Home  »  Company  »  Can Fin Homes  »  Quotes  »  Directors Report
Enter the first few characters of Company and click 'Go'

Directors Report of Can Fin Homes Ltd.

Mar 31, 2017

To the Members

The Directors are pleased to present the 30th Annual Report of the business and operations of the Company together with the audited accounts for the year ended March 31, 2017.

1. Financial Results

The financial performance for the FY16-17 is summarized here below:

(Rs, in Lakh)

Particulars

Year ended

Year ended

March 31, 2017

March 31, 2016

Profit before Tax & Provisions

38,838.06

27,326.61

Less: Provision for Standard Assets

1,065.00

1,400.00

Provision for Doubtful Debts

815.38

540.53

(Written Back)

Prior Period adjustments

-58.85

0.00

Profit before Tax

37,016.53

25,386.08

Tax expenses:

(a) Provision for Tax - Current Year

11,513.00

8,000.00

(b) Deferred Taxation

1,977.65

1,675.56

Profit after Tax

23,525.88

15,710.51

Balance brought forward from previous

114.58

309.30

year

23,640.46

16,019.81

Appropriations:

Transfer to Special Reserve u/s.36(1)(viii)

6,400.00

5,500.00

of the Income Tax Act, 1961

Transfer to General Reserve

9,200.00

4,000.00

Additional Reserve (u/s.29C of the NHB

4,800.00

3,200.00

Act)

Proposed Dividend

-

2,663.08

Tax on Distributed Profits

-

542.15

Balance carried forward to balance sheet

3,240.46

114.58

23,640.46

16,019.81

2. Shareholders'' Wealth

Particulars

Year ended March 31, 2017

Year ended March 31, 2016

Earnings Per Share (EPS) (H)

88.38

59.02

Dividend Rate

100%

100%

Market Price of shares (H)

2,121.45

1,154.40

Market Capitalization (Rs,in Crore)

5,643.06

3,070.70

3. Business Performance Highlights

a. Sanctions

During the year, the company has sanctioned loans amounting to Rs,5451 Crore as compared to Rs,4418 Crore in the previous year, recording a growth of 23%. Despite slowdown in real estate market in some parts of the country, stiff competition from Banks & HFCs, the business performance of the company continued to be encouraging during 2016-17.

During the year, your Company continued to focus on retail (housing and non-housing) loan segment which constituted 99% of its total sanctions. 88% of fresh loan approvals during the year were for housing and 12% were for non-housing loans. The cumulative loan sanctions since inception of your Company stood at H26,362 Crore at the end of the FY16-17. Average ticket size of incremental housing loans and non-housing loans are Rs,18 Lakh and Rs,10 Lakh respectively.

b. Disbursements

During the year, the company has disbursed loans amounting to Rs,4,792 Crore as compared to Rs,3,923 Crore in the previous year, recording a growth of 22%. The cumulative loan disbursements from inception to the end of the FY16-17 was Rs,23,083 Crore.

c. Loans outstanding (Loan Book)

The total loan outstanding as at March 31, 2017 were Rs,13,313 Crore, recording a growth of 25% over last year (previous year Rs,10,643 Crore).

Your Company continues to grow in the high-yielding non-housing loan segment. During the year, non-housing loan portfolio has increased from H1,262 Crore to Rs,1,529 Crore indicating a growth rate of 21%, which constitutes 11.86% of total portfolio.

d. Non-Performing Asset (NPA)

Your directors are pleased to report that the Gross NPA of your Company as on March 31, 2017 was contained at Rs,27.91 Crore (previous year Rs,19.76 Crore). The net NPA as on the date continued to be Nil, with the NPA Provision Coverage Ratio at 100% for the 8th year in succession. The gross NPA percentage as on March 31, 2017 stood at 0.21% compared to 0.19% as on March 31, 2016, one of the lowest in the industry.

During the year under review, your Company could make a cash recovery of Rs,4.08 Crore (previous year Rs,3.32 Crore) in respect of accounts which were Non Performing Assets as on March 31, 2016. Recovery in written-off accounts during FY16-17 was Rs,0.37 Crore.

e. Profits

Your Directors are happy to inform that during the year under review, your Company recorded an Operating Profit of Rs,388.38 Crore (previous year Rs,273.27 Crore), Profit Before Tax (PBT) of Rs,370.17 Crore (previous year Rs,253.86 Crore) and Profit After Tax (PAT) of Rs,235.26 Crore (previous year H157.11 Crore) registering a Year-on-Year increase of 42%, 46% and 50%, respectively. During the year Company has made provisions for standard assets amounting to Rs,10.65 Crore (previous year Rs,14.00 Crore), provisions for Non-performing assets amounting to Rs,8.15 Crore (previous year Rs,5.41 Crore), provisions for Taxation and Deferred Tax Liability amounting to Rs,134.91 Crore (previous year Rs,96.76 Crore).

f. Dividend

Your Company has been paying dividends continuously. Your directors, after giving due consideration to Capital Adequacy requirements, projected business plan for the year, deferred tax liability and the dividend policy, are happy to recommend a dividend of H10 per equity share (100%) for the second successive year, for the financial year ended March 31, 2017. The amount of dividend recommended for payment for the year under review is Rs,26.62 Crore The tax on dividends u/s.115-O of the Income Tax Act, 1961, at about 20.36% (Rs,5.42 Crore), is being paid to the Government by your Company.

4. Expansion of Branch Network

During the FY16-17, 10 new branches and 20 satellite offices were opened by CFHL while 4 top performing satellite offices were upgraded to full-fledged branches. Further, CFHL introduced the concept of ''Affordable Housing Loan Centers’ (AHLCs) to exclusively provide smaller ticket size Loans under CLSS (PMAY), Urban Housing (LUH) and Rural Housing schemes. Under this initiative, the first tranche of 10 AHLCs were opened in Q4 by upgrading existing satellite offices. As at the end of FY16-17, CFHL has an expanded network of 170 outlets spread across 19 states comprising 124 branches, 10 AHLCs and 36 Satellite Offices. CFHL became the first HFC to start exclusive Affordable Housing Loan centre’s in sync with the ''Housing for all’ initiative by the Government.

During the FY17-18, CFHL has plans to open 12 branches and 10 SOs. CFHL will also open 20 more AHLCs, taking the number of such exclusive outlets for Affordable Housing Loans to 30, to mark 30th year of CFHL’s commitment to promote home ownership.

The Registered Office and all the branches have good ambience, spacious premises and other facilities to enhance service quality and visibility in the market.

5. Technology Initiatives

All the branches and the Registered Office are linked through a core-banking platform (Integrated Business Suite) under the Application Service Provider (ASP) Model. The Company is also in the process of a tie-up with BSNL for a higher bandwidth MPLS lines.

In order to improve operational efficiency, your Company embarked on technology initiatives like the introduction of Online Application Module in the Company’s website to receive applications online, mobile website, customer portal in the website to access account statements/certificates at customers’ end, missed call facility to borrowers for their information about outstanding balances in their loan accounts, SMS alerts to remind borrowers of loan installments/new schemes. Your Company has introduced online money transfer and customer portal to facilitate its borrowers to view their statement of account(s), generate certificates, product information and branch location.

