “Prudential Framework for Resolution of Stressed Assets” for early resolution of stressed assets in a transparent and time-bound manner, giving complete discretion to lenders with regard to design and implementation of Resolution Plans. As your Company was under stress due to liquidity issue of the industry as well its own, and also due to various adverse media reports on the functioning of your Company, the lenders initiated appropriate action.

As per this framework, lenders shall undertake a prima facie review of the borrower account within thirty days from such default (Review Period). During this Review Period of thirty days, lenders may decide on the resolution strategy, including the nature of the Resolution Plan (RP), the approach for implementation of the RP, etc. In cases where RP is to be implemented, all lenders shall enter into an Inter Creditor Agreement (ICA), during the above- said Review Period, to provide for ground rules for finalization and implementation of the RP. RP shall be implemented within 180 days from the end of Review Period. The ICA shall provide that any decision agreed by lenders representing 75% by value of total outstanding and 60% of lenders by number shall be binding upon all the lenders. The RP may involve any action / plan / reorganization including, but not limited to, regularization of the account by payment of all over dues by the borrower entity, sale of the exposures to other entities / investors, change in ownership and restructuring.

Your Company which was already working with creditors for a restructuring plan with possible stake sale to strategic investors, was brought under the new guidelines of RBI and an ICA process was set into motion. By July 5, 2019, all major banks signed the ICA and RP process could be initiated immediately thereafter. 27 banks including all term lending banks and banks holding Non-Convertible Debentures (NCDs), NHB, LIC and NABARD signed the ICA in due course of time. Your Company and lenders, each appointed leading RP advisors to help draft the Plan. All key processes for drafting RP, including valuation / liquidation valuation, legal due diligence and rating process for RP rating were undertaken. Over the next 90 days during July and September 2019 multiple sittings were organized with ICA members. Joint Lenders Forum (JLF) including Non-Convertible Debentures (NCDs) and Fixed Deposit holders were held to explain the RP framework under consideration. Voting process was undertaken to obtain mandate from NCD holders through the Trustee. Enabling a change in the management control was a key aspect of the RP in making, including a possible lenders led stake buy-out as an interim arrangement, were kept open as options to be explored.

Considering the large investors base under NCD, obtaining mandate from 60% of investors by number proved challenging. First round of voting by NCD holders could garner only 28% in favor from public investors. Mutual Funds (MF) too could not sign ICA reportedly due to the requirement to set aside your Company bonds in a side pocket prior to the default date, a condition which many MFs could not meet.

The ICA members and JLF however remained on consultative mode to find an acceptable solution to different class of investors; a flexibility which ICA offered. Multiple RP models were carved out towards this end and to secure the mandate from the requisite majority of lenders. Early September 2019 saw a leading MF moving Honble High Court of Bombay restraining your Company from making any payments to any creditors. This was followed by various litigations against your Company which impeded the ICA work from moving in an environment of coordinated approach. Consultative process came to halt. The option was to go for a court led process.

With the introduction of Section 227 of the IBC on November 15, 2019 by the Central Government bringing Financial Institutions under the ambit of IBC process, the action shifted with RBI moving in and taking control of the affairs of your Company with the supersession of the Board of Directors of your Company and appointment of Administrator as stated earlier in this Report.

Standalone

During the financial year under review, your Company made total loan disbursements of Rs 1,553 crore as against Rs 28,770.61 crore in the previous financial year. During the financial year under review, the Gross NPAs as a percentage of the outstanding loans were 62.97% as against 5.27% in the previous year. The net NPAs as a percentage of the outstanding loans were 44.77% during the Financial Year under review as against 4.01% in the previous year.

The standalone and consolidated financial statements for the year ended March 31,2020 have been prepared as per the Ind AS.

For the financial year under review, your Company suffered a Loss Before Taxes of Rs 18,247.99 crore as against Rs 1,164.98 crore in the previous financial year and Loss After Tax for the year under review is Rs 13,612.32 crore as against Rs 1,036.05 crore in the previous financial year, mainly on account of Net Loss on Fair Value Changes of Rs 14,996.48 crore and Rs 6,241.13 crore towards impairment on financial instruments during the financial year under review.

Consolidated

During the financial year under review, your Companys total revenue on consolidated basis stood at Rs 9,578.85 crore, lower than Rs 12,911.66 crore in the previous financial year. The overall operational expenses for the financial year under review were Rs 27,641.37 crore, as against Rs 14,015.67 crore in the previous financial year. Operating Loss Before Tax for the year under review stood at Rs 18,062.52 crore as compared to Rs 1,104.01 crore in the previous financial year. The Loss After Tax for year under review stood at Rs 13,455.81 crore as against Rs 965.91 crore in the previous financial year.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF YOUR COMPANY

No specific material changes and commitments, unless as disclosed in this Report, affecting the financial position of your Company have occurred between the end of the financial year under review, i.e. March 31,2020 and the date of this Report.

DIVIDEND

Owing to the loss incurred by your Company for the financial year under review, no dividend has been declared/recommended on Equity Shares for the financial year ended March 31,2020.

The Dividend Distribution Policy is available on the website of your Company at the URL https://www.dhfl.com/docs/ default-source/investors/dividend-distribution-policy/dividend- distribution-policy-jan-2018.pdf and forms part of this Report as “Annexure - 2”.

TRANSFER OF UNCLAIMED DIVIDEND / DEPOSITS AND SHARES TO INVESTOR EDUCATION & PROTECTION FUND (IEPF)

Pursuant to the provisions of Sections 124 and 125 of the Companies Act, 2013, rules made thereunder and Investor

Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 read with the relevant circulars and amendments thereto, the amount of dividend / deposits remaining unpaid or unclaimed for a period of 7 (seven) years from the due date is required to be transferred to the Investor Education and Protection Fund (IEPF) as constituted by the Central Government.

Further, as per the provisions of Section 124(6) of the Companies Act, 2013 read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer & Refund) Rules 2016, the shares in respect of which the dividend has not been claimed for seven (7) consecutive years are required to be transferred by your Company to the designated Demat account of the IEPF Authority.

Unpaid / Unclaimed Dividend

During the financial year under review, in October, 2019 your Company has transferred unclaimed final dividend of Rs 0.08 crore pertaining to the financial year 2011-12 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.

Transfer of Shares to IEPF

Pursuant to the provisions of Section 124(6) of the Companies Act, 2013 and the rules made thereunder, on September 30, 2019, your Company transferred 14,074 equity shares of Rs 10 each to Investor Education and Protection Fund (IEPF) established by the Central Government in respect of which the dividend remained unpaid/unclaimed for a period of seven consecutive years i.e. from 2011-12 till the due date of October 2, 2019 after following the prescribed procedure.

Unclaimed Deposits

During thefinancial year under reviewtill October, 2019, an amount of Rs 0.14 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 the Order dated December 3, 2019 passed by the Honble NCLT, Mumbai the CIRP has been initiated for your Company and the moratorium has been commenced under Section 14 of the Code read with Rule 5(b)(i) of FSP Rules effective from November 29, 2019.

As on March 31,2020, an amount equal to Rs 4,96,780 pertaining to the Interim Dividend 2012-13, was transferable by your Company to IEPF. Further, 11,208 equity shares of Rs 10 each in respect of which the dividend remained unpaid/unclaimed for a period of seven consecutive years i.e. from interim dividend 2012- 13 till the due date of December 28, 2019 were also required to be transferred to IEPF. Additionally, as on March 31, 2020 amount due for transfer to IEPF was Rs 59,27,629 with respect to unpaid/ unclaimed matured deposits along with the interest accrued thereon. However, the same have not been transferred as any alienation of the assets of your Company post insolvency commencement date is prohibited by the moratorium under Section 14 of the Code, as per the legal advise received by your Company from the legal advisor. Further, as per Section 238 of the Code, provisions of IBC prevail over any other law to the extent of any inconsistency. Therefore, as per the legal advise received by your Company from the legal advisor, if these amounts are transferred to IEPF post insolvency commencement date (i.e. after December 3, 2019) or any time during the moratorium period it would violate the provisions of Section 14 of the Code read with Rule 5(b)(i) of FSP Rules. Accordingly, your Company has requested the IEPF Authority vide its letter dated April 15, 2020 to advise your Company on how the compliance with Section 125(2)(c) of the Companies Act, 2013 may be achieved. It has also been brought to the notice of IEPF Authority that it may file a proof of claim in the relevant form of CIRP Regulations for the monetary claims against your Company, arising prior to insolvency commencement date, which will be duly evaluated on merits by the Administrator. The dues arising from such claims will be addressed on the basis of the outcome of the CIRP and considered in accordance with the due process as laid out in the Code read with the FSP Insolvency Rules.

LENDING OPERATIONS

Your Company did not undertake any major lending operation in the financial year, due to various external factors. However, your Company has made significant efforts to strengthen its base to commence retail lending activities, by initiating review of its policies and processes, to come out stronger and sharper.

However, the COVID-19 pandemic outbreak and the resultant lockdown in the country had impacted various functions of your Company including Head Office and branch operations, collections and field visits and also new disbursements. During the initial phases of lockdown till about May 31, 2020, wherein strict restrictions on mobility were in force, your Companys Head Office and branches, micro-branches remained shut and could not function, in compliance with the Government guidelines. Due to swift adaption of alternate technology, Work from Home (WFH) enablement and other functional and connectivity support, a large number of employees of your Company were able to carry on with the day-to-day operations even during the lockdown.

In the month of April 2020 and May 2020, about 32% and 36% of the retail borrowers respectively, availed moratorium. During this period, the retail collections of your Company were impacted on account of the moratorium availed by the borrowers and due to the restricted movement of collections and field officers. In the month of April 2020, your Companys team contacted about 60% of its retail borrowers who had availed moratorium facility to explain them about the impact of moratorium on their loan accounts and also encouraged them to make the regular payments as per the monthly EMI payment cycle. In June 2020, even while the moratorium was extended to the customers, extensive awareness and collections campaign helped your Company reduce its under-moratorium borrower position from 36% in May 2020 to 27% in June 2020 in terms of count.

During the lockdown period, your Company also undertook an exercise to identify potentially stressed accounts and follow-up was ensured. With comprehensive efforts to improve collections, your Company has been able to significantly reduce the quantum of its overdue (irregular) retail accounts.

The retail disbursement process of your Company, which was commenced in the end of February 2020, was impacted during the lockdown owing to the restriction on conducting field visits for due-diligence and other verification processes. The outsourced call centre activities of your Company were affected during the lockdown, however, the agency was able to revive the operations with WFH enablement within 10 days and the teams commenced the operations in limited way and gradually scaled to near full level by end of May 2020.

Your Company has been closely monitoring the prevalent situation and would continue to take all necessary steps as required to maximise the value of your Company and continue the organisation as a going concern.

Moratorium of loans as per RBI Guidelines

To address and mitigate the burden of debt servicing owing to COVID - 19, and continuity of viable business, the RBI issued guidelines on March 27, 2020 permitting all commercial banks, co-operative banks, all-India Financial Institutions and NBFCs including Housing Finance Companies and micro-finance institutions to give moratorium to customers on payment of installments falling due between March 1, 2020 to May 31, 2020. Further in view of the extension of lockdown and continuity, RBI has further extended the same for three months i.e. from June 1, 2020 to August 31,2020.

Accordingly, as per your Companys policy on providing moratorium to the borrowers your Company started offering moratorium to the customers of your Company.

Further, RBI vide Circular dated April 17, 2020 has issued detailed instructions with regard to asset classification and provisioning norms.

Your Company has complied with the applicable guidelines issued by RBI from time to time in this regard.

Securitisation / Assignment of Loans

During the financial year under review, your Company has sold/ assigned multiple pools of Rs 6,108.85 crore. Your Company will, however, continue to collect the Equated Monthly Installments (EMIs) receivable from the borrowers in most of the cases, 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.

In line with the Notification vide no. S.O. 464 (E) dated January 30, 2020 issued by the Ministry of Corporate Affairs (MCA), your Company continues to discharge its obligations as a servicing or collection agent where it is contractually obliged to do so. As part of such obligation, your Company continues to collect the Equated Monthly Installments (EMIs) receivable from the borrowers on behalf of the acquirer of the loans and remit the applicable amounts to the latter in line with the underlying transaction documents.

COST REDUCTION MEASURES

Cost has been another focus area for your Company during the CIRP period. Your Company has undertaken a comprehensive review of all cost elements, and all unwanted costs have been eliminated while all necessary costs are being optimised. Your Company has formed various internal committees to look deeper into activities that have high cost outlays and how can those costs be optimised. As a result most of the outsourcing agreements and lease agreements have been reviewed and re-negotiated, and there is a concerted focus on grooming employees in multitasking to ensure all non-technical vacancies are filled internally. As a result of these concerted efforts your Company has not only been able to reduce costs significantly, but more importantly your Company has been able to set in motion a process that will reap rich dividends to your Company in the next few years.