6. Customer-Friendly Initiatives

The transparent, ethical, equitable practices adopted towards all customer segments is the hallmark of your Company. With the launch of customer portal, the company has taken a step in the direction of enabling the customer to get easy access to their account related information such as IT certificate, EMI payment details, balance outstanding etc., at the click of a button. Your Company’s website provides all the major information on the products and applicable charges. The Fair Practice Code (FPC) and Most Important Terms and Conditions (MITC) are made available on the website as per NHBs directions. The distinctive referral scheme wherein customers are benefited from the refund of their processing fees, upon referring new customers to the Company, is also one of our unique customer friendly initiatives. Emphasis continues to be placed on the reduction of the turnaround time (TAT) in sanctioning and disbursing loans at all levels in order to benefit the customers.

7. Financial Resources

a. Refinance from National Housing Bank (NHB) and borrowings from Banks

During the year, your Company had availed fresh refinance amounting to Rs,441.21 Crore (previous year Rs,630.64 Crore) under the NHB refinance scheme. The cumulative NHB borrowings as on March 31, 2017 were Rs,3,375.03 Crore (previous year Rs,3,535.04 Crore), with the overall cost of borrowing (including the loans under Rural Housing and Urban Housing Schemes) of 8.23% p.a. as on March 31, 2017.

Borrowings from Banks

Your Company progressively reduced its dependence on bank borrowings. During the year, borrowings were diversified through a combination of short-term and long-term loans considering the asset liability management position to derive the maximum benefit of competitive interest rates. The lenders included HUDCO, State Bank of India, Bank of Baroda, HDFC Bank and Oriental Bank of Commerce apart from Canara Bank, the principal bankers to the Company. The aggregate bank borrowings (term loans plus overdraft) at the end of the financial year stood at Rs,2,247.65 Crore (previous year Rs,2,536.58 Crore); the overall borrowings are within regulatory ceiling of 16 times of net owned funds.

The overall cost of borrowings (average) was 9.09% p.a. as on March 31, 2017. During the year, the long-term ''rating’ for term loans for your Company was ''[ICRA]AAA’ (pronounced ICRA triple A) by ICRA Ltd., these ratings assumed to possess the highest degree of safety with regard to the timely servicing of financial obligations.

b. Debentures

(i) Secured Non-Convertible Debentures

In its continuing efforts to reduce fund costs, your Company issued Secured Redeemable Non-Convertible Non-Cumulative Taxable Debentures (SRNCD) aggregating Rs,1,862 Crore (previous year Rs,1,540 Crore) in different tranches through private placement with a coupon rate range of 7.57% to 8.55%. The debentures were secured by way of a floating charge on the assets i.e., loan receivables specifically earmarked for the purpose in favour of the Debenture Trustees. Most investors in these debentures comprised major insurance companies, public sector banks, corporate and investors of repute, indicating their safety perception in your Company’s fundamentals and prospects.

The tenure of debentures is range bound for two to five years. The interest on these debentures was serviced regularly. The aggregate borrowings by way of Secured NCDs as on March 31, 2017 was Rs,3,602 Crore (previous year Rs,2,090 Crore) while the overall cost was 8.57% p.a.

The debentures were rated ''[CARE] AAA’ by CARE, ''IND AAA’ by India Ratings and Research Pvt. Ltd (FITCH), and ''[ICRA] AAA’ by ICRA Limited. These debentures were listed on the Wholesale Debt Market (WDM) segment of the National Stock Exchange of India Limited.

Your Company plans to raise Nonconvertible Debentures up to a maximum Rs,6,000 Crore subject to cost benefit and asset liability management requirements and with the approval of members at ensuing Annual General Meeting.

(ii) Unsecured Non-Convertible Debentures

During FY14-15, your Company had issued 8.94% Unsecured Non-Convertible Debentures in the nature of Tier II Bonds aggregating Rs,100 Crore for a tenure of 10 years. These debentures are subordinated to present and future senior indebtedness of the Company and qualify as Tier II Capital under the National Housing Bank (NHB) guidelines for assessing Capital Adequacy Requirements. These Tier II Bonds were rated ''IND AAA’ long-term rating by India Rating & Research Pvt Limited (FITCH), ''[CARE] AAA’ by Credit Analysis & Research Ltd., (CARE) and ''[ICRA] AAA’ by ICRA Ltd. Your Company has serviced the interest on the above debentures on the due date.

c. Commercial Paper

Your Company mobilizes funds through commercial paper (CP). The outstanding at the end of the March 2017 was Rs,2,320.62 Crore (previous year Rs,961.37 Crore). The effective cost of funds was 7.43% p.a. The CP issue by your Company was rated at the maximum [ICRA] A1 rating by ICRA Ltd., indicating, ''Instruments with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations’.

d. Deposits

During the year your Company accepted deposits of Rs,149.93 Crore (Previous year Rs,67.66 Crore). The outstanding balance of deposits (including interest accrued, but not due) as of March 31, 2017 was Rs,226.65 Crore (previous year Rs,220.97 Crore). The rate of interest on public deposits ranged from 7.50% to 8.10%, while the overall cost (average) of deposits was 8.83% p.a. as on March 31, 2017.

As on March 31, 2017, a sum of H\Rs,20.09 Crore relating to 1,020 accounts of public deposits (Rs,17.06 Crore as on March 31, 2016 relating to 1,106 accounts) remained unclaimed/overdue. Of this amount, a sum of Rs,2.29 Crore relating to 140 accounts (previous year Rs,2.20 Crore relating to 239 accounts) were claimed and renewed/settled up to May 15, 2017. Your Company has not defaulted in repayment of deposits or interest during the year. The Company has complied with the requirements under Chapter V of the Companies Act, 2013 to the extent applicable.

During the year, the deposit schemes of your Company are rated ''MAAA’ (pronounced as M Triple A) by ICRA Ltd., indicating ''highest credit-quality’ and that the rated deposit programme carried the lowest credit risk. Your Company, being a housing finance Company registered with National Housing Bank (NHB), has complied with the Directions/Guidelines issued by the NHB with regard to deposit acceptance and renewal. Your Company is exempted from the applicability of the Companies (Acceptance of Deposits) Rules 2014.

e. Mortgage-backed securities

Your Company did not opt for any securitization during the year under review or during the previous year. There were no securitized assets outstanding as on March 31, 2017.

8. Compliance with Directions/ Guidelines of National Housing Bank (NHB) and other statutes

Your Company adhered to the prudential guidelines for non-performing assets (NPAs) as per the National Housing Bank (NHB) Directions 2010, as amended from time to time. Your Company complied with the guidelines and directions issued by NHB on withdrawal of pre-closure charges for all loans. The Guidelines/ norms for asset classification of credit/ investments, credit rating, acceptance of deposits, Fair Practices Code (FPC), Most Important Terms and Conditions (MITC), Customer Complaints Redressal Mechanism, Know Your Customer (KYC), Anti-Money Laundering (AML) Guidelines, Asset Liability Management, Capital Adequacy Ratio (CAR) norms, Customer Redressal Mechanism and other related instructions, issued by the National Housing Bank (NHB) were implemented in letter and spirit with an explicit notification on the website of your Company.

As per the National Housing Bank Circulars NHB.HFC.DIR.4/CMD/2012 dated January 19, 2012 and NHB.HFC. DIR.9/CMD/2013 dated September 6,

2013, your Company has made a general provision @:

(i) 1% of Standard Assets in respect of Commercial Real Estates other than Residential Housing,

(ii) 0.75% of Standard Assets in respect of Commercial Real Estate -Residential Housing, and

(iii) 0.40% of the total outstanding amount of loans, which are Standard Assets other than (i) and (ii) above.

Loans to individuals for third dwelling unit onwards are treated as Commercial Real Estate (CRE) exposure. A provision of Rs,10.65 Crore was made in the books as on March 31, 2017 and the cumulative provision in that regard stood at Rs,62.65 Crore as on the above date. The recognition of income and provision for all assets was made in the books as per the Guidelines on Prudential Norms applicable as of March 31, 2017.

Your Company this year has carved out Rs,22.50 Crore from current year P&L and Rs,37.00 Crore from General Reserves towards Deferred Tax Liability (DTL) as per NHB guidelines NHB(ND)/DRS/ Pol.62/2014 dated May 27, 2014 and NHB(ND)/DRS/Pol.65/2014 dated August 22, 2014 and ensured full compliance of regulatory guidelines. Amount which is proposed to be transferred to reserves is given in detail in Note no. 3 of Notes forming part of the financial statements.

During the year the NHB has issued 3 new directions viz.,

(1) Housing Finance Companies -Auditor’s Report (National Housing Bank) Directions, 2016

(2) Housing Finance Companies -Approval of Acquisition or Transfer of Control (National Housing Bank) Directions, 2016

(3) Housing Finance Companies -Corporate Governance (National Housing Bank) Directions, 2016

Your Company has taken steps to comply with the requirements of all the applicable provisions of the above Directions for FY16-17. In terms of the CG Directions, the Company has given the "Related party transaction policy" as Annexure 7 to this Report.

The NHB had conducted Audit of 201415 during the previous year and raised an issue on the procedure followed by the Company since beginning on valuation of Government Security under HTM Category (Held to Maturity) invested for SLR purpose. Since there is no change in regulations/procedures during the period, the matter has been represented by the Company and a final decision is awaited. These facts have been disclosed in the Notes to accounts.

Your Company has complied with the Accounting Standards issued by the ICAI, New Delhi, and other related statutory Guidelines/Directions as applicable to the Company from time to time. Compliance of all Regulatory guidelines of NHB/other statutes are periodically reviewed at Audit Committee/Board.

9. Compliance under the Companies Act, 2013

Your Company has complied with the requirements of the applicable provisions of the Companies Act, 2013 and related Rules during the FY 16-17. In accordance with Sec 134 (3) (a) of the said Act, an extract of the Annual Return in the prescribed format is appended as Annexure 4 to this Report.

During FY 16-17 Canara bank, Promoters of the Company had disinvested 35,80,849 (13.45%) equity shares of the Company and the shareholding of the Bank as on March 31, 2017 stood at 30%. The disinvested portion of 13.45% was purchased by M/s. Caladium Investments Pte. Ltd., Singapore, an affiliate of GIC, Singapore’s Sovereign Wealth Fund.

10. Capital Adequacy

The Capital Adequacy Ratio (CAR) of your Company as at March 31, 2017 was 18.50% (previous year 20.69%), well above the Regulatory benchmark of 12% prescribed by the National Housing Bank (NHB).

11. Depreciation

Depreciation was calculated on the Written Down Value Method based on useful life, in the manner prescribed in Schedule II to the Companies Act, 2013.

12. Deferred Tax Liability (DTL)

Vide Circular NHB (ND)/DRS/Pol.62/2014 dated May 27, 2014, the National Housing Bank (NHB) directed Housing Finance Companies (HFCs) to provide for deferred tax liability with respect to the balance in the Special Reserve created under Section 36(1)(viii) of the Income Tax Act, 1961 as on March 31, 2014 and permitted to adjust the same from retained earnings. Further, Vide Circular NHB(ND)/DRS/Pol.65/2014 dated August 22, 2014, NHB permitted HFCs to adjust the Deferred Tax Liability in a phased manner over three years in the ratio of 25:25:50 starting from FY14-15. Accordingly the Company has to adjust the DTL of Rs,7,399.96 Lakh in three years. The Company has transferred the third and final tranche of 50% being Rs,3700 Lakh in this year ending March 31, 2017 from the General Reserves to DTL (Rs,3700 Lakh transferred in the previous two years). Further, Deferred Tax Liability (net) of Rs,1,977.65 Lakh (previous year Rs,1,675.56 Lakh) was charged to the Statement of Profit & Loss, on account of various components of asset & liabilities including Special Reserve appropriated during the current year.

13. Recovery Action under Securitization & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Sarfaesi Act)

During the year, your Company initiated action against 188 defaulting borrowers under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest ("SARFAESI") Act, 2002 and recovered H8.94 Crore (previous year H2.66 Crore) from borrowers of Non-Performing accounts. By way of seized assets, your

Company has recovered Rs,3.80 Crore (previous year RS,1.09 Crore). During the year, Company recovered RS,0.37 Crore in written off accounts (previous year RS,0.74 Crore). During the year, your Company negotiated one-time settlement (OTS) with eligible NPA borrowers as per its recovery policy and recovered RS,16.75 Lakh (previous year RS,86.08 Lakh).

14. Listing of Securities

The equity shares of the Company are continued to be listed on the BSE Limited (BSE), Mumbai, and the National Stock Exchange of India Ltd. (NSE), Mumbai. The listing fee payable to these Stock Exchanges were paid before the due dates. The Securities & Exchange Board of India, vide its letter dated December 26, 2014 bearing No. WTM/ RKA/MRD/165/2014, granted an exit to the Bengaluru Stock Exchange Ltd., (BgSE)., Bengaluru.

Listing Agreement: The Securities Exchange Board of India (SEBI), has notified the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 on September 2, 2015 with the aim to consolidate and streamline the provisions of Listing Agreements for different segments of capital to ensure better enforceability. The Regulations were effective from December 1, 2015. Accordingly, as per the requirements, your Company entered into Listing Agreements with the National Stock Exchange of India Ltd and BSE Limited within the prescribed period. Smt. Veena G Kamath, ACS, is the Compliance Officer of the Company from FY 16-17 (Shri K S Sathyaprakash, FCS, was the Compliance Officer of the Company up to 31/05/2016). The Board of Directors has authorized the Company Secretary and the Chief Financial Officer, severally, for reporting disclosure of material events, if any, in terms of Regulation 30 of the said Regulations.

Dividend distribution policy is given as Annexure 8 as required under SEBI amended LODR Regulations.

15. Human Resources Development

The total number of employees of your Company was 626 (471 regular and 155 on contract) as on March 31, 2017 as against 553 (395 regular and 158 on contract) as at the end of the previous year. Attrition rate stood at about 3.50% for regular employees, which is far below the industry level.

To upgrade knowledge/skill of the employees, some employees were deputed for training programmes/ seminars organized by the National Housing Bank and other reputed institutions. During the year, training in credit, information technology, human relations, finance, taxation, marketing, fraud prevention and other topics of importance were imparted to employees and executives. Your Company has put in place a series of HR measures including promotions, appropriate employee recognition and reward schemes. Industrial relations in your Company continued to be cordial during the year.

Particulars of Employees:

During FY16-17, your Company had not employed anyone with a remuneration of H102 Lakh or more per annum nor had employed for a part of the year with a remuneration of H8.5 Lakh or more. The ratio of remuneration of each Director to the median of employees remuneration and such other details as required under Sec 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, are furnished below:

i. The ratio of the remuneration of Managing Director to the median remuneration of the employees (regular employees) of the Company for the FY16-17 was 3.18 : 1 (Non-executive directors and Independent Directors are eligible for sitting fee only)

ii. The percentage increase in remuneration in the financial year under the head Managing Director was 24%, of which part terminal benefits of the earlier Managing Director is also included (the remuneration of Managing Director is as per the Service Regulations of Canara Bank in terms of the resolution passed by the members at the General Meeting for appointment in the Company).