Various officers of your Company have also voluntarily come forward to accept reduction in salary amount willingly because your Company was under CIRP and there was cost cutting drive all across.

SHARE CAPITAL

A) Authorized Share Capital

During the financial year under review, there has been change in the authorized share capital of your Company. The Authorized share capital of your Company as at March 31, 2020 stood at Rs 10,90,39,00,240 divided into (i) 84,03,90,024 equity shares of Rs 10/- each aggregating to Rs 840,39,00,240 and (ii) 25,00,000 non-convertible redeemable cumulative preference shares of Rs 1,000/- each aggregating to Rs 250,00,00,000.

B) Issued and Paid-up Share Capital

(1) Equity Share Capital

During the year under review, there has not been any change in the issued and paid-up share capital of your Company. The issued and paid-up equity share capital of your Company as at March 31, 2020 was Rs 313,82,30,240 divided into 31,38,23,024 equity shares of Rs 10/- each.

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

No preference shares have been issued by your Company so far.

RESOURCE MOBILISATION

Your Company vide special resolution passed by the Members of your Company, under Section 180(1)(c) of the Companies Act, 2013, at the 33rd Annual General Meeting held on July 21, 2017, 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 your Company upto an amount of Rs 2,00,000 crore and the total amount so borrowed shall remain within the limits as prescribed by National Housing Bank.

Your Company had issued and allotted from time to time various non-convertible debentures, sub-ordinated debts, perpetual debts, by way of public issue and private placement basis, However during the financial year under review, your Company did not borrow through any instrument such as Non-Convertible Debentures, External Commercial Borrowings, Masala Bonds, Subordinate Debt, Perpetual Debt, bank borrowings etc.

Upon commencement of the CIRP of your Company, interim moratorium / moratorium under Section 14 of Insolvency and Bankruptcy Code, 2016 (IBC Code) was imposed with effect from November 29, 2019. The moratorium on initiation and continuation of legal proceedings, including debt enforcement action ensures a stand-still period during which creditors cannot resort to individual enforcement action. The interest on the debt borrowed has also ceased to accrue from the date of commencement of CIRP, and no interest shall be applicable for the CIRP period as per legal opinion obtained by your Company. Further, any such payment of interest and principal may amount to according preferential treatment to a set of creditors to the prejudice of other stakeholders. In accordance with law, all creditors are bound by the process laid out under the IBC Code.

Deposits

Your Company is a deposit accepting Housing Finance Company, registered with National Housing Bank (NHB), however, your Company has stopped accepting or renewing deposits w.e.f. May 20, 2019 due to downgrading of its credit rating below the investment grade as prescribed under Housing Finance Companies (NHB) Directions, 2010 and further directions from authorities. The total deposits reduced by 23% to Rs 5,355.72 crore as on March 31, 2020 as compared to Rs 6,915.55 crore as on March 31,2019.

Commercial Papers

Your Company has not borrowed any funds through Commercial Papers during the financial year under review. As at March 31, 2020, Commercial Papers outstanding amount stood at Rs 100 crore (Face Value).

SECURITY COVERAGE FOR THE BORROWINGS

The security details of the aforesaid secured borrowings made by your Company are mentioned at Note No. 17 and 18 in the Notes to accounts forming part of the audited (standalone) financial statements for the financial year ended March 31,2020.

CREDIT RATINGS

Due to a series of defaults in repaying debts/ borrowings your Company suffered consistent downgrades in its credit ratings of various loan facilities/financial instruments, since February 2019. On June 5, 2019, the credit rating was downgraded to ‘default grade.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Your Company being a housing finance Company, the disclosure regarding particulars of loans made, guarantees given and securities provided in the ordinary course of its business is exempted as per the provisions of Section 186(11) of the Companies Act, 2013. Details of the investments made by your Company pursuant to the provisions of Section 186 of the Companies Act, 2013 are given in the Note No. 9 in the Notes to accounts forming part of the audited (standalone) financial statements for the financial year ended March 31,2020.

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 13% on a stand-alone basis. The following table sets out your Companys Capital Adequacy Ratios as at March 31, 2018, 2019 and 2020:

Particulars

As on March, 31

2020 2019 2018
Capital Adequacy Ratio -1.83% 14.07% 15.29%

During the year under review, the National Housing Bank amended the capital adequacy requirements for Housing Finance Companies (HFCs). Accordingly, the minimum stipulated capital adequacy ratio for the year ended March 31,2020 was increased from 12% to 13% and the minimum Tier I capital was increased from 6% to 10%. Going forward, as stipulated the minimum capital adequacy ratio for HFCs would increase to 14% on or before March 31,2021 and 15% on or before March 31,2022.

The Capital Adequacy Ratio (CAR) of your Company was at -1.83 % as on March 31, 2020, as compared to the regulatory requirement of 13% as disclosed at point no. 69.3.1 in the Notes to Accounts, “Disclosure Required by the National Housing Bank”.

The NHB Directions, 2010 also require that your Company transfers minimum 20% of its annual profits to a reserve fund. Due to net loss incurred during the financial year under review, no transfer was made by your Company.

Pursuant to Section 14 of the Code read with Rule 5(b)(ii) of the FSP Rules the license or registration which authorises the financial service provider to engage in the business of providing financial services shall not be suspended or canceled during the moratorium period and the Corporate Insolvency Resolution Process.

In view of the same, while your Company could not fulfill the requirements of CAR and transfer to reserve fund as per NHB requirements, the licenses or similar grants given to your Company to operate as a Housing Finance Company by any authority is not to be suspended or terminated on the grounds of insolvency during the CIRP.

NON-PERFORMING ASSETS AND PROVISIONS FOR CONTINGENCY

The following table sets forth your Companys gross NPAs, net NPAs, cumulative provisions and write-offs for the periods indicated:

Financial Year ended March 2020

Financial Year ended March 2019

Retail ICD Wholesale Total Retail ICD Wholesale Total
Gross Non-Performing Assets 7,146.98 3,390.43 39,689.97 50,227.38 24,66.71 1,746.81 824.76 5,038.28
% of Gross NPA to Total Loan Portfolio 21.32% 100.00% 92.61% 62.97% 4.18% 32.16% 2.65% 5.27%
Net Non-Performing Assets 3,092.95 2,001.63 30,617.97 35,712.56 2,113.99 1,438.42 279.01 3,831.42
% of Net NPA to Total Loan Portfolio 9.23% 59.04% 71.44% 44.77% 3.58% 26.49% 0.90% 4.01%
Total cumulative provision on Loans 4,320.06 1,388.80 9,101.08 14,809.94 892.17 308.39 606.54 1,807.10
Write-off 163.13 - 41.24 204.37 112.93 - 99.33 212.26

Recovery & Collections

During the earlier managements tenure, the follow up of wholesale accounts was only from Head Office. In the present CIRP period, the wholesale accounts have been allotted to the zonal heads where the Project is operational. Your Company has formed distinct teams for retail and wholesale with task-force consisting of legal, credit, operations and collections with focused number of Projects. Under retail, NPA monitoring and recovery action has been brought under separate vertical and the speciliased teams are working towards maximizing the recovery. Amongst various actions being taken, now your Company is focusing on actions such as asset tracing, attachment of salary/cashflowof defaulters, action against guarantors, willful defaulter actions, repossession of properties and auctioning thereof under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). Your Company has a very robust and comprehensive collections setup comprising of call centers, field agents, law firms and auctioneers to deal with various stages of default while adhering to NHB guidelines. Your Company has been filing requisite particulars of mortgaged properties with CERSAI as per the prevailing guidelines issued by CERSAI. Major CERSAI registration action was initiated during the CIRP and the backlog left by the previous management is presently being cleared.

Your Company has established a closed monitoring mechanism for all the Projects financed by them and periodical visits are being initiated. The legal actions are being initiated against defaulting borrowers including the directors of the defaulting borrower.

INVESTMENTS

The Investment Committee of your Company is responsible for approving investments in line with the Investment Policy and limits as set out by the erstwhile Board / the Advisory Committee, from time to time. The Investment Policy is reviewed and revised in line with the market conditions and business requirements from time to time. 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. During the earlier managements tenure till October 2019, your Company was having liquidity issues and hence the treasury functions were curtailed. During CIRP, the risk appetite of your Company was assessed carefully by the Advisory Committee along with the Committee of Creditors (CoC) and a conscious decision of parking the surplus funds with overnight fund schemes of mutual funds and/or deposits with banks has been taken.

During the financial year under review, your Company made a loss of Rs 2 crore (pre CIRP) from mutual fund and other treasury operations and earned Rs 204 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 13% of the public deposits. As at March 31,2020, your Company has invested Rs 721.28 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 588.86 crore. It is being maintained within the limits prescribed by National Housing Bank.

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

As on March 31, 2020, your Company has four (4) wholly owned subsidiaries viz., DHFL Advisory & Investments Private Limited (DAIPL), DHFL Investments Limited (DIL), DHFL Holdings Limited (DHL), DHFL Changing Lives Foundation (DCLF), a Section 8 Company; one (1) joint venture viz., Pramerica Life Insurance Limited (PLIL) (formerly known as DHFL Pramerica Life Insurance Company Limited) and one (1) associate Company viz., DHFL Ventures Trustee Company Private Limited (DHFL Ventures).

Pursuant to the provisions of Section 129(3) of the Companies Act, 2013, your Company has prepared Consolidated Financial Statements of your Company which forms part of this Annual Report. However, based on an Agreement dated March 31,2017 executed by the erstwhile management, the financial statements of DIL have never been consolidated with your Company as per decision of erstwhile management of your Company. 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 forms part of this Report as “Annexure - 3”. 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 accounts of the subsidiary/ies, joint venture entity and associate Company, are available on your Companys 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 financial year under review, your Company under erstwhile management sold the entire stake held by it in the Joint- Venture Company, DHFL Pramerica Asset Managers Private Limited (presently known as PGIM India Asset Management Private Limited) (i.e. 17.12% directly and 32.88% through DAIPL) and DHFL Pramerica Trustees Private Limited (presently known as PGIM India Trustees Private Limited) to PGLH of Delaware and the transaction was consummated on July 31,2019. Consequent upon said disinvestment on July 31, 2019, both DHFL Pramerica Asset Managers Private Limited and DHFL Pramerica Trustees Private Limited ceased to be Joint Venture companies of your Company.

Further, during the financial year under review, your Company under erstwhile management completed the sale/transfer of its entire stake held in Aadhar Housing Finance Limited (AHFL) (formerly DHFL Vysya Housing Finance Limited) i.e. 23,01,090 equity shares (equivalent to 9.15% of AHFL) to BCP Topco VII Pte. Ltd. (BCP Topco), which is controlled by private equity funds managed by Blackstone and consummated the transaction on June 10, 2019. Consequent upon sale/transfer on June 10, 2019, AHFL ceased to be an associate company of your Company. BCP Topco had withheld certain amount from the total sale consideration owing to alleged non-fulfillment of certain conditions by the erstwhile promoters group. During the CIRP, your Company has been making various efforts to recover the said withheld amount from BCP Topco.

Your Company under erstwhile management, during the current financial year, also completed the sale/transfer of its entire stake held in Avanse Financial Services Limited (Avanse) i.e. 1,92,50,719 (30.63%) equity shares to Olive Vine Investment Limited, an affiliate of the Warburg Pincus group and consummated the transaction on July 30, 2019. Consequent upon sale/transfer on July 30, 2019, Avanse ceased to be an associate company of your Company.

INFORMATION TECHNOLOGY

Your Company has a digital transformation program which comprises of technology enablers for business growth and operational efficiency. The journey towards digital transformation involves enhancing customer and employee experience by strengthening enterprise architecture and expanding the digital footprint to meet evolving business needs. Deposit part of the Tech 2.0 program was successfully implemented in 2017 while rest of the application such as loan, Accounting, Treasury etc. were not implemented. Entire Tech 2.0 program was reviewed by third party in CIRP and it was decided to implement some of the applications on the basis of cost, stage of the implementation and time to implement. Rest of the application where cost and time implication are high, have been kept in abeyance.

As part of this program, best-fit solutions were being implemented/ enhanced in the areas of (i) customer relationship management to achieve higher customer satisfaction and enhanced marketing and sales effectiveness; (ii) digital channels to provide for effective interaction between your Company and its customers and business partners/agents (iii) enhancing deposits system (iv) complete digitization of processes and document management to facilitate the centralization of processes (v) Mobility solutions for collections management, customer on-boarding and technical verifications (vi) loan origination and management system middleware enhancements (viii) Integration with fintech solutions for improving operational efficiency.