The Chief Financial Officer and the Company Secretary are employees of the Company and the percentage increase in their remuneration was 16.06% and 7.15% respectively.

iii. The percentage increase in the median remuneration of employees in the financial year is 23.84%.

iv. Apart from 471 permanent employees on the rolls of the Company, there were 155 employees on contract as on March 31, 2017.

v. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration: Average % increase in remuneration of the employees as well as that of Managerial remuneration was around 10% during the period under review.

The Company affirms that the remuneration is as per the remuneration policy of the Company.

The Company has a Policy on "Prevention of Sexual Harassment of Women at Workplace" and matters connected therewith or incidental thereto covering all the aspects as contained under the "The Sexual Harassment of Women at Workplace (Prohibition, Prevention and Redressal) Act, 2013". During FY16-17 no cases of sexual harassment were reported. The Company has laid down a Code of Conduct for Prevention of Insider Trading, in accordance with the requirements under the Securities and Exchange Board of India (Prevention of Insider Trading) Regulations, 2015 and Companies Act, 2013, with a view to regulate trading in Securities of the Company by its directors, designated persons and employees. The same is made available on the website of the Company.

16. Transfer of Unclaimed and Unpaid Dividend/ Deposit Amounts to the Investor Education and Protection Fund (IEPF)

In terms of (section 125 of the Companies Act, 2013 only section 125 (8) to (11) notified by MCA on September 05, 2016) the amounts (dividend, deposits etc., with interest) that remained unclaimed and unpaid for more than 7 years from the date they first became due for payment, should be transferred to IEPF.

As an investor-friendly measure, your Company has been intimating the respective shareholders / depositors / investors to encash their dividend warrant/renew matured deposits or lodge their claim for payment of due, if any, from time to time and claims made are settled. As per the statutory requirements, unclaimed deposits/ other dues for the previous seven years as of the date of the Annual General Meeting are made available on the website of MCA-IEPF as well as on the Company’s website.

In order to receive prompt payment of dividend, the members/investors are requested to demat the shares held in physical mode, register bank account particulars, opt for ECS facility, register nomination and intimate change of address, if any, to the Company/ Depository Participants promptly.

a. Unclaimed dividends

As at March 31, 2017, dividends aggregating to H124.18 Lakh (previous year H98.34 Lakh) relating to dividends declared for the years FY09-10 to FY15-16 (of which H34.28 Lakh related to dividend for the year 2016), had not been claimed by shareholders. As an investor friendly measure, your Company has intimated shareholders to lodge their claims and related particulars were provided in the annual reports each year as well as on the website of your Company.

The dividend pertaining to 2008-09, which remained unclaimed/unpaid amounting to H5.41 Lakh (in respect of 1,824 shareholders), was transferred to IEPF on October 3, 2016, after the settlement of claims by members received in response to the individual reminder letters sent by your Company to the respective members.

The dividend pertaining to 2009-10 remaining unclaimed and unpaid, amounting to H6.98 Lakh (in respect of 2,062 shareholders) as on March 31, 2017, would be transferred to IEPF during August 2017 after settlement of the claims received up to the date of completion of seven years i.e. on August 25, 2017.

b. Unclaimed deposits

As required under Section 125 of the Companies Act, 2013 (corresponding Section 205C of the Companies Act, 1956), the unclaimed and unpaid deposits together with interest for the year 2008-09 amounting to H0.72 Lakh (previous year H3.62 Lakh) that remained unclaimed and unpaid for a period of 7 years were transferred to IEPF during the year under review.

c. Transfer of shares to IEPF Demat account

Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and refund) Rules, 2016 was notified by the Ministry of Corporate Affairs (MCA) on September 05, 2016. As per Rule 6 of the said Rules, the shares, in respect of which dividend amounts have not been paid or claimed for 7 consecutive years, are required to be transferred to ''IEPF Suspense Account (CFHL)

On verification of records of unclaimed dividend amounts from 2003 to 2009, which have already been transferred to IEPF on lapse of 7 years (during 2010 to 2016 respectively), 430 shareholders have not claimed dividend for consecutive 7 years and their shares are liable to be transferred to IEPF.

In terms of the above Rules, two reminders dated September 24, 2016 and December 02, 2016 were sent by the Company to all the shareholders who have not claimed their dividends for a consecutive period of 7 years, informing that their shares will be transferred to IEPF suspense account on December 25, 2016, if they do not place their claim for unclaimed dividend amounts before the Company.

In the meantime, the action was stayed due to a General Circular No.15/2016 dated December 07, 2016 issued by the MCA informing that revised notifications will be issued.

Further, the MCA issued a revised notification dated February 28, 2017 extending the period for transfer, of unclaimed shares to IEPF Demat Account, up to May 31, 2017. The Company has sent a third reminder dated April 13, 2017 in this regard to 389 shareholders who have not claimed their dividend amounts for a consecutive period of 7 years, informing the said due date for transfer of shares to IEPF Demat account. Your Company has provided the IEPF Rules, the paper notifications issued and a list of the shareholders, whose shares will be transferred to IEPF in the Investor Page of the website of the Company.

17. Particulars regarding conservation of energy, technology absorption and foreign exchange earnings and expenditure

Since your Company is a housing finance Company and does not own any manufacturing facility, the requirement relating to providing the particulars relating to conservation of energy and technology absorption as per Sec 134

(3) (m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules 2014, are not applicable.

Your Directors are pleased to inform that Solar Power systems and power saving lamps have been installed in 16 branches so far as a measure for conservation of energy. Your Company has installed Solar-UPS in some of its branches.

As a part of Save Green efforts and leverage of technology, a lot of paper work at branches and the Registered Office has been reduced (also refer para 5).

During the year, your Company did not earn any income or incur any expenditure in foreign currency/exchange other than payment of Dividend to NRIs on repatriation basis to an extent of H26.73 Lakh through authorized dealers.

18. Directors & Key Managerial Personnel Appointments / Reappointments:

The Board of Directors made the following appointments/ re-appointments based on the recommendations of the Nomination and Remuneration Committee:

(1) Shri S K Hota, General manager of Canara Bank was appointed as the Managing Director with effect from May 19, 2016. His appointment was approved by the members at the 29th Annual General Meeting of the Company held on July 20, 2016.

(2) Shri Naganathan Ganesan, FCA, was appointed as an Additional Director (Independent Director) with effect from September 07, 2016.

(3) Shri Thallapaka Venkateswara Rao, Independent Director, has been re-appointed by the Board as an Independent Director for a period of one year from the conclusion of the ensuing Annual General Meeting up to the conclusion of the Annual General Meeting of the Company of the year 2018.

(4) Shri Kokkarne Natarajan Prithviraj, Independent Director, has been re-appointed by the Board as an Independent Director for a period of one year from the conclusion of the ensuing Annual General Meeting up to the conclusion of the Annual General Meeting of the Company of the year 2018.

The directors had filed their consent(s) and declarations that they are not disqualified to become directors in terms of the provisions of Companies Act, 2013 and related Rules. The directors have intimated to the Company that they are not holding any shares or taken any loan(s) from the Company. The proposals relating to the appointment and re-appointment of directors will be placed for approval by members at the ensuing Annual General Meeting.

The particulars of directors including their profile are provided in the Report of Directors on Corporate Governance forming part of this Annual Report. Further, the agenda relating to appointments / re-appointments of Directors are provided in the Notice of the 30th Annual General Meeting of the Company seeking approval from the members. The particulars relating to the Directors and all other relevant information are provided in the explanatory statement forming part of the said Notice for the information of members.

Retirement by rotation:

In terms of Section 152 and all other applicable provisions of the Companies Act, 2013, and the Articles of Association of the Company, Smt. P

V Bharathi, Director, retires by rotation at the ensuing Annual General Meeting and being eligible, offers herself for re-appointment. The particulars relating to Smt. P V Bharathi, Director are provided in the Report of the Directors on Corporate Governance. Your Directors recommend the reappointment of Smt. P V Bharathi as a Director.

The agenda relating to re-appointment of Smt. P V Bharathi, Director, forms part of the notice convening the ensuing Annual General Meeting and all other relevant information as per SEBI Regulations are also provided in the explanatory statement.

Resignations:

Shri C Ilango, Managing Director of the Company had submitted his resignation with effect from May 18, 2016 (after office hours) consequent to his repatriation to Canara Bank.

19. Meetings of the Board

During the year, nine meetings of the Board of Directors were held and the related details, including that of various committees constituted by the Board, are made available in the Report of Directors on Corporate Governance forming part of the annual report placed before the members.

Your Company has complied with all the requirements as applicable under Companies Act, 2013 and related rules, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and also HFCs Corporate Governance (NHB) Directions, 2016, in relation to the Board of Directors and the Committees of the Board.

Committees of the Board

Currently the Board has six Committees viz. the Audit Committee, the Nomination and Remuneration Committee, the Corporate Social Responsibility Committee, the Stakeholders Relationship Committee, the Risk Management Committee and the Management Committee. A detailed note on the composition of the Board and its Committees and other related particulars are provided in the Report of Directors on Corporate Governance forming part of this Annual Report.

20. Directors'' Responsibility Statement

In accordance with the provisions of Section 134(3)(c) read with Section 134(5) of the Companies Act, 2013, and based on the information provided by the Management, the Board of Directors report that:

a) in the preparation of annual accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any;

b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;

c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) the Directors have prepared the annual accounts on a going concern basis;

e) the Directors, in the case of a listed Company, have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively and

f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

The Independent Directors have given declarations to the Company in terms of with Section 149(7) of the Companies Act, 2013, that they meet the criteria of independence as provided in Section149(6).

Code of Conduct

In terms of Regulation 26(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, all the members of the Board and Senior Management Personnel have affirmed compliance with the Code of Conduct of Board of Directors and Senior

Management for the FY16-17. As required under Schedule V (D) of the said Regulations, a declaration signed by the Managing Director & Chief Executive Officer of the Company stating that the members of the Board and the Senior Management Personnel have affirmed compliance of their respective Codes of Conduct, is enclosed to this Report as Annexure 2.

21. Nomination and Remuneration Committee (NRC) Policy

Your Company has constituted a Nomination and Remuneration Committee (NRC) of the Board in terms of Section 134(3)(e) of the Act, Regulation 19 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 and Para 3(II) of NHB Corporate Governance (National Housing Bank) Directions, 2016, consisting of 3 Directors. This Committee identifies persons who are qualified to become Directors of the Company. The appointment, renewal, reappointment, re-categorization and/ or removal of the Directors so identified, including extension or continuation of the term of appointment, will be recommended by the NRC to the Board. This Committee has also laid down the criteria to identify persons who may be appointed to the senior management of the Company. The NRC has formulated the criteria for determining qualifications, positive attributes and independence of a Director, carrying out evaluation of every Director’s performance. The NRC Policy of the Company covering all the above aspects is made available on the official website of the Company at http://www.canfinhomes.com/Aboutus/ Corporate Governance documents(path).

The Board ensures the annual evaluation of its own performance and that of its Committees and individual directors through the meeting of independent directors, the NRC and evaluation by each of the directors independently.

22. Corporate Social Responsibility (CSR) Policy

Your Company constituted a Corporate Social Responsibility (CSR) Committee of the Board as prescribed under Section 135 of the Companies Act 2013 and has put the CSR policy in place. The Company has focused in promoting education including special education and employment in enhancing vocation skills especially among children. The company also focuses on women empowerment by Promoting gender equality, setting up homes and hostels for women and orphans; setting up old age homes, day care centre’s, livelihood enhancement projects for the elderly & the differently abled. Reducing inequalities faced by socially and economically backward groups and contribution to Prime Minister’s National Relief Fund also forms part of its CSR activities.

The activities undertaken by the Company under CSR initiative is on Pan India basis and the projects are executed by our branches in those areas. The total amount to be spent under the CSR initiatives for FY16-17 was H402 Lakh (previous year H372 Lakh), out of which projects sanctioned under CSR activities was H392 Lakh. The disbursements/ amount spent on the approved projects during 2016-17 is H436 Lakh which includes H155 Lakh of previous sanctions that are carried over. The unspent amount of H18 Lakh (H8 Lakh pertaining to FY15-16 and H10 Lakh to FY16-17) is carried forward as per provisions of Companies Act with the aim to go in for granular details/ appropriate projects before spending in FY17-18. A summary of CSR details as on March 31, 2017 is given below:

Sl

No.

Activities undertaken

No. of Beneficiaries

Amount in Rupees

1

Construction of Schools

6

39,40,412.00

2

Desks & benches/ Tables/ Almirah/ Green Board/ Chairs/ School Bags/ Books

124

215,80,691.00

3

Drinking water facility/ supply of other articles of necessity etc.

28

20,78,533.00

4

Repair and Renovation of schools

11

44,19,961.00

5

Electrical & Electronic Items

5

4,05,551.00

6

Toilet Facility

5

11,15,380.00

7

Scholarship

1

34,600.00

8

Contribution to Pradhan Mantri National Relief Fund

1

100,00,000.00

Total

181

435,75,128.00

The Annual Report on CSR activities including brief contents are provided as an Annexure 6 to this report.

23. Risk Management Policy

Your Company has constituted a Risk Management Committee with two directors and a senior executive of the Company. In terms of Section 134(3)(n) of the Act, your directors wish to state that your Company has drawn and implemented a Risk Management Policy including identification of elements of risks, if any, which may threaten the existence of your Company. The above policy is being reviewed/re-visited once a year or at such other intervals as deemed necessary for modifications and revisions, if any.

24. Audit and Internal Control

Your Company strengthened existing internal control systems for loan reviews at periodical intervals and introduced measures for minimizing operational risks commensurate with the nature of its business and size of operations. Further, your Company has reviewed delegation of authorities and streamlined standard operating procedures for all areas of its business/ operations/ functions, strengthened the Offsite Transaction Monitoring System (OTMS) to track transactions/early-warning signals across all branches by introducing innovative monitoring tools.

The National Housing Bank conducts inspection of your Company on an annual basis. During the year, the NHB conducted credit inspection of your Company in December 2016 for the position as at March 2016. The compliance on the observations were submitted within the prescribed time to the NHB, which were reviewed by the Audit Committee and the Board.

Your Company has also put in place a well- defined policy on Risk Based Internal Audit (RBIA) and as per the said policy, all the 120 branches that became due for audit, were audited in the FY16-17.

Apart from the RBIA Audit, considering the volume of business, branches are also subjected to quarterly/ half yearly internal audit by empanelled audit firms. The Audit Committee reviewed the audit reports/remarks/ observations and replies/ compliances including the compliance of KYC norms.

25. Secretarial Audit

The Secretarial Audit for FY16-17 was conducted as required U/s.204 of the Companies Act 2013, by S. Kedarnath and Associates, a firm of Company Secretaries in Practice. In terms of Section 204(3) of the Act, your Directors are pleased to inform that there was no qualification or observation or other remarks made by the said Company Secretaries in their Secretarial Audit Report. The Secretarial Audit Report issued by the Practicing Company Secretaries is enclosed to the report of Directors (Annexure 3) in terms of Section 134(3) (f) read with Section 204(1) of the Act.