CUSTOMER SERVICE

Your Company has established a multi level customer query and grievance redressal process which provides many alternative channels for the customer to approach your Company. Details of the same are regularly updated on your Companys web-site. Customer service and monitoring process have been accorded a paramount importance across the organizational hierarchy with the prime objective of prompt and efficient services to the customer.

3R INITIATIVES TAKEN BY YOUR COMPANY

Your Company has taken up a project “Mission 3R (Reassess, Reorient, Restructure)” which has been launched to improve operational efficiency. Purpose of the mission is to enhance revenue of your Company, achieve operational efficiency, improve productivity and to ensure compliance. Cross functional teams from following functions of your Company (with inputs from CIRP advisors) were formed to brainstorm on ideas to achieve the program objectives:

- Sales, Credit, Operations;

- Collections/ Recovery, RCU, Compliance, Legal;

- Wholesale, Technical, Liabilities, Accounts;

- HR, Admin, IT, Audit, Treasury

The initiatives would be implemented and prioritized based on impact of initiative, ease of implementation and cost of implementation. Outcomes expected are as follows:

- Enhanced productivity and utilization of manpower across functions;

- Leaner Organization Structure;

- Cost Reduction / Lower cost to serve;

- Lesser redundancy and repetition of tasks;

- Automation / Digitization of manual tasks

HUMAN RESOURCES

Human Resources are the most important asset of any financial services organization. In the backdrop of the crisis that your Company was in, your Company faced increased attrition during the first half of the financial year. While the challenges ensued, your Company conducted various restructuring activities internally to manage the people crisis. For all key exists, the succession plan triggered in, and your Company was able to immediately fill all key leadership positions ensuring continuity and stability. The erstwhile management was unable to fill up the KMPs and the positions vacated by the senior management who left your Company in the first half of the financial year. During the CIRR your Company was also able to attract talent, through lateral hiring, to fill key management positions which have enabled your Company to bring in best Industry practices of governance and compliance.

Your Company also undertook proactive measures to ring-fence critical talent through a Deferred Incentive Plan which was initiated during the ICA process and effectively finalized during the CIRP This has helped your Company to reduce attrition significantly, and has also created a positive impact on business operations and continuity.

Your Company also actively encouraged cross utilization of resources to avoid the need of hiring from the market, and also to nurture multi-tasking skills in employees. This ensured that all employees of your Company were productively employed, and also helped your Company save on hiring costs, and wherever necessary strengthened its hiring process to ensure economical quality hires.

While being cost conscious during the CIRP period, your Company implemented projects through cross functional teams to help it move into the next phase of leadership and strategic partnership. This ensures the system and its machinery to remain active for the business continuity and growth. Furthermore, your Company has also drawn out its a succession plans to maintain business readiness for the next stages of change.

During this period, your Company re-assessed all its internal policies and practices and brought in measures to make them more compliant as well as mitigate risks that it was being exposed to.

During the end of the fiscal your Company, along with the entire globe, faced an unprecedented situation of a pandemic. Business Continuity and Employee Safety Plan was activated to ensure compliance with all national and local guidelines, at the same time maintaining continuity of business operations, specific functional guidelines were designed. Continuity of all functions was ensured without any downtime through a robust BCP strategy and collaborative cross-functional efforts.

Engagement through effective communication

Your Company also enhanced its internal communication channels to ensure effective two-way communication for information to reach the last mile. This was done to ensure all information about large changes in your Company are available to employees from management first rather than external information sources which may not always be reliable.

Engagement programs focusing on learning and alignment of your Company to the larger community were put together for employees of your Company to foster confidence among employees, as well as cross-functional programs to boost team- spirit among peers.

With the commencement of CIRP the continuous engagement with the entire workforce through Webinar/Townhall meetings was initiated to ensure constant flow of information and keep the morale of the workforce high and reduce attrition.

With the various interventions, throughout the functions your Company saw a sharp decrease in attrition. As on March 31, 2020, your Companys total workforce was 2,179 as against 3,320 on March 31,2019. The manpower is in line with your Companys operations and geographical reach, especially in Tier II and Tier III cities, towns and peripheral suburbs.

Learning and Development

The Learning and Development (L&D) departments role is to align employee goals and performance with that of your Companys. The department is responsible for identifying skill gaps among employees and teams and then develop training modules and deliver them to bridge those gaps basis your Companys learning strategy.

The department operates on the foundation that your Companys employees are the greatest asset. The department plays a critical role liaising with cross functional teams to identify employee learning needs, ensure the employees are able to meet the challenges of their jobs and that they are aligned to the business goals of your Company. It has been working closely with the learners to ensure the training interventions improve productivity and motivate them to perform with renewed vigor and zeal. The L&D team is evolving to constantly upgrade their skills and knowledge and utilize the knowledge and expertise of Subject Matter Experts from the different functions to meet your Companys goal. The team has utilized their in-house capability to develop content and train the employees on their online learning management system, classroom and virtually through the webex platform. The L&D team has been constantly training the employees on the changes in the policies and documentation process to ensure all operate with the new plans.

In the last financial year training was imparted to 2,100 on roll employees and 2,543 off roll employees, covering all Mandatory Modules which ensures the employees are aware and updated on important policy guidelines namely Information Security, Know Your Customer & Anti Money Laundering, Prevention of Sexual Harassment, and Code of Business Ethics.

The Mandatory Induction program forthe new joinees is conducted Online as part of the employee on boarding, it provides an overall view of your Companys vision and mission, ensures the new joinee is aware and updated of the important policy guidelines namely Information Security, Know your Customer and Anti Money Laundering, Prevention of Sexual Harassment and Code of Business Ethics.

In keeping with its importance and in compliance with National Housing Bank norms, trainings on Know Your Customer Anti Money Laundering with a total coverage of 2,075 employees were also imparted at all levels within your Company.

Taking concrete steps based on the study findings, is helping your Company in building a stronger and more engaged workforce. Customer focus remains at the core of all L&D initiatives.

Your Companys 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.

To further enable insurance product solicitation, procuring and servicing on behalf of your Company, 203 employees were identified across Branch Network of your Company to be the ‘Insurance - Specified Person(s), who were sponsored post commencement of CIRP to undergo Insurance Regulatory and Development Authority of India (IRDAI) prescribed mandatory 75 Hours of Training and Examination to fulfill requirements of obtaining Certificate of Registration with IRDAI.

EMPLOYEE REMUNERATION

The Board of Directors of your Company has been superseded by the Reserve Bank of India on November 20, 2019 as noted above. The ratio of the remuneration of each erstwhile director holding position of director during the year under review to the median employees 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 Report as “Annexure - 4”.

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 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 your Company excluding the said statement. Any Member interested in obtaining a copy of the said statement may write to the Secretarial Department at the Registered Office of your Company.

EMPLOYEES STOCK OPTION SCHEME (ESOP)/ EMPLOYEE STOCK APPRECIATION RIGHTS (ESARs)

Your Company had formulated employee stock option schemes/ employee stock appreciation rights plan with an intent to reward the employees of your Company for their performance and to motivate them to contribute to the growth and profitability of your Company.

During the financial year under review, all the Employee Stock Appreciation Rights (ESARs) granted under Grant IV and Grant VI of the ESAR Plan 2015 were completed on account of exercise/ lapse from time to time of all the options granted thereunder. The applicable disclosures as stipulated under SEBI (Share Based Employee Benefits) Regulations, 2014 (SEBI SBEB Regulations), for the financial year under review, form part of this Report as “Annexure - 5” and in terms of Regulation 14 of SEBI SBEB Regulations the said details are also available on the website of your Company at the URL: https://www.dhfl.com/investors/esos- esar-disclosures

Your Company has received a certificate from its auditors confirming that the Employee 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 your Company. The said certificate would be available for the inspection by the Members of your Company.

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 Energy

The operations of your Company are not energy intensive. However, your Company has always been conscious of the need for conservation of energy and has been sensitive in making progress towards this initiative. Adequate measures are always taken to ensure optimum utilisation and maximum possible saving of energy at the offices and branches of your Company.

Your Company constantly improves on and installs various energy saving devices. Your Company replaces old electrical drives and has been switching from conventional lighting systems to LED lights at most of the branches in metro areas which also conserve energy.

B. Technology Absorption

Your Company has taken positive steps towards digital transformation to enhance customer experience, provide superior customer service, improve operational efficiency to support evolving business needs. However, during CIRP, an end-to-end Information Technology review was undertaken through a third party expert and the gaps were identified in the legacy as well Tech 2.0 which has been under implementation for past 5 years. During the CIRP period, some of the gaps are being addressed by initiating appropriate BPR measures and enhancing the current systems.

By expanding digital footprint, your Company has embraced various mobility solutions to improve productivity and efficiency in customer on boarding, collections and technical verification processes. In addition, your Company is doing continuous enhancement of the core technology architecture to provide a scalable future ready platform to support and enable your Companys growth. The newtechnology platform covers all functions starting from sales to loan underwriting and management, customer relationship management, financial accounting and collections management.

Your Company is also adopting various analytics solutions to provide better insights about its customers and internal operations, and take informed decisions based on advanced and predictive analytics, especially during the CIRP.

C. Foreign Exchange Earnings and Outgo

There were no foreign exchange earnings during the year.

During the financial year under review, your Companys expenditure in foreign currency decreased by 57.09% from Rs 198.79 crore in the financial year ended March 31,2019 to Rs 85.30 crore for the financial year ended March 31, 2020. The decrease in foreign exchange expenses was due to non payment of interest on external commercial borrowings.

INSURANCE

Your Company has insured its various properties and facilities against the risk of fire, theft, risk of financial loss due to fraud and other perils, etc. and has also obtained Directors and Officers Liability Insurance Policy which covers your Companys Directors and Officers (employees in managerial or supervisory position) against the risk of financial loss including the expenses pertaining to legal representation expenses arising in the normal course of business. Also the Public Liability policy availed covers the legal liability arising out of third party bodily injury or third party property damage in Company premises.

Further, your Company has obtained money policy to cover “money in safe and till counter and money in transit” for your Companys branches and various offices. All the vehicles owned by your Company are also duly insured.

Your Company also has in place a group mediclaim policy for its employees and their dependent family members, as well as group term life and group personal accident policies, which provide uniform benefits to all the employees.

Your Company is registered with Insurance and Regulatory Development Authority of India (IRDAI)to act as a Corporate Agent (Composite) for distribution and solicitation of life and general insurance products of Pramerica Life Insurance Limited (formerly DHFL Pramerica Life Insurance Limited), Cholamandalam MS General Insurance Company Limited and Navi General Insurance Limited (formerly DHFL General Insurance Limited), respectively. However, duringtheCIRP, all the above engagements are being reviewed.

Your Company serves as group administrator for group health and/or personal accident insurance policy for its customers and also solicits property (fire & standard perils) retail general insurance product to ensure adequate insurance coverage for the properties financed during the tenure of the loan.

Your Company also has in place a policy on Open Architecture for Retail Insurance Business, in terms of the Insurance Regulatory and Development Authority of India (Registration of Corporate Agents) Regulations, 2015, which lays down the manner of soliciting and servicing insurance products and addresses the manner of adopting the philosophy of open architecture and its implementation.

VIGIL MECHANISM (WHISTLE BLOWER POLICY)

Pursuant to the provisions of Section 177 (9) and (10) of the Companies Act, 2013 read with Rule 7 of Companies (Meetings of Board and its Powers) Rules, 2014 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, your Company has in place a Whistle Blower Policy, which provides for a vigil mechanism that encourages and supports its Directors and employees to report instances of illegal activities, unethical behavior, actual or suspected, fraud or violation of your Companys Code of Conduct and Code of Business Ethics.

The said policy is available on the website of your Company at the URL: https://www.dhfl.com/docs/default-source/investors/whistle- blower-policy/whistle-blower-policy-revised.pdf

During the CIRP, your Company appointed a Vigilance Officer and reviewed the Staff Accountability Policy with the intent to implement the relevant guidelines in true spirit.

PREVENTION, PROHIBITION & REDRESSAL OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE

As per the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, your Company has in place a Policy on Prevention, Prohibition & Redressal of Sexual Harassment of Women at Workplace and has a robust mechanism to redress the complaints reported thereunder. An Internal Complaints Committee has been constituted, which comprises of internal members and an external member who has experience in the subject field.