Loans, Guarantees or Investments:

There are no particulars of loans, guarantees or investments made during the year in terms of Section 186(1) and 186(2) of the Act requiring disclosure to be made in the report of Directors as required under Section 134(3)(g) of the Act. In terms of Section 186(11)(a) the requirement relating to the disclosure is not applicable to a loan made, guarantee given or security provided by a housing finance Company.

Related Party Transactions:

The particulars of contracts or arrangements with the ''Related Parties’ referred to in sub-section (1) of Section 188 of the Act are furnished in Note No.30 of the Notes forming part of the financial statements for FY16-17, forming a part of the Annual Report. The particulars of Related Party Transactions as required u/s sec 134(3)(p) and 134(3)(n) in the prescribed format is attached to this Report as Annexure 5.

26. Auditors

M/s K P Rao & Co., Chartered Accountants, Bengaluru, Statutory Auditors of your Company (Firm Registration No.003135S) appointed by the members at the 29th Annual General Meeting (AGM) of your Company held on July 20, 2016 and other 53 firms of branch auditors who were appointed by the Board based on the approval of the members at the above AGM, to hold office from the conclusion of the said meeting until the conclusion of the ensuing AGM of your Company, would retire at the ensuing AGM. Considering the applicability of the Companies (Audit and Auditors) Rules, 2014, M/s K P Rao & Co, are not eligible for reappointment as Statutory Auditors for your Company for the FY17-18 as they have completed 3 years from the applicability of the Companies (Audit and Auditors) Rules, 2014.

Your Directors recommend the appointment of M/s. Varma & Varma, Chartered Accountants (Firm Regn. No. 004532S) as the Statutory Auditors. The resolutions seeking approval of the members for appointment of Statutory Auditors and fixation of their remuneration and authorization to the Board of Directors for appointment of Branch Auditors and fixation of their remuneration are included in the notice convening the ensuing Annual General Meeting. The above said appointment attracts the provisions of Section 139,142, 143 and all other applicable provisions, if any, of the Companies Act, 2013 and Rules. Your Company has obtained the consent and a certificate from the statutory auditors under section 139 of the Companies Act, 2013 to the effect that their re-appointment, if made, would be in accordance with the conditions as may be prescribed. The statutory auditors have also confirmed that they hold a valid certificate issued by the ''Peer Review Board’ of The Institute of Chartered Accountants of India.

Statutory Auditors Report

In terms of Section 134(4) and 134(3)(ca) of the Act, your Directors are pleased to inform that, as in the previous years, there is no qualification, reservation or adverse remark or disclaimer made by the statutory auditors of the Company in their audit report for the financial year FY16-17.

The Board has adopted policies and procedures for ensuring the orderly and efficient conduct of its Business, adherence to its polices, safeguarding its assets, prevention and detection of frauds/errors, accuracy and completeness of the accounting records and timely preparation of reliable financial disclosures. M/s K P Rao & Co, the Statutory Auditors of the Company have audited the Internal Financial Controls over the Financial Reporting of the Company and submitted a Report, which forms part of the Auditors’ Report, placed before the members together with the Financial Statements for FY16-17.

Your Directors wish to inform that there are no material changes and commitments, other than what is reported in the financial statements, affecting the financial position of your Company, which occurred between the end of the financial year to which the financial statements relate and the date of this report. Your Directors also wish to inform that there were no significant and material orders passed by the Regulators/Courts/Tribunals impacting the going concern status and Company’s operations in future.

On January 18, 2016, the Press Information Bureau, Government of India, Ministry of Corporate Affairs (MCA) issued a note outlining the road map for implementation of Indian Accounting Standards converged with IFRS (Ind AS) for Scheduled Commercial Banks (excluding RRBs), Insurance Companies and NBFCs. Companies having Net worth of more than H500 Crore shall comply with the Indian Accounting Standards (Ind AS) for financial statements for accounting period beginning from April 1, 2018 onwards with comparatives for the period ending March 31, 2018 or thereafter.

The applicability of the said notification on your Company is with effect from FY18-19 onwards and necessary steps have been taken for smooth implementation INDIAN ACCOUNTING STANDARDS (IND AS).

27. Management Discussion and Analysis Report

In terms of Regulation 34(2) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Management Discussion and Analysis Report forms part of this Annual Report.

28. Corporate Governance

As required under the Companies Act, 2013, Regulation 34 read with Schedule

V of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 and Housing Finance Companies

- Corporate Governance (National Housing Bank) Directions, 2016, the ''Report of Directors on Corporate Governance’ for the year FY16-17 is placed in this Annual Report.

The said Report covers in detail the Corporate Governance Philosophy of the Company, Board Diversity, Directors appointment and remuneration, declaration by Independent Directors, Board evaluation, familiarization programme, vigil mechanism etc.

Business Responsibility Report:

The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, mandates inclusion of Business Responsibility Report (BRR) in the prescribed format, as a part of the Annual Report for top 500 listed entities based on the market capitalization. In compliance with the said Regulations, the BRR is provided as a part of this Report.

In terms of Regulation 17(10) of the SEBI (Listing Obligations & Disclosure Requirement) Regulations, 2015 read with the SEBI Circular No. SEBI/HO/CFD/ CMD/CIR/P/2017/004 dated January 5, 2017, your Company has put in place the ''Board and Director’s Evaluation Policy’ laying down a framework for evaluation of the Board, its Committees and of the individual directors with defined attributes for evaluation. The results of the evaluation exercise will be shared with the Board in subsequent Board Meeting(s), including listing of the identified strengths, areas of improvement and actions to be taken, if any.

29. Save Green Efforts

In recognition and support to the green initiative taken by the Ministry of Corporate Affairs (MCA), Government of India, your Company is sending AGM notices, annual reports, correspondence with the stakeholders etc. to the respective e-mail IDs of stakeholders. As a step towards paperless banking, initiatives taken by your Company include ECS facility for repayment of loans, streamlining the systems and procedures for reporting by the branches and at the Registered Office through Integrated Business Suite (IBS), networking of branches with the Registered Office, harnessing solar energy for lighting and computer operations in its 16 branches and the like. The usage of the paper is minimized.

As in the previous years, we are publishing only the statutory disclosures in the print version of the Annual Report. Electronic copies of the Annual Report, Annual General Meeting Notices, and such other notices are being sent to all members whose e-mail address are registered with the Company/Depository participants. For members who have not registered their e-mail address and to those who specifically request for physical copies, the same is sent in the permitted mode.

30. Outlook for 2017-18

In tune with the Government’s mission to provide "Housing For All By 2022", your Company has geared itself to provide home loans under Credit Link Subsidy Scheme (CLSS) for the Low Income Group (LIG) and Middle Income Group (MIG) segment under Pradhan Mantri Awas Yojana (PMAY), which is likely to give a fillip to the aspirations of persons desirous of owning a home. We have also introduced 2 new products ''New Gruhalakshmi Rural Housing Scheme (new GRHS)’ and ''New Loan For Urban Housing’ (New LUH) with low interest rates to compete with the best rates prevailing in the market. The real estate scenario is expected to improve and credit off take is also expected to emerge stronger in the current year. Implementation of Real Estate Regulation Act (RERA) in most of the states of the country is expected to bring a disciplined growth boosting the confidence level of new home buyers.