Pursuant to the provisions of Section 22 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, the complaints received thereunder and the details relating thereto are as follows:

a. Number of complaints received in the year: Nil

b. Number of complaints disposed of during the year: Nil

c. Number of cases pending more than ninety days: Nil

d. Number of workshops or awareness programmes against sexual harassment carried out: Your Company on a regular basis sensitizes its employees on prevention of sexual harassment through various workshops, awareness programmes which are conducted at branch, regional, zonal and national level.

e. Nature of action taken by the employer or district officer: Nil

RISK MANAGEMENT

Your Companys Risk management setup was strengthened and made effective with the commencement of CIRR

Your Company has a Risk Management Committee (RMC), which post commencement of the CIRP has been revived with the approval of the Advisory Committee. CRO was made to report to the Chief Executive Officer and directed to establish Operational Risk Management Committee (ORMC), Credit Risk Management Committee (CRMC) and Information Security Committee that comprises of members of its senior management team and these were established during CIRP. These committees meet on a periodic basis to assess the risk management system and the emergent risks your Company is exposed to.

Your Company is striving to manage its risk in a proactive manner and has adopted structured and disciplined approach to risk management by developing and implementing risk management framework. With a view to manage its risk effectively, your Company has put in place an Enterprise Risk Management Policy which covers a formalized Risk Management Structure, along with other aspects of Risk Management i.e. Credit Risk Management, Operational Risk Management and Fraud Risk Management. The Risk Management Committee of your Company, on periodic basis, assess the risk management systems, processes and minimization procedures of your Company. During the financial year under review, during the CIRP period, the risk management policy of your Company was revised to align the same with the changing business environment.

During thefinancial year under review, as per the NHB requirement, your Company appointed the Chief Risk Officer (CRO) in July 2019 and set-up the Enterprise Risk team in September 2019. The Internal Audit function continues to report to the CRO as an interim arrangement during the presently ongoing CIRP process.

The Comprehensive Risk Management Policy was amended on October 17, 2019 to create the Enterprise Risk Management Policy to establish the Risk Management structure and spell out the roles and responsibility of ORMC and CRMC. Further, the details of various aspects of Operational and Credit Risk Management along with assessment process and procedures were included in the subject policy.

BUSINESS CONTINUITY PLAN

Your Company has put in place a new Business Continuity Policy (BCP) framework in place which is based on the 4 pillars viz. People, Processes, Information Technology & Infrastructure and Vendor Management. As per the new Policy, the BCP structure has been made more clear and precise. The new policy framework encompasses a wide range of subject matters as follows:

- BCP planning and readiness for all types and levels of disasters;

- BCP Invoking - redefined communication structure to remove the funnel approach and enable real-time action and reporting;

- Business Impact Analysis (BIA) - with details of activities and processes that would be carried out during disaster;

- Function Continuity Plan - to ensure continuity of each functions operations against the Business Impact Analysis (BIA);

- End-to-end BCP Management through R, A, C, I matrix (Responsible, Accountable, Consult, Inform) to cover People, Processes, Information Technology & Infrastructure and Vendor Management;

- Vendor Contingency Plan - Vendor Readiness and BCP management;

- BCP Information - Version Control; Common FTP Server (restricted users), Knowledge base on Policy (workline for all employees), Policy extract on website (all stakeholders).

Adherence to NHB guidelines - Circular-90-2017-18 on presence of BCP for IT;

- A BCP Committee comprising of top management team of your Company has been formed to oversee the BCP implementation and monitoring.

NOMINATION (INCLUDING BOARDS DIVERSITY) REMUNERATION & EVALUATION POLICY (NRE POLICY) & PERFORMANCE EVALUATION

Priorto supersession of the Board of Directors of your Company by the RBI on November 20, 2019, your Company had combination of Executive and Non-Executive Directors as well as Independent Directors including a Woman Independent Director on its Board of Directors.

The Nomination (including Boards Diversity), Remuneration & Evaluation Policy (NRE Policy) of your Company, has been formulated as per the provisions of Section 178 of Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. Additional details with respect to the said policy are given in the Report on Corporate Governance forming part of this Annual Report.

The said policy is available on the website of your Company at the URL: https://www.dhfl.com/docs/default-source/investors/ nomi nation-/in cl uding-boards-diversity)-remune ratio n-and- evaluat ion-policy-of-the-company/nomi nation-remuneration- evaluation-policy-revised, pdf

The Board of Directors of your Company was superseded by RBI on November 20, 2019 as noted above. No separate meeting of the Independent Directors was held during the financial year under review nor has the evaluation of performance of Directors, Board or the Committees thereof was carried out till the appointment of Administrator by RBI.

Since your Company is undergoing Corporate Insolvency Resolution Process under the IBC Code, the role of the Board and Committees is being fulfilled by the Administrator supported by the Advisory Committee.

CORPORATE SOCIAL RESPONSIBILITY

Your Company has in place a Corporate Social Responsibility Policy (CSR Policy), as per the provisions of the Companies Act, 2013 and Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended, which, inter-alia, lays down the guidelines and mechanism for undertaking socially useful projects for welfare and sustainable development of the community at large.

Education being the key to social empowerment, your Company had adopted Early Childhood Care and Education (ECCE) as a core thematic area for its CSR and implemented it through the wholly owned subsidiary of your Company viz. DHFL Changing Lives Foundation. Further, in keeping with its presence in the financial sector of the country and the sectors responsibility to help the lower income segment, your Company adopted ‘Financial Literacy” and “Skills Development” as two other key areas for its CSR investments.

Your Company has been incurring losses during the last two financial years. The loss suffered by your Company during the year under review was Rs 13,612.32 crore vis-a-vis loss of Rs 1036.05 crore for the financial year 2018-19. During the year under review, your Company faced severe liquidity crunch, which inter-alia resulted in defaults in payment of dues to the deposit holders, lenders etc., consequently the credit rating of your Company has been downgraded to the default rating in June 2019.

The Reserve Bank of India (RBI) superseded the Board of Directors of your Company as mentioned earlier in the Report.

In view of the above, your Company could spend only Rs 0.06 crore during the year under review and it was not possible to spend the full amount as required under Section 135 of the Companies Act, 2013. Your Company is however committed to remain a socially responsible organization supporting the national aspirations and missions. The Annual Report on CSR activities forms part of this Report as “Annexure - 6”.

LISTING OF SHARES

The Equity Shares of your Company continue to remain listed on BSE Limited and the National Stock Exchange of India Limited.

DISTRIBUTION NETWORK

The distribution network of your Company is designed to reach out to the Lower and Middle Income (LMI) segment and tap a growing potential customer base throughout India. Your Company maintains a pan-India marketing and distribution network with a presence across at 305 locations throughout India, including 182 Branches, 99 Micro Branches, 17 Zonal/ Regional/CPU Offices, 4 Disbursement Hubs, 1 Registered Office, 1 Corporate Office and 1 National Office as on March 31, 2020. Additionally, as on March 31, 2020 your Company had international representative offices located in London and Dubai. However, as part of expenditure control and efficicency improvement, these overseas representative offcies are in the process of being closed during the CIRP period.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

The Reserve Bank of India superseded the Board of Directors of your Company and appointed Mr. R. Subramaniakumar as the Administrator (the Administrator) of your Company on November 20, 2019 and accordingly powers of the Board are vested in the Administrator. Further, RBI, in exercise of powers conferred under Section 45-IE 5(a) of the RBI Act, 1934, on November 22, 2019 constituted a three member Advisory Committee to assist the Administrator of your Company in discharge of his duties. The members of the Advisory Committee are Dr Rajiv Lai I, erstwhile Non-Executive Chairman, IDFC First Bank Ltd., Mr. N S Kannan, Managing Director and CEO, ICICI Prudential Life Insurance Co. Ltd. and Mr. NS Venkatesh, Chief Executive, Association of Mutual Funds of India.

The Board of Directors of your Company as at November 20, 2019 (i.e. the date of supersession of the erstwhile board of directors) consisted of six Directors, out of which three were Independent Directors, two were Non-Executive Directors and one was Executive Director designated as a Chairman & Managing Director.

The following changes occurred in the composition of the erstwhile Board of Directors and Key Managerial Personnel during the financial year under review and until the date of this Report in addition to the changes as mentioned above:

Members of your Company at the 35th Annual General Meeting (AGM) held on September 28, 2019 had approved the appointment of the following as directors (1) Mr. Alok Kumar Misra (DIN: 00163959), Mr. Sunjoy Joshi (DIN: 00449318) both effective from March 26, 2019 and Dr. Deepali Pant Joshi (DIN: 07139051) effective from May 8, 2019 were appointed as Independent Directors of your Company for a period of five consecutive years (2) Mr. Srinath Sridharan (DIN: 03359570), was appointed as a Non-Executive Director of your Company effective from March 26, 2019, liable to retire by rotation; and (3) Mr. Dheeraj Wadhawan (DIN: 00096026), Non-Executive Director who retired by rotation at the said AGM and being eligible, offered himself for re-appointment and was re-appointed. All these directors were superseded by RBI exercising the powers vested with RBI as explained earlier in the Report.

During the year under review, no stock options were issued to any of the Directors of your Company.

During the year under review, Mr. Vaijinath M Gavarshetty was appointed as the Chief Executive Officer (CEO) of your Company effective from October 1,2019 by the erstwhile Board of Directors of your Company. Mr. Vaijinath M Gavarshetty assumed his office as CEO of your Company with effect from November 21, 2019.

The positions of Chief Financial Officer and Company Secretary were vacant for long and the following were appointed by Administrator and confirmed / ratified by Committee of Creditors (COC), as the power for appointment is vested with COC.

Mr. Sunil Kumar Bansal was appointed as the Chief Financial Officer of your Company with effect from December 4, 2019 and Mr. Satya Narayan Baheti was appointed as the Company Secretary of your Company with effect from December 9, 2019.

BOARD MEETINGS

During the year 2019-20, prior to supersession of Board of Directors by RBI, 10 (Ten) Board Meetings were convened and held. The intervening gap between the said Board Meetings was within the period prescribed under the Companies Act, 2013 and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The details of the Board composition, its meetings held during the year along with the attendance of the respective Directors thereat are set out in the Report on Corporate Governance forming part of this Annual Report.

Board Committees

Prior to the supersession of the Board of Directors by the RBI, your Company had a duly constituted Audit Committee as per the provisions of Section 177 of the Companies Act, 2013 and provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The erstwhile Board of Directors also had other committees which included Nomination and Remuneration Committee, Stakeholders Relationship Committee, Risk Management Committee, Finance Committee, Corporate Social Responsibility Committee, Review Committee for Declaration of Wilful Defaulters to Credit Information Companies (CICs), Special Committee for Sale of Strategic Investments and Special Committee for Resolution Plan.

The details of the composition of the erstwhile Committees of the Board including their respective constitution, role as existing till November 20, 2019 are included in the Report on Corporate Governance forming part of this Annual Report.

With the Corporate Insolvency Resolution Process (CIRP), Advisory Committee functions as various sub committees as well, excepting those exempted for Company under CIRP. Many items which were not regularly monitored by erstwhile Board has also been taken up for discussion in the advisory Committee Meeting.

ADVISORY COMMITTEE

RBI vide its Press Release dated November 22, 2019, in exercise of the powers conferred under Section 45 IE 5(a) of the RBI Act, constituted a three (3) member Advisory Committee to assist the Administrator in discharge of his duties and to advise the Administrator in the operations of the your Company during the Corporate Insolvency Resolution Process (CIRP).

Further, RBI vide Press Release dated December 4, 2019, notified that RBI has decided that even after initiation of CIRP of your Company vide NCLT order dated December 3, 2019, the Advisory Committee shall continue as the Advisory Committee constituted under Rule 5 (c) of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019. The Advisory Committee shall advise the Administrator in the operations of your Company during the Corporate Insolvency Resolution Process (CIRP).

The Administrator is the Chairman of the meetings and the minimum quorum is Chairman and atleast two advisors. As on the date of this Report, 41 Advisory Committee Meetings were held covering a very wide range of agenda pertaining to the CIRP matters as well as your Companys status as a going concern. The Advisory Committee oversees the operations of your Company and also the CIRP. They undertake the task as otherwise vested with the Board of your Company. They function akin to Board.

PARTICULARS OF CONTRACTS AND AGREEMENTS WITH RELATED PARTIES

Your Company has in place a Related Party Transaction Policy as per the provisions of Companies Act, 2013 read with the rules made thereunder and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, which describes the related party transactions requiring requisite approvals and requirements of appropriate reporting and disclosure of transactions between your Company and its related parties. The said policy also defines the materiality of related party transactions and lays down the procedures of dealing with such transactions.

As per the records of your Company, after the CIRP there were no material related party transactions entered by your Company. Thus, the disclosure of related party transaction as per Section 134(3)(b) of the Companies Act, 2013 in the prescribed Form AOC - 2 is not applicable for CIRP period.

For the financial year ended March 31, 2020, the details of the related party transactions entered into by your Company in the ordinary course of business at arms length basis are mentioned in the notes to the accounts forming part of the audited (standalone) financial statements.