For the FY17-18, your Company is targeting a loan book size of H17,000 Crore by March’ 18. Lending to the salaried class will continue to be our mainstay. The prime focus of your Company would be growth with quality, duly ensuring enhancement of operations, increasing the Non Housing Loan (NHL) portfolio, further improvement in the asset quality and reduction of cost.

The performance of the Company is keenly viewed by our shareholders, stake-holders, customers, banks, peer groups and the general public. The onus of maintaining the high standards is a formidable challenge, however your Company is confident of meeting the same.

31. Acknowledgements

Your Directors would like to thank Canara Bank for continuous support.

Your Directors would like to acknowledge the role of all its stakeholders viz., shareholders, debenture holders, CP holders, depositors, bankers, lenders, borrowers, merchant bankers, Debenture Trustees and all others for their continued support to your Company and the confidence and faith that they have always reposed in your Company.

Your Directors acknowledge and appreciate the guidance and support extended by all the Regulatory authorities including National Housing Bank (NHB), Securities Exchange Board of India (SEBI), Ministry of Corporate Affairs (MCA), Registrar of Companies, Karnataka, the Stock Exchanges and the NSDL and CDSL.

Your Directors thank the Rating Agencies ICRA, CARE, India Ratings & Research Ltd., (FITCH), the Registrars Share Transfer Agents, Debenture Trustees and Trustees of public deposits of your Company, Government(s), local/ statutory authorities, and all others for their whole-hearted support during the year and look forward to their continued support in the years ahead.

Your Directors value the professionalism of all the employees who have proved themselves in a challenging environment and whose efforts have stood the Company in good stead and taken it to present level.

For and on behalf of the Board of Directors

Place: Bengaluru K N Prithviraj

Date : May 15, 2017 Chairman


Mar 31, 2013

TO THE MEMBERS,

The Directors are pleased to present the 26th Annual Report of the business and operations of the Company together with the audited accounts for the year ended March 31, 2013, the Silver Jubilee Year of your Company.

Financial Results

The financial performance for fiscal 2013 is summarised here below:

For the year ended For the year ended Particulars March 31, 2013 March 31, 2012 (Rs. in lakh) (Rs. in lakh)

Profit before Tax & Provisions 7370.80 6830.87

Provision for Standard Assets 685.00 1100.00

Provision for Doubtful Debts Written back (823.81) (361.17)

Prior Period adjustments (5.53)

PROFIT BEFORE TAX 7509.61 6097.57

Tax expenses:

(a). Provision for Tax - Current Year 2000.00 1780.00

(b). Previous year 19.52

(c). Deferred Taxation 78.00 (58.42)

PROFIT AFTER TAX 5412.09 4375.99

Balance brought forward from previous year 548.55 936.89

Amount available for appropriation: 5960.64 5312.88

Appropriations:

Transfer to Special Reserve u/s.36(1)(viii) 1500.00 1350.00 of the Income Tax Act, 1961

Transfer to General Reserve 1800.00 2700.00

Additional Reserve (u/s.29C of the NHB Act) 1100.00

Proposed Dividend 81934 614.62

Tax on Distributed Profits 132.93 99.71

Balance carried forward 60837 548.55

5960.64 5312.88

PERFORMANCE HIGHLIGHTS Sanctions

During the year, the housing loans and other loans sanctioned were to the extent of Rs.2092.65 Crore (Previous year Rs.1105.41 Crore) registering a growth of 89% over the previous year. The cumulative loan sanctions since inception of the Company, as at the end of the financial year 2012-13 was Rs.9915.24 Crore.

Disbursement

During the year, the loans disbursed were to the extent of Rs.1813.77 Crore (Previous year Rs.859.07 Crore) registering an increase of 111% over the previous year. The cumulative loan disbursements since inception of the Company as at the end of the financial year 2012-13 stood at Rs.8474.83 Crore.

Loans Outstanding

The cumulative loan(s) outstanding at the end of the year was Rs.4016.15 Crore (Previous year Rs.2674.39 Crore) registering an increase of 50%.

Non Performing Asset (NPA)

During the year, your Company has reduced the gross NPA to Rs.15.66 Crore (Previous year Rs.19.01 Crore) registering a gross NPA ratio of 0.38% and a reduction of 17.62%. The net NPA continued to be Nil, with Provision conversion ratio at 100%. Your Company could register a cash recovery of Rs.2.60 Crore (Previous year Rs.2.14 Crore) in 44 accounts in long-pending NPA accounts by way of One Time Settlement (OTS).

Profits

Your directors wish to inform with pleasure that during the year under review, your Company has recorded a Profit Before Tax (PBT) of Rs.75.10 Crore (Previous year Rs.60.98 Crore) and Profit After Tax (PAT) of Rs.54.12 Crore (Previous year Rs.43.76 Crore) after making provision for standard assets amounting to Rs.6.85 Crore (Previous year Rs.11 Crore) which is a requirement in terms of the Directions of NHB.

Dividend

The subject relating to recommending the Dividend for the year 2012-13 was discussed in detail by the Directors with specific reference to the profit earned by the Company during the year, the requirement of maintaining the Capital Adequacy Ratio (CAR) at 12%, additional requirement of funds for incremental business projected for the next year, amount available for appropriation for the year to increase CAR, appropriation of Rs.11 Crore towards the Additional Reserve u/s.29C of the NHB Act, for the first time and the like.

With due consideration to the views expressed by the members of the Company at the previous annual general meetings, appreciating the confidence reposed by the members in the Company and their continued support, the Board of Directors of your Company have recommended a dividend of Rs.4 per equity share (40%) against Rs.3 per equity share (30%) recommended during the previous year, for the year ended March 31, 2013. The tax on distributed profits u/s.115-O of the Income Tax Act, 1961, at 16.22% is being paid to the Government by the Company.

Branch network expansion

Your Company has a strong marketing and distribution network. Keeping in view the housing needs across the Country, enhancing the level of business significantly and to meet the requirements of a larger section of customers especially for housing and non-housing loans, 17 new branches were opened by your Company in different parts of the Country. Located in major cities, the total branch network of the Company at the end of the financial year stood at 69 (previous year 52). Your Company envisages increasing the number of branches to about 85 by March 31, 2014. The above net work coverage is expected to provide increased market penetration to cater to the evolving needs of our existing customers and tapping a growing potential customer base throughout India. The Registered Office and branches have been up-graded with state-of-the art ambience and facilities to the customers during their visit to the branches have been enhanced. All the branches of the Company are on the core banking platform.

FINANCIAL RESOURCES

Deposits

The deposits outstanding (inclusive of interest accrued, but not due) as of March 31, 2013 were Rs.171.45 Crore as against Rs.143.89 Crore as at the end of the previous year.

As on March 31, 2013 a sum of Rs.11.12 Crore relating to 1800 accounts (Rs.12.14 Crore as on March 31, 2012 relating to 2057 accounts) was unclaimed. Out of the same, a sum of Rs.2.46 Crore relating to 403 accounts (Rs.3.25 Crore relating to 506 accounts) was claimed and renewed/settled as of date. The remaining depositors have been informed individually by the respective branches either to renew or claim their deposit amounts.

The Ministry of Corporate Affairs, Government of India, New Delhi, vide order F.No.07/07/ 2009-CL/VI dated July 12, 2010 has granted an exemption to the Company from the applicability of the provisions of Section 58A(2)(a) and (b) of the Companies Act, 1956 ("the Act”) for a period of 3 years with effect from October 22, 2009, which enables the Company to publish abridged deposit advertisement(s) only during the period of validity of the Statutory Advertisement. The said approval is granted subject to certain conditions mentioned vide paragraph nos. (i) to (vii) of the said Order viz., mentioning reference to the statutory advertisements published by the Company with date and name of the news paper, filing of the said abridged advertisement with the Registrar of Companies in Karnataka, within 15 days of its publication, that the exemption granted would be without prejudice to any legal rights available to any depositor or any share holder or creditor as per law in force in respect of recovery of any amount which has become due for repayment and the exemption granted does not convey approval of Central Government under any other provisions of "the Act”. The statutory requirements, as applicable, are being complied with periodically.