As part of the CIRP, your Company is required to undertake Related Party Transactions after approval of the Committee of Creditors as per the provisions of Section 28 of the Code. According your Company has identified related parties as per Section 5(24) of the Code and appropriate approvals are sought from CoC for such transactions. The TAA appointed in respect of the Company has also provided a list of Related Parties as per Sec. 5(24) of the Code as part of his Report.

Pursuant to Housing Finance Companies-Corporate Governance (National Housing Bank) Directions, 2016, the Related Party Transaction Policy of your Company forms part of this Report as “Annexure - 7”. The said policy is available on the website of your Company at URL https://www.dhfl.com/docs/default-source/ investors/re I ated-party-transaction-po I icy-of-th e-company/ related-party-transaction-policy_27-06-2018.pdf.

As RBI superseded the erstwhile Board of Directors of your Company owing to lack of Governance, amongst various other reasons, the present management emphasizes good governance practices as paramount for your Company.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATOR OR COURT OR TRIBUNALS

There were no significant and material orders passed by any Regulator or Court or Tribunal which would impact the going concern status of your Company and its future operations except as mentioned below:

An Order dated May 29, 2020 was passed by the Adjudicating Officer(AO) of SEBI levying a penalty of Rs 20 lakh on your Company in relation to shortfall / non creation of Debenture Redemption Reserve during past 3 years (financial year 2016-17 onwards) / Debenture Reserve Fund (April- 2019) and late submission of financial results for financial year 2018-19, both pertaining to the period before initiation of CIRP. Based on advice of the Legal Advisors, your Company has filed an appeal in the matter with the Honble Securities Appellate Tribunal, mainly on questions of jurisdiction and interpretation of legal provisions while not defending the actions/inactions of the earlier management in the subject matter.

Further, the interim moratorium / moratorium u/s 14 of IBC as declared in respect of your Company, prohibits all of the following, namely:

(a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;

(b) transferring, encumbering, alienating or disposing off by the corporate debtor any of its assets or any legal right or beneficial interest therein;

(c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);

(d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

INTERNAL AUDIT & INTERNAL FINANCIAL CONTROL AND ITS ADEQUACY

Your Company has an Internal Audit Department, which provides comprehensive audit coverage of functional areas and operations of your Company to examine the adequacy of and compliance with policies, procedures, statutory and regulatory requirements. Annual audit plan is placed before the Audit Committee / Advisory Committee and adherence to the plan is reported quarterly to the Audit Committee / Advisory Committee.

Compliance status of audit observations and follow up actions thereon are reported to the Audit Committee / Advisory Committee. The Audit Committee / Advisory Committee reviews and evaluates adequacy and effectiveness of your Companys internal control environment and monitors the implementation of audit recommendations.

Internal Audit is an independent and objective assurance and consulting activity designed to add value and improve your Companys operations. The Internal Audit function continues to report to the Chief Risk Officer (CRO) of your Company as an interim arrangement during the presently ongoing CIRP process. Internal Audit function is accountable to the Board of Directors through the Chairman of the Audit Committee / Advisory Committee through the Administrator. Internal audit also assists the management in identifying operational risks for revenue leakage and opportunities for cost savings and revenue enhancements; ensures working within the regulatory and statutory framework and facilitates early detection and prevention of frauds.

However, during the CIRP period it is observed that internal audit effectiveness was lacking during the earlier period and its independence is being established now with a view to prevent the lapses identified by the transaction avoidance auditor.

SECRETARIAL AUDIT REPORT, ANNUAL SECRETARIAL COMPLIANCE AUDIT REPORT AND CORPORATE GOVERNANCE CERTIFICATE

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI Listing Regulations), the management of your Company appointed M/s. Vinod Kothari & Company, Practicing Company Secretaries, to undertake the Secretarial Audit of your Company for the financial year 2019-20. The Secretarial Audit Report for the financial year 2019-20 forms part of this Report as “Annexure - 8”.

Pursuant to SEBI Circular ClR/CFD/CMD1/27/2019 dated February 8, 2019, Amruta Giradkar and Associates, Practicing Company Secretaries, Mumbai undertook the Annual Secretarial Compliance Audit of your Company for the financial year 2019- 20 (ASCR). The ASCR has been submitted by your Company to BSE Limited and the National Stock Exchange of India Limited on July, 29, 2020 and the same is available on the websites of Stock Exchanges and on the website of your Company.

The certificate by Ms. Amruta Giradkar & Associates, Practicing Company Secretary, with relation to compliance with the conditions of Corporate Governance as stipulated in Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms part of this Report as “Annexure - 9”.

The Secretarial Audit Report contains certain observations at Annexure II and certain qualifications at Annexure III of the Report; similarly the ASCR and CGC also contain certain observations, qualifications and remarks. The responses to all the aforesaid observations, qualifications and remarks are given herein below:

Response to para 1 of Annexure II and paras 1.3, 3, 5.1, 5.2, 6.2, 6.3, 6.4 of Annexure III to the Secretarial Audit Report: Pursuant to the provisions of Companies Act, 2013 (the Act) and the General Circular No. 08/2020 dated March 6, 2020 issued by the Ministry of Corporate Affairs (MCA), your Company has duly filed the Order passed by the Honble NCLT, Mumbai on December 3, 2019 with MCA in e-form INC-28. The said form is pending for approval with the concerned ROC. Your Company has also requested the concerned ROC for approval of the said form. After completion of the action with relation to the said e-form INC-28 by ROC and other relevant authorities, your Company would be able to file other pending forms with the MCA as mentioned in the aforesaid paras of the secretarial audit report.

Response to para 2 of Annexure II to the Secretarial Audit Report: Pursuant to the aforementioned Order dated December 3, 2019 passed by the Honble NCLT, Mumbai the Corporate Insolvency Resolution Process (CIRP) has been initiated for your Company and the interim moratorium / moratorium has been commenced under Section 14 of the Code, effective from November 29, 2019. As on March 31, 2020, an amount equal to Rs 4,96,780 was transferable by your Company to IEPF pertaining to the Interim Dividend 2012-13. Further, as on March 31,2020, amount due for transferto IEPF was Rs 59,27,629 with respect to unpaid/unclaimed matured deposits along with the interest accrued thereon. However, the same have not been transferred as any alienation of the assets of your Company post insolvency commencement date is prohibited by the moratorium under Section 14 of the Code, as per the legal advise received by your Company from the legal advisor. Further, as per Section 238 of the Code, provisions of IBC prevail over any other law to the extent of any inconsistency. Therefore, as per the legal advise received by your Company from the legal advisor, if these amounts are transferred to IEPF post insolvency commencement date (i.e. after December 3, 2019) or any time during the moratorium period it would violate the provisions of Section 14 of the Code read with Rule 5(b)(i) of FSP Rules. Accordingly, your Company has requested the IEPF Authority vide its letter dated April 15, 2020 to advise your Company on how the compliance with Section 125(2)(c) of the Companies Act, 2013 may be achieved. It has also been brought to the notice of IEPF Authority that it may file a proof of claim in the relevant form of CIRP Regulations for the monetary claims against your Company, arising prior to insolvency commencement date, which will be duly evaluated on merits by the Administrator. The dues arising from such claims will be addressed on the basis of the outcome of the CIRP and considered in accordance with the due process as laid out in the Code read with the FSP Insolvency Rules.

Response to para 3 of Annexure II to the Secretarial Audit Report: As per the provisions of the Companies Act, 2013, Independent Directors of your Company are required to hold at least one meeting in a financial year, without the attendance of non-independent directors and members of management. The last meeting of the Independent Directors was held on January 25, 2019. However as the board was superseded in the month of November, 2019, no such meeting was held after the last meeting held on January 25, 2019.

Response to para 4 of Annexure II to the Secretarial Audit Report; and point no. 3(a) & 3(b) of CCG and paras (b)2, (b)5, (b)7 and (b)8 of the ASCR: Since the Compliance Officer i.e. Company Secretary, Chief Executive Officer and Chief Financial Officer of your Company had resigned in the last quarter of the Financial Year 2018-19, the Board of Directors pursuant to resolution passed on March 29, 2019, had inter-alia, authorised the erstwhile Chairman & Managing Director of your Company to submit any filings or communications to the stock exchanges or any other authorities as may be required under applicable laws and to sign any letters, communications or any other related documents in this connection.

Response to para 5 of Annexure II to the Secretarial Audit Report: As per Reg. 54(1) of SEBI Listing Regulations, in respect of listed NCDs, your Company is required to maintain hundred per cent asset cover sufficient to discharge the principal amount at all times for the non-convertible debt securities issued. Your Company having come under CIRP from December 3, 2019, the assets coverage shortage related aspects are expected to be addressed under a resolution plan to be approved by NCLT, which would provide for settlement of dues of creditors as per the provisions of the IBC Code.

Response to para 6 of Annexure II to the Secretarial Audit Report and para (b)11 of ASCR: Your Company has made the disclosure by way of a letter to the Stock Exchanges with reference to para 3(C2) of SEBI Circular No. SEBI/HO/CFD/CMD1/CIR/P/2019/140 dated November 21, 2019 to the effect that your Company is currently under moratorium pursuant to Section 14 of the IBC Code since November 29, 2019 and hence, your Company is not in a position to make payment of interest or principal to any of the lenders of your Company including the NCDs holders and that the payments to the lenders remains in abeyance and will be subject to the outcome of the CIRP process.

Response to para 7 of Annexure II to the Secretarial Audit Report: As per the regulation 7(2)(a) & (b) of the SEBI (Prohibition of Insider Trading) Regulations, 2015 the promoters, directors, designated persons etc. are required to inform your Company of trades falling under the said regulations, and no provision of the said regulations requires your Company to follow specific process for the same. However, your Company has taken note of the observation and would endeavour to take appropriate action in this regard subject to the financial and other constraints.

Response to para 8 of Annexure II to the Secretarial Audit Report: In response to NHBs letter dated November 20, 2019 with regard refinance recall notice, and February 5, 2020 and February 24, 2020 with regard to Assets of Third Party, your Company vide its letter dated March 17, 2020 submitted its clarifications and justification to NHB. Further, NHB vide its letter dated May 4, 2020 did not accept your Companys justification and on July 27, 2020 NHB filed a petition in the National Company Law Tribunal, Mumbai in the subject matter which is being contested by your Company.

Response to para 9 of Annexure II to the Secretarial Audit Report: In response to the NHB Show Cause Notice dated September 2, 2019, the erstwhile management of your Company had submitted its replies vide letters dated September 17, 2019 and November 7, 2019, stating therein that there was no non-compliance and that sufficient liquid assets in terms of NHB guidelines have been maintained.

Response to para 10 of Annexure II to the Secretarial Audit Report: Statutory Auditors certifies on annual basis with regard adherence to Para 3 of the NHB Directions which impose limits on public deposits vis-a-vis the net owned funds. The statutory auditors have certified Schedule II for half year ended September, 2019 based on the unaudited financial statement as on September 30, 2019. It may be added here that the net owned funds figure as on March 31,2020 was negative.

Response to para 1.1 of Annexure III to the Secretarial Audit Report: Since the board resolution passed was subject to approval of the Members of your Company and Board of Directors did not have final authority to implement the action stated in the resolution, Form MGT 14 in respect of the said board resolution was not filed.

Response to para 1.2 of Annexure III to the Secretarial Audit Report: Your Company, vide letter dated April 17, 2020 has advised the erstwhile director to sign the minutes, being related to pre-CIRP period and the communication and co-ordination with the erstwhile directors for signing the same is in process. Further, as per the provisions of the Companies Act, 2013 read with the Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI), if a director does not comment on the draft minutes of the Board / Board Committees within 7 days of such circulation of draft minutes, the said minutes shall be deemed to have been approved by such director.

Response to para 1.4 of Annexure III to the Secretarial Audit Report: The permission of Board of Directors was not sought as required under the provisions of Companies Act, 2013 as the matter was not bought to the notice of the board by the concerned director, period pertain to erstwhile management Response to para 1.5, 1.6 and 8.1 (ii) of Annexure III to the Secretarial Audit Report and para (b) 1, (d)3, (d)4 of the ASCR: The erstwhile management of your Company could not appoint within the prescribed time limit owing to various factors, hence there was a delay. However, they appointed Mr. Vaijinath M Gavarshetty, as CEO vide their appointment letter dated October 1, 2019. The Administrator after assuming his office upon supersession of Board of Directors by RBI, appointed the Chief Financial Officer and Company Secretary with the approval / ratification of COC.

Response to para 2.1 of Annexure III to the Secretarial Audit Report and para (b)6 of ASCR and point no. 3(c) of CCG: During the financial year 2018-19 i.e. prior to supersession of the Board of Directors by the RBI, your Company had granted short term loan of Rs 30 crore to Wadhawan Global Capital Limited (WGC). However, instead of obtaining prior approval of the Audit Committee, the said related party transaction was ratified by the erstwhile Audit Committee members on May 3, 2019 and by the erstwhile Board of Directors on May 5, 2019 i.e. within the period of three months prescribed under the Companies Act, 2013.

Response to para 2.2 of Annexure III to the Secretarial Audit Report: In March, 2018, your Company had granted a Property Term Loan of Rs 27.97 crore to Wadhawan Holdings Private Limited, a related party of your Company without taking prior approval of Audit Committee/Board of Directors. The said transaction was ratified by the erstwhile Audit Committee members and the erstwhile Board of Directors on July 13, 2019.

Response to para 4.1 ,i and 8.4 of Annexure III to the Secretarial Audit Report: Your Company has filed an appeal before Securities Appellate Tribunal (SAT) against the Order No. Order/SR/SM/2020- 21/7991/25 dated May 29, 2020 passed by Adjudicating Officer of SEBI imposing the penalty on your Company the same is pending before the SAT. SAT vide its Order dated July 15, 2020 has inter-alia directed that the matter to be listed on September 15, 2020 and that no recovery shall be made for your Company until further order.

Response to para 4.1.ii of Annexure III to the Secretarial Audit Report: Your Company had defaulted in its repayment obligations in June 2019 and as a result, the ‘no default statement was not applicable. However, post discussions with rating agencies, the statement in a suitably modified format was submitted regularly.

Response to para 4.2 of Annexure III to the Secretarial Audit Report: Post March 2019, upon resignation of CEO and CFO of your Company, CEO/CFO certificate to the concerned issuing and paying agent (IPA) could not be issued. Your Company had made relevant disclosures in the public domain (through stock exchanges) about the default in payment of commercial paper on June 25, 2019. Post that, your Company had also made relevant disclosures about working on a resolution plan under June 7, 2019 circular of RBI.

Response to para 4.3.i of Annexure III to the Secretarial Audit Report: The delay in submission was due to discussions and coordination with AD Bank regarding the compliance and also due to required operational clarity.

Response to para 4.3.ii of Annexure III to the Secretarial Audit Report: Your Companys ECBs had been fully hedged. However, starting June 2019, banks with whom your Company had hedging contracts started pre-terminating the derivative contracts. Your Company had approached few banks to get limits / enter into fresh contracts to cover up the unhedged exposures but was unable to get fresh derivative limits.

Response to para 5.3, 8.1 (i) of Annexure III to the Secretarial Audit Report and paras (b)9, (d)1, (d)2 of ASCR: The reasons for delayed submissions of the financial results for the quarter and financial year ended March 31, 2019, June 30, 2019, September 30, 2019 and December 31, 2020 as per the letters submitted by your Company to the stock exchanges, are as follows:- (a) For March 31,2019: In view of the requirement of submission of the IndAS compliant Audited Standalone and Consolidated Financial Results for the first time requiring additional resources, time and effort as also full time engagement of accounts and finance team in various non-routine audits and due diligence by various parties, there was a delay in submission, (b) For June 30, 2019: In view of the requirement of submission of the quarterly consolidated financial statements becoming applicable from the quarter ended June 30, 2019 requiring additional time and effort as also full time engagement of accounts and finance teams in various non-routine audits and the due diligence by various parties there was a delay in submission, (c) For September 30, 2019: For the delay in submission of the said financial results by your Company was on account of resignation of the erstwhile Statutory Auditors and reasonable time required by the new Statutory Auditors to review the financial results, (d) For December 31, 2019: Since your Company had submitted the financial results for the quarter/ half year ended September 30, 2019 on January 22, 2020 with a delay, hence there was a delay in finalization of financial results for the quarter and nine months ended December 31,2019.

Response to para 5.4 of Annexure III to the Secretarial Audit Report and para (b) 10 of ASCR: The Notice sent to the Members of your Company convening the 35th Annual General Meeting contained the resolution seeking approval of the members of your Company inter-alia for appointment of the M/s. K. K. Mankeshwar & Co. as Statutory Auditors of your Company. The said resolution provided that the appointment of the said auditors shall be at such remuneration, taxes and out of pocket expenses, as may be determined and recommended by the Audit Committee in consultation with the Statutory Auditors and approved by the Board of Directors of your Company, hence, the details of the remuneration were not included in the said Notice.

Response to para 6.1 of Annexure III to the Secretarial Audit Report and para (b)3 of ASCR: There was an inadvertent delay of one day in filing the intimation pursuant to regulation 13 (3) of SEBI Listing Regulations and the said intimation was filed with stock exchanges on October 22, 2019 instead of October 21, 2019.

Response to para 7.1 of Annexure III to the Secretarial Audit Report: The statutory auditors have certified Schedule II for half year ended September, 2019 based on the unaudited financial statement as on September 30, 2019.

Response to para 7.2 of Annexure III to the Secretarial Audit Report: Your Company holds 100% of equity share capital of DHFL Investments Limited (DIL), however, based on the agreement dated March 31, 2017, your Company does not exercise control over DIL and hence is not considered as a subsidiary company for the purpose of preparation of the Ind AS Financial Statements, as per the opinion received by your Company.

Response to para 7.3 of Annexure III to the Secretarial Audit Report: Due to resignation of erstwhile Joint Statutory Auditors of your Company, the audit of the annual returns i.e. return under HFC (NHB) Directions along with the Auditors Certificate - Schedule I and return on prudential norms Schedule II (Capital Adequacy Ratio) for the financial year ended March 31, 2019 could not be completed and hence your Company was not able to submit the same to NHB. However both provisional returns were submitted to NHB. In light of the above and other unavoidable circumstances, the declaration of subsequent quarterly financial results of your Company during the financial year 2019-20 were also delayed as a result of which there were delays in filing of certain regulatory returns with NHB. Howeverthe March 2020 results were published well within the time, despite the complications and your Company being under CIRP.

Response to para 7.4 of Annexure III to the Secretarial Audit Report: As per the ALM Policy of your Company the Asset-Liability Committee (ALCO) meetings are required to be chaired by the CEO and in his absence the meeting is required to be chaired by the CFO. Owing to the resignations of both CEO and CFO of your Company during the quarter ended March 31, 2019 and continuing vacancies in the said positions, the ALCO meetings were headed by a Senior Management Personnel designated as Senior Vice President & Executive Assistant to the Chairman, who was a member of the ALCO committee. However during the CIRP, post November 2019, the meetings are chaired by CEO.

Response to para 7.5 of Annexure III to the Secretarial Audit Report: Your Company had duly registered on the Central Know Your Customer Registry (CKYC) portal and subsequently completed the testing requirements. However, prior to proposed deployment, due to certain internal developments and pending process approvals followed by revisions in the KYC Guidelines and CKYC reporting format requirements, the overall activity was put on hold till further notice. Further, your Company has since concluded on the revised SOP requirements and your Company is coordinating with the CKYC authorities to proceed with retesting your Companys readiness for the process prior to final deployment. All these efforts are being taken only during CIRP period.

Response to para 8.2 of Annexure III to the Secretarial Audit Report: NHB had issued to your Company the Show Cause Notice dated April 12, 2019 and in reply thereto your Company had, inter- alia, submitted to NHB that the resignation of Mr. Harshil Mehta, the erstwhile Joint Managing Director & CEO of your Company with effect from February 13, 2019 and appointment of Mr. Srinath Sridharan as Additional Director in the category of Non-Executive Director of your Company with effect from March 26, 2019 were in the ordinary course of functioning of your Company and that there was no change in the management of your Company which resulted in change in more than 30% of the Directors and also that since there was no non-compliance of Clause 3(i)(c) of Housing Finance Companies-Approval of Acquisition or Transfer of Control (NHB) Directions, 2016, your Company had requested NHB that the said Show Cause Notice and the penalty proposed therein may kindly be withdrawn. However, the said submission was not accepted by NHB and penalty of Rs 5,000 was levied on your Company by NHB, which has been duly paid.

Response to para 8.3 of Annexure III to the Secretarial Audit Report: The NHB vide its letter dated 26th September, 2019 had issued a show- cause notice to your Company stating that your Company has breached para 2(b) of the Fair Practice Code issued by your Company and also further violated the NHB Policy Circular NHB (ND)/DRS/Pol. No. 30 dated September 23, 2009. In terms of the said policy requires that the person mortgaging the property need to disclose the name of HFC. The same was not found by NHB. Your Company vide its letter dated October 7, 2019 had requested NHB that the said Show Cause Notice and the penalty proposed therein may kindly be withdrawn. However, the said submission was not accepted by NHB and penalty of Rs 5,000 was levied on your Company by NHB, which has been duly paid.

Response to para 8.5 of Annexure III to the Secretarial Audit Report: During the service tax audit conducted in financial year 2019-20 for the period from 2013-14 to June 2017, the service tax auditors highlighted that service tax was payable on notice pay recovered from employees. As per the view of your Company, service tax is not payable on such notice pay recoveries. However, as the said view of your Company was not agreed, your Company paid the service tax along with applicable interest and penalty on the same.

Response to para (b)4 of ASCR: Provisions of SEBI Listing Regulations provide that an Independent Director of the Company resigns or is removed from the Board of Directors of the listed entity shall be replaced by a new Independent Director at the earliest but not later than the immediate next Board Meeting or three months of such vacancy whichever is later.

STATUTORY AUDITORS

M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration Number 117366W/W-100018) and M/s. Chaturvedi Shah LLP, Chartered Accountants (Firm Registration Number 101720W/W10035) had resigned as the Joint Statutory Auditors of your Company with effect from August 2, 2019 and August 22, 2019, respectively. Members of your Company at the 35th AGM held on September 28, 2019 had appointed M/s. K. K. Mankeshwar & Co., Chartered Accountants (Firm Registration Number 106009W), as the Statutory Auditors of your Company, to fill the casual vacancy created upon resignation of the Statutory Auditors, with effect from August 26, 2019 till the conclusion of 35th Annual General Meeting of your Company, and also from the conclusion of the 35th Annual General Meeting of your Company till the conclusion of the 40th Annual General Meeting of your Company. The same auditor is continued during the CIRP period also, since any change require approval of COC also.

Auditors Report

The Report of the Statutory Auditors to the members for the financial year under review contains disclaimer of opinion and the managements response to the Basis for Disclaimer of Opinion contained in the Statutory Auditors Report (hereinafter referred to as “the Basis for Disclaimer of Opinion”) are as follows:-

The Reserve Bank of India (RBI) had superseded the Board of Directors of Dewan Housing Finance Corporation Limited (Company) and appointed Mr. R. Subramaniakumar as the Administrator of your Company in terms of Section 45-IE of the Reserve Bank of India Act, 1934 (RBI Act). Accordingly, the Administrator is vested with powers of the Board of Directors of your Company, pursuant to the aforesaid press release of the RBI. The RBI, in exercise of powers conferred under Section 45 IE 5(a) of the RBI Act, had constituted a three member Advisory Committee to assist the Administrator of your Company in discharge of his duties. Further, pursuant to an order dated 3rd December, 2019 of the National Company Law Tribunal, Mumbai Bench (NCLT), Corporate Insolvency Resolution Process (CIRP) has been initiated against your Company as per the provisions of the Insolvency and Bankruptcy Code, 2016 (Code).

The Administrator (assisted by the Advisory Committee), at the Advisory Committee Meeting held on June 20, 2020 have inter-alia, considered and taken on record the Ind AS Audited Financial Results (Standalone & Consolidated) of your Company for financial year ended March 31,2020, as per Regulation 33, 52 and other applicable regulations of the SEBI Listing Regulations and in compliance with the Ind AS as per the provisions of the Companies (Indian Accounting Standards) Rules, 2015

Response to point No. 1 of the Basis for Disclaimer of Opinion: The Reserve Bank of India (RBI) vide Press Release dated November 20, 2019 in exercise of the powers conferred under Section 45-IE (1) of the Reserve Bank of India Act, 1934 (RBI Act) superseded the Board of Directors of your Company and appointed an Administrator under Section 45-IE (2) of the RBI Act. Thereafter, RBI vide its Press Release dated November 22, 2019, in exercise of the powers conferred under Section 45 IE 5(a) of the RBI Act 1934, constituted athree (3) Member Advisory Committee to assist the Administrator in the discharge of his duties.

On November 29, 2019, the RBI filed the Petition before the NCLT under Rule 5(a)(i) of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudication Authority) Rules, 2019 (FSP Rules) to initiate CIRP against your Company read with Section 227 of the Code. Accordingly, in terms of Rule 5(b)(i) of the FSP Rules, an interim moratorium came into effect on the filing of the application to initiate CIRP.

Further, CIRP was initiated against your Company under Section 227 read with of Section 239(2)(zk) of the Code and read with Rules 5 and 6 of the FSP Rules by an Order dated December 3, 2019 of the Honble National Company Law Tribunal, Mumbai Bench (NCLT/Adjudicating Authority). The Adjudicating Authority, vide the above Order, appointed the Administrator to perform all the functions of a Resolution Professional to complete the CIRP of your Company as required under the provisions of the Code.

As per the said NCLT order dated December 3, 2019, a moratorium in terms of the Sec. 14 of the Code is applicable on your Company.

The Administrator, Advisors and KMPs have not been able to analyze in depth the accuracy, validity, completeness or authenticity of the information and figures mentioned in the audited financial statements as they have joined after November 20, 2019.

Moreover, the entire Present Management i.e. Administrator, CEO, CFO and CS has been involved in the affairs of your Company for less than four months in the entire financial year 2019-20. Further, since March 25, 2020 lockdown was imposed in the Country on account of COVID-19 causing a complete shutdown of offices which extended beyond the financial year 2020 till May 31,2020.

As a part of CIRP of your Company, a Transaction Audit to determine avoidable transactions in terms of Section 43, 45, 49, 50 and 66 of the IBC Code and an exercise to determine the liquidation value and fair valuation of your Company is underway. These activities could not be conclusively completed till the signing of the financial statements in view of the disruption caused due to the lockdown restrictions. The outcome of such Transaction Audit may provide additional facts/information about the past data with respect to your Company.

The Administrator has signed the audited financials solely for the purpose of compliance and discharging his duties during CIRP period of your Company and in accordance with the provisions of the IBC, read with the Regulations and Rules thereunder, and based on the explanations, clarifications, certifications, representations and statements made by the existing staff of your Company in relation to the data pertaining to the period prior to the joining of the Present Management and does not have personal knowledge of the past affairs, finances and operations of your Company.

Response to point No. 2 of the Basis for Disclaimer of Opinion: The Administrator and the Advisory Committee was set up by the RBI to assist the Administrator in discharge of his duties to exercise oversight on the operations of your Company apart from running the CIRP process in accordance with the provisions of the Code and Regulation under IBC 2016 the Present Management has undertaken various steps and several initiatives recently including various efforts to strengthen the financial policies and processes, functioning of the IT system, loan / security documentation, legal audit, internal financial controls and updating risk control matrices, information security, operational and credit management risk and fraud risk management, through in-house resources and engagement of external professional experts/consultants. The management team has also initiated steps for comprehensive compliance of various applicable Rules and Regulations within your Company. The betterment process is a continuous effort, however, the same could not be fully concluded and implemented by March 31, 2020 due to the time essentially required; and the same is impacted due to the COVID-19 situation and the resultant lockdown The Present Management team believes that these initiatives will strengthen Companys overall governance structure and control environment. On conclusion and implementation of all such initiatives, it is believed that the operational efficiency will improve and operational issues will get addressed.

Your Company will continue to focus on affordable segment of housing and mid-tier segment which will allow it to have a perfect asset mix. Your Company will keep exploring cross-selling opportunities which can play a major role in improving the overall disbursement and profitability.

Response to point No. 3 of the Basis for Disclaimer of Opinion: The Administrator, Advisors and KMPs have not been able to analyze in depth the accuracy, validity, completeness or authenticity of the information and figures mentioned in the audited financial statements as they have joined after November 20, 2019.

Moreover, the entire Present Management has been involved in the affairs of your Company for less than four months in the entire financial year 2019-20. Further, since March 23, 2020 lockdown was imposed in the Country on account of COVID-19 causing a complete shutdown of offices which extended beyond the financial year 2020 till May 31,2020.

The standalone financial results of your Company for the year ended March 31, 2020 have been taken on record by the Administrator while discharging the powers of the erstwhile Board of Directors of your Company which were conferred upon him by the RBI vide its press release November 20, 2019 and subsequently, powers conferred upon him in accordance with the NCLT Order dated December 3, 2019 to run your Company as a going concern during CIRP. Hence the financial statements for the year ended March 31, 2020 have been prepared on “going concern” assumptions.

Response to point No. 4 of the Basis for Disclaimer of Opinion: The Ministry of Corporate Affairs (MCA), has initiated investigation in the month of December 2019, into the affairs of your Company under Section 212(1) of the Companies Act, 2013 through Serious Fraud Investigation Office (SFIO). Further, Enforcement Directorate (ED) has also initiated investigation in connection with the loans given by your Company to certain borrowers. Central Bureau of Investigation (CBI) has also started investigation in connection with certain loan granted by your Company Apart from this CBI is also investigating into the matter of amounts invested by a state government entity - Provident Fund in the Fixed Deposits of your Company. Your Company is fully co-operating with all the investigating agencies.

Response to point No. 5 of the Basis for Disclaimer of Opinion: The investments/ advances by way of unsecured Inter Corporate Deposit (ICD) aggregating Rs 5,65,269 lakh were outstanding as at March 31, 2019. Of these, ICDs aggregating Rs 93,835 lakh have since been repaid by the borrowers and ICDs, aggregating to Rs 1,30,661 lakh have been converted during the period of previous management into term loans during the period prior to November 20, 2019, resulting in an outstanding of Rs 3,78,624 lakh under ICDs, including interest receivable as of March 31, 2020. The recoverability or otherwise of the remaining amount is yet to be ascertained, and hence the appropriate provision amounting to Rs 2,25,032 lakh has been made as a prudent measure. Due to nonavailability of the recovery data, your Company has considered the Loss Given Default Percentage (LGD%) as specified in the guidelines issued by RBI in the circular “Implementation of Internal Rating Based Approached for Calculating of Capital Charge for Credit Risk” as a proxy LGD%. This is based on the industry practice followed in the cases where the companies do not have the trend of recovery experience.

Response to point No. 6 of the Basis for Disclaimer of Opinion : In respect of certain Project / Mortgage Loans, the Management is actively engaged with the loanees to remediate certain lacunae in loan documentation wherever possible.

Response to point No. 7 of the Basis for Disclaimer of Opinion: The wholesale loan portfolio aggregating to Rs 49,58,544 lakh (pursuant to classification of this portfolio to “held for sale” in the previous year ended on March 31,2019) has been “fair valued” as at March 31 2020 at Rs 30,73,231 lakh, with the resulting fair value loss aggregating Rs 18,85,313 lakh. Out of this, fair value loss aggregating Rs 3,25,629 lakh has been accounted up to March 31, 2019 and balance loss of Rs 15,59,684 lakh has been charged to the Statement of Profit and Loss for the year ended March 31,2020. The basis of valuation of the portfolio is changed during the quarter ended March 31,2020 by discounting the cash flow assessed by the external registered valuer as against the contractual cash flow used by the erstwhile management in the previous year and during the nine months ended on December 31, 2019. Further, as an outcome of valuation exercise to be completed during the CIRP, this may undergo change. However, the said valuation will be as on December 3, 2019, the date of commencement of CIRP. The recoverability or otherwise of these loans is yet to be ascertained and hence the appropriate provision has been made as a prudent measure on fair valuation method as per Ind AS provisions.

Response to point No. 8 of the Basis for Disclaimer of Opinion : The Present Management in the process of analyzing and reconciling its total assets have observed that an amount of Rs 3,01,868 lakh have not been reconciled and could not be mapped to any security against which this amounts was disbursed in the past. The process of identifying and mapping of this amount to any scheme under which they were disbursed and further steps to be taken basis the findings, are being addressed as a part of CIRP and the same is underway and the Transaction Audit report may reveal further details in this regard. In the light of the above position and in the absence of internal confirmations, it has been decided as a prudent measure to treat the amount as loss assets as per asset classification norms and also due to non-availability of any security, your Company has fully provided for this amount while preparing the financials of your Company for the year ended March 31,2020. However, the same has been identified as fraudulent transaction under Section 66 by Transaction Avoidance Auditor and now application has been filed in the Honble NCLT as per the code. Initial reporting has also been made to NHB.

Response to point No. 9 of the Basis for Disclaimer of Opinion : Your Company has made substantial amount of provisioning were made as of March 31 2020 as per prudential norms stipulated by NHB, leading to negative net owned fund of Rs 4,537 crore and adverse CRAR of -1.83%. Further, the loss aggregating Rs 13,575.15 crore incurred by your Company during the year ended March 31, 2020, has rendered your Company not being able to comply with the regulatory requirements of NHB in respect of the Net Owned Fund (NOF) and which also resulted in contraventions of the provisions of NHB Act, 1987, Directions and Guidelines thereunder.

National Company Law Tribunal (NCLT) has admitted petition application filed by the RBI under sub-Clause (i) of clause (a) of Rule 5 of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudication Authority) Rules, 2019 (FSP Rules) read with Section 227 of the Code. The purpose of the ongoing CIRP is to find a resolution to your Company and carry on the day to day operations only to continue your Company as a going concern. Also, actions being taken now are being shared with the Committee of Creditors (COC), which is represented by NHB as well. Progress made under CIRP is regularly reported to the Committee of Creditors, in which NHB is also duly represented. The Code provides for a Resolution Plan to be put forward by the prospective Resolution Applicants. The requirements for an acceptable Resolution Plan, as per CIRP Regulations (Regulation 38), inter-alia, are as under:

A Resolution Plan shall provide for: (a) the term of the plan and its implementation schedule; (b) the management and control of the business of the corporate debtor during its term; and (c) adequate means for supervising its implementation.

A Resolution Plan shall demonstrate that (a) it addresses the cause of default; (b) it is feasible and viable; (c) it has provisions for its effective implementation; (d) it has provisions for approvals required and the timeline for the same; and (e) the resolution applicant has the capability to implement the Resolution Plan.

Some of the critical adverse parameters like Capital Adequacy, Asset Quality, Earnings, Liquidity etc. can be only addressed with successful implementation of a resolution plan which is part of the CIRP being perused.

Therefore, despite following a going concern approach, the present management team has a limited scope to effect improvements in the working of your Company and the successful Resolution Applicant would only be expected to be in a position to meet all the regulatory norms of business and improvement expectations

Response to point No. 10 of the Basis for Disclaimer of Opinion: Your Company had applied Ind AS 109 with respect to Expected Credit Losses (ECL) for the first time for the year ended March 31, 2019. During the current period, your Company has revisited the underlying assumptions required to calculate the provisions for ECL on the retail loan portfolio to remediate the deficiencies in the underlying assumptions as followed in the previous year

Response to point No. 11 of the Basis for Disclaimer of Opinion: Pursuant to the admission of your Company under the IBC, with a view to reflecting fairly the position for the purpose of presentation in respect of your Companys obligation tor interest and principal amount in respect of all the borrowings, your Company has not provided for interest amount of Rs 2,36,133 lakh on borrowings since insolvency commencement date i.e. December 3, 2019, based on the opinion obtained from legal advisors. Under the IBC, the treatment of creditors under the resolution plan is as per debts due as on the insolvency commencement date and therefore, no interest is accrued and payable after this date. If the interest was accrued on borrowings, the loss year would have been higher by Rs 1,75,612 lakh (net of tax). The same has been undertaken as per the legal advise and views of the experts.

Response to point No. 12 of the Basis for Disclaimer of Opinion : Your Company has elected to exercise the option of lower tax rate provided under Section 115BAAofthe Income-tax Act, 1961, as introduced by the Taxation Laws (Amendment) Ordinance, 2019 dated September 20, 2019. Accordingly, your Company has remeasured its deferred tax assets (including re-measuring the opening balance as at April 1, 2019 and has taken a charge of Rs 40,907 lakh relating to the same in the current financial year) basis the rate provided in the said section. The full impact of above mentioned change has been recognized in the financials for the year ended March 31,2020.

Further your Company has credited a net sum of Rs 4,60,985 lakh to the Statement of Profit and Loss for the year ended March 31, 2020 on account of deferred tax asset created as per Ind AS - ‘Income Taxes. Your Company is running as a going concern as per the provisions of the Code which requires the Administrator to preserve the value of your Company and maintain it as a going concern. Further, various bidders have expressed interest in submitting a Resolution Plan for your Company which is in an indicator of your Companys running as a ‘going concern in future.

Response to point No. 13 of the Basis for Disclaimer of Opinion: Your Company in the past has incurred cost for development of customized software for its operations and recording of transactions which has been carried as intangible asset under development, the balance of which as at March 31, 2020 is Rs 10,517 lakh. Considering the factors, as stated your Company is of the view that no adjustments is required to be made to the carrying of the intangible assets under the development pursuant to the requirement of Ind AS 36 on impaired Assets.

Response to point No. 14 of the Basis for Disclaimer of Opinion: Your Company is currently undergoing Corporate Insolvency Resolution Process (CIRP) under the provisions of the Insolvency and Bankruptcy Code, 2016 (Code). The CIRP is to facilitate a sustainable resolution plan for your Company.

The present management has undertaken various good governance initiatives recently including various efforts to strengthen of the financial policies and processes, cost cutting steps, functioning of the IT system; loan / security documentation, legal audit, internal financial controls and updating risk control matrices, information security, operational and credit management risk and fraud risk management, through in-house resources and engagement of external professional experts/consultants. However, the same could not be fully concluded and implemented by March 31, 2020 due to the time essentially required; and the same is impacted due to the COVID-19 situation and the resultant lockdown.

The management team has also initiated steps for comprehensive compliance of various applicable rules and regulations within your Company. The betterment process is a continuous effort and the same is impacted due to the COVID 19 situation and the resultant lockdown. The Company believes that financial position of your Company will improve upon implementation of approved resolution plan by committee of creditors and NCLT.

Response to point No. 15 of the Basis for Disclaimer of Opinion: The Present Management in the process of analyzing and reconciling its total assets have observed that an amount of Rs 3,01,868 lakh have not been reconciled and could not be mapped to any security against which this amounts was disbursed in the past. The process of identifying and mapping of this amount to any scheme under which they were disbursed and further steps to be taken basis the findings, are being addressed as a part of CIRP and the same is underway and the Transaction Audit report may reveal further details in this regard.

The Administrator on the advise of the Advisory Committee and in consultation with the process advisors and legal advisors will file an application before the Honble NCLT as and when reports under the above sections are received from the TAA. First such filing was done on August 30, 2020. The disclosure in relation to said filing as approved by the Advisory Committee on the advise of the legal advisors and the process advisors and submitted by your Company to the stock exchanges pursuant to the provisions of Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI Listing Regulations) is annexed at “Annexure - 1 ” to this Report.

In the light of the above position and in the absence of internal confirmations, it has been decided as a prudent measure to treat the amount as loss assets as per asset classification norms and also due to non-availability of any security, your Company has fully provided for this amount while preparing the financials of your Company for the year ended March 31, 2020.

Response to point No. 16 of the Basis for Disclaimer of Opinion : In certain instances, the amount of the claim admitted or to be admitted by the Administrator under CIRP process may differfrom the amount reflecting in the books of accounts of your Company. The audited financial results are drawn on the basis of the figures appearing in the books of accounts of your Company as on March 31, 2020. The Administrator, the Advisors, KMPs stated that the figures may be interpreted solely for the purpose of satisfying the requirement for filing of yearly/ quarterly audited financial results and that these figures could change during the CIRP process or thereafter depending upon the findings made during the CIRP process or thereafter.

Response to point No. 17 of the Basis for Disclaimer of Opinion : The Reserve Bank of India (RBI) vide Press Release dated November 20, 2019 in exercise of the powers conferred under Section 45-IE (1) of the Reserve Bank of India Act, 1934 (RBI Act) superseded the Board of Directors of your Company and appointed an Administrator under Section 45-1E (2) of the RBI Act. Thereafter, RBI vide its Press Release dated November 22, 2019, in exercise of the powers conferred under Section 45 IE 5(a) of the RBI Act, 1934, constituted athree (3) member Advisory Committee to assist the Administrator in the discharge of his duties. On November 29, 2019, the RBI filed the Petition before the NCLT under sub-Clause (i) of clause (a) of Rule 5 of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudication Authority) Rules, 2019 (FSP Rules) to initiate CIRP against your Company read with Section 227 of the Code. Accordingly, in terms of Rule 5(b)(i) of the FSP Rules, an interim moratorium came into effect on the filing of the application to initiate CIRP. Further, CIRP was initiated against your Company under Section 227 read with clause (zk) of sub - section (2) of section 239 of the Code and read with rules 5 and 6 of the FSP Rules by an order dated December 3, 2019 of the Honble National Company Law Tribunal, Mumbai Bench (NCLT/Adjudicating Authority). The Adjudicating Authority, vide the above order, appointed the Administrator to perform all the functions of a resolution professional to complete the CIRP of your Company as required under the provisions of the Code. The moratorium was declared by the NCLT. As per the said NCLT order dated 3rd December, 2019, a moratorium in terms of the Sec. 14 of the Code is applicable on your Company.

The Administrator after his appointment and with the approval of Committee of Creditors of your Company, as constituted by him in accordance with Section 18(c) and 21(1) of the Code and the Regulation 17(1) of the CIRP regulations, appointed the Company Secretary (CS) and the Chief Financial Officer (CFO). The Key Managerial Personnel (KMPs or Present Management) the Chief Executive Officer (CEO), was appointed on 1-10-2019 by the erstwhile management. CEO, the Company Secretary (CS) and the Chief Financial Officer (CFO) along with the Senior management of your Company has ensured that your Company continues to operate a s a Going Concern”.The Administrator and the Advisory Committee as set up by the RBI to assist the Administrator in discharge of his duties exercise oversight on the operations of your Company apart from running the CIR process in accordance with the provisions of the Code and Regulations under IBC, 2016. The Present Management has undertaken various good governance initiatives recently including various efforts to strengthen of the financial policies and processes, functioning of the IT system; loan / security documentation, legal audit, internal financial controls and updating risk control matrices, risk and fraud risk management, through in-house resources and engagement of external professional experts/ consultants. The management team has also initiated steps for comprehensive compliance of various applicable rules and regulations within your Company. The betterment process is a continuous effort, however, the same could not be fully concluded and implemented by March 31, 2020 due to the time essentially required; and the same is impacted due to the COVID-19 situation and the resultant lockdown and the same is impacted due to the COVID-19 situation and the resultant lockdown.

These initiatives will strengthen Companys overall governance structure and control environment. On conclusion and implementation of all such initiatives, it is believed that the operational efficiency will improve and operational issues will get addressed.

Response to point No. 18 of the Basis for Disclaimer of Opinion : The Company has taken steps to identify legal and other shortcomings in securing the loan assets and initiated corrective steps wherever possible. Simultaneously provision coverage are stepped up based on fair valuation of the loans. The Company under CIRP process is required to identify and address any past act or acts which are prejudicial or likely to be prejudicial to the interest of your Company and the same is in progress

Response to point No. 19 of the Basis for Disclaimer of Opinion : The World Health Organisation has declared the novel coronavirus (COVID-19) as a pandemic on March 11,2020. Besides the impact of this outbreak on human life, it has also disrupted the financial, economic and social structures of the entire world. The Central Government in India also declared a national lockdown from March 25, 2020 to May 31, 2020, through various notifications, and subsequently the Central Government has announced Unlock 1.0 till June 30, 2020. During unlock 1.0 period private offices are allowed to operate with 10% of the staff with certain conditions initially and restricted the movement as a preventive/ precautionary measures to avoid the spread of COVID-19. Your Company remains fully compliant with the guidelines and directions of both Central and State Government. The situation has caused uncertainty and impacted the collections and other operations of your Company. However, with various remote working measures, your Company has been able to restore its normal operations except certain functions which require physical movement e.g. field level visits. With unlock 1.0, the branches of your Company were made operational including National Office and the field visits have commenced.

In orderto give effect to the RBI guidelines on regulatory measures on COVID-19 - Regulatory Package, your Company has offered moratorium to its eligible customers for a period for installments falling due between March 1,2020 and August 31,2020 based on approved policy in this regard. Your Company has taken various steps to ensure the effective implementation of the moratorium policy and continues to monitor the impact of such moratorium on its portfolio, -35% of account holders by number availed Moratorium as of May, 2020. The recovery from the moratorium accounts is forthcoming with the Unlock 1.0 and commencement of field visits. It is believed that the recovery will further improve in Moratorium accounts.

Response to the Report on Other Legal and Regulatory Requirements under the Basis for Disclaimer of Opinion has been covered in the aforesaid responses.

Further, in response to para 3 j (iii) of Report on Other Legal and Regulatory Requirements in the said Report, your Company has been adhering to the timelines for the transfer of amounts of unclaimed dividends, deposits and shares to the Investor Education and Protection Fund (IEPF).

As required under Section 124 of the Companies Act, 2013, your Company has transferred unclaimed dividend of the year 2011-12 Rs 8 lakh ( Rs 9 lakh) and towards unclaimed deposits and interest accrued thereon Rs 14 lakh ( Rs 26 lakh) to Investor Education & Protection Fund (IEPF) during the year, till stay order of received from Honble Bombay High Court with general delay ranging from 1 to 16 days in transferring unclaimed public deposits. Further, during the year Rs 59 lakh unclaimed Deposit and Rs 5 lakh of unclaimed dividend was due for payment to the Investor Education and Protection Fund under Section 125 of the Companies Act, 2013 as at the yearend in respect of Unclaimed Matured Deposits which was not deposited into IEPF, pursuant to stay order issued by Honble Bombay High Court and after RBI initiated the CIRP process against your Company.

DIRECTORS RESPONSIBILITY STATEMENT:

The financial statements of your Company for the financial year ended March 31, 2020 have been taken on record by the Administrator while discharging the powers of the erstwhile Board of Directors of your Company which were conferred upon him by the RBI vide its press release dated November 20, 2019 and subsequently, powers conferred upon him in accordance with the NCLT Order dated December 3, 2019 to run your Company as a going concern during CIRP. Hence the financial statements for the year ended March 31, 2020 have been prepared on “going concern” assumptions.

The Administrator, Advisors and KMPs have not been able to analyse in depth the accuracy validity, completeness or authenticity of the information and figures mentioned in the audited financial statements as they have joined after November 20, 2019. Moreover, the entire Present Management has been involved in the affairs of your Company for less than four months in the entire financial year 2019-20. Further, since March 25, 2020 lockdown was imposed in the Country on account of COVID-19 causing a complete shutdown of offices which extended beyond the financial year 2020 and May 31,2020.

In certain instances, the amount of the claim admitted or to be admitted by the Administrator under CIRP process may differ from the amount reflecting in the books of accounts of your Company. The audited financial statements are drawn on the basis of figures appearing in the books of accounts of your Company as on March 31,2020.

The Administrator has signed the financial statements solely for the purpose of compliance and discharging his duties during CIRP period of your Company and in accordance with the provisions of the IBC, read with the regulations and rules thereunder, and based on the explanations, clarifications, certifications, representations and statement made by the existing staff of your Company in relation to the data pertaining to the period prior to the joining of the present management and does not have knowledge of the past affairs, finances and operations of your Company.

REPORT ON CORPORATE GOVERNANCE & MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, a separate section titled ‘Report on Corporate Governance forms part of this Annual Report which also includes certain disclosures that are required, as per the Companies Act, 2013.

Pursuant to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Housing Finance Companies - Corporate Governance (National Housing Bank) Directions, 2016, a separate section titled ‘Management Discussion and Analysis forms part of this Annual Report.

BUSINESS RESPONSIBILITY REPORT

Pursuant to Regulation 34(2) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended, a separate section titled Business Responsibility Report (BRR) forms part of this Annual Report which describes your Companys performance and activities from environmental, social and governance perspective. The BRR is also available on the website of your Company at the URL: https:// www.dhfl.com/docs/default-source/default-document-library/ business-responsibility-report.pdf

EXTRACT OF ANNUAL RETURN

Pursuant to Section 92 of the Companies Act, 2013 and the Rules framed thereunder, as amended the extract of the Annual Return as at March 31, 2020, in the prescribed Form MGT-9 and the Annual Return as at March 31,2020, in the prescribed Form MGT- 7 are available on website of your Company at the URL: https:// www.dhfl.com/docs/default-source/default-document-library/ form-no-mgt-9-extract-of-annul-return.pdf and https://www.dhfl. com/docs/default-source/default-document-library/annual-return- as-on-3T;:t-march-2020.pdf, respectively.

For and on behalf of the Board (Advisory Committee)

R. Subramaniakumar

Administrator of Dewan Housing Finance Corporation Limited 6th Floor, HDIL Towers, Anant Kanekar Marg, Station Road, Bandra (East), Mumbai 400 051

For and on behalf of Dewan Housing Finance Corporation Limited (a Company under Corporate Insolvency Resolution Process by an Order dated December 3, 2019 passed by Honble NCLT, Mumbai). The Administrator has been appointed under Rule 5(a)

(iii) of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 under the Insolvency and Bankruptcy Code, 2016. The affairs, business and property of Dewan Housing Finance Corporation Limited are being managed by the Administrator, R. Subramaniakumar, who acts as agent of the Company only and without any personal liability.

Place: Mumbai

Date: September 5, 2020