Rating of deposits

The deposit schemes of the Company continued to be rated as "MAA ” (pronounced M double A plus) by the credit rating agency viz., ICRA Ltd., indicating high-credit-quality and the rated deposit programme carries low credit risk. The high credit quality rating takes into account the strong ownership, low operating cost structure, superior capital adequacy, its favourable liquidity position and comfortable asset quality indicators. The outlook on the rating has also been re-affirmed as "Stable”.

Long term financial resources

Refinance from National Housing Bank (NHB)

With the continued support by the NHB and to meet the funds requirement due to substantial increase in business operations during the year, your Company availed refinance amounting to Rs.1,326.90 Crore (Previous year Rs.280 Crore) under the NHB''s Refinance Scheme to Housing Finance Companies. The cumulative borrowings from NHB as on March 31, 2013 were Rs.1795.74 Crore (Previous year Rs.595.18 Crore).

Mortgage Backed Securities (MBS)

Your Company did not go in for any securitisation during the year or during the previous year considering its cost and funds available through alternative sources. As such there were no securitised assets outstanding as on March 31, 2013.

Debentures

The Company had no outstanding on account of debentures as on March 31, 2013.

Borrowings from banks

Your Company borrowed Rs.639 Crore from banks during the year compared to Rs.595 Crore during the previous year. The aggregate of term loans, including the overdraft amount, from Canara Bank and HDFC Bank Ltd., outstanding at the end of the financial year stood at Rs.1571.70 Crore as against Rs.1561.23 Crore during the previous year and there were no short-term loans.

Rating of term loans

During the year a Rating for the borrowings by the Company by way of Term Loans was obtained from ICRA Ltd., and the Rating of ICRA AA (pronounced ICRA double A plus) with a stable outlook to the Line of Credit of Can Fin Homes Ltd.

Compliance with Directions/Guidelines of National Housing Bank (NHB) and other statutes

Your Company adhered to the prudential guidelines for Non-Performing Assets (NPAs), issued by the National Housing Bank (NHB) under its Directions 2010, as amended from time to time. Your Company has complied with the Guidelines and Directions issued by the NHB on asset classification of Credit / Investments, Credit Rating, Deposits, Fair Practices Code and Customer Complaints Redressal Mechanism, Know Your Customer (KYC) and Anti Money Laundering Guidelines and other related aspects.

In compliance of the Directions issued by the NHB vide letter No.NHB(ND)/DRS/Pol.No.45/2011-12 dated January 19, 2012, a provision for Standard Assets in respect of Commercial Real Estates is required to be made at 1% and for other Standard Assets, the said provision is required to be made at 0.40%. A provision of Rs.685 Lakh has been made in the books as on March 31, 2013 and the cumulative provision in that regard stood at Rs.18 Crore as of the above date. The recognition of income and provision for non-performing assets has been made in the books as per the Guidelines on Prudential Norms applicable as of March 31, 2013.

Your Company has complied with the Accounting Standards issued by the ICAI, New Delhi and other related statutory guidelines/Directions as applicable to the Company from time to time.

Capital adequacy

The Capital Adequacy Ratio (CAR) maintained by your Company has been above the minimum required level of 12% prescribed by the National Housing Bank (NHB). The Capital Adequacy Ratio of the Company as on March 31, 2013 was 14.72% (Previous year 17.44%). The moderate reduction witnessed in the CAR is mainly due to a high growth rate in business and changes in the rate of provision for Standard Assets in respect of commercial real estates. Your directors have reviewed the position in detail and have initiated steps for monitoring the required CAR during the ensuing year in tune with the business projections for 2013-14.

Recovery action under Securitisation & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) has proved to be a useful recovery tool and the Company has been able to successfully initiate recovery action under SARFAESI Act and recover Rs.1.89 Crore relating to 14 Non-Performing accounts.

Particulars of employees

There are no such particulars to be furnished under the provisions of Section 217(2A) of "the Act”, read with Companies (Particulars of Employees) Rules, 1975.

Listing of securities

The equity shares of the Company continued to be listed on the Bangalore Stock Exchange Ltd., (Bg.SE), Bengaluru, Bombay Stock Exchange Ltd., (BSE), Mumbai and the National Stock Exchange of India Ltd., (NSE), Mumbai. Your Company has been utilising the e-filing facilities for submission of various returns/reports.

The Listing Fee payable to the above Stock Exchanges has been paid before the due dates.

The securities of the Company are actively traded on the BSE and NSE. The other related particulars are provided to the members in the Report on Corporate Governance.

Man Power - Human Resources Development

The manpower of your Company was 320 as on March 31, 2013, including the Managing Director, executives, officers and other employees, against 251 employees during the previous year.

During the year some of the employees of the Company were deputed for selected training programmes/seminars on different subjects organised by the National Housing Bank and other reputed institutions as a Human Relations measure and to equip the employees with latest changes/ developments in the areas like housing finance and related subjects. Further, during the year internal training on Credit, Information Technology, Human Relations, Finance, Taxation, Marketing and other related topics of importance were imparted to all the employees of the Company.

As a motivational measure and in recognition of their performance under recovery out of NPA accounts, eligible employees were rewarded under the incentive scheme.

Transfer of unclaimed and unpaid dividend/deposit amounts to the Investor Education and Protection Fund (IEPF)

As an investor friendly measure, your Company has been intimating the respective shareholders/ depositors/ investors to encash their dividend warrant/lodge their claim for payment due, if any, from time to time and claims made are settled. Certain amount still remains unclaimed despite constant and sincere efforts by the Company to pay such unclaimed amounts to the investors. As per the statutory requirement such details for the previous 7 years as of the date of the annual general meeting made available on the website of MCA as well as on the Company''s website. With a view to receive prompt payment by the investors, the members/investors are requested to register bank account numbers, opt for ECS facility, register nomination and intimate change of address, if any, to the Company/Depository Participants promptly.

In terms of Section 205C of "the Act”, the amounts (dividends, deposits etc.) that remained unclaimed and unpaid for more than 7 years from the date they became first due for payment, should be transferred to IEPF which your Company is complying with from time to time. In terms of the said Section no claim would lie against the Company or the IEPF after such transfer.

(i) Unclaimed dividends

As on March 31, 2013 dividends aggregating to Rs.57.99 Lakh (previous year Rs.53.85 Lakh), relating to dividends declared during 2005-06 to 2011-12, of which Rs.11.88 Lakh related to dividend for the year 2012, had not been claimed by the members of the Company. Your Company has been intimating the shareholders to lodge their claim for dividend from time to time and the related details are being provided in the annual reports every year.

The dividend pertaining to the financial year 2004-05 which remained unclaimed/unpaid amounting to Rs.6.67 Lakh (in respect of 1553 shareholders) was transferred to IEPF during August 2012, after settlement of claims by the members, received in response to the individual reminder letters sent by the Company to the respective members.

The dividend pertaining to the financial year 2005-06 remaining unclaimed and unpaid amounting to Rs.7.82 Lakh (in respect of 1776 shareholders) as at the end of the financial year 2012-13 would be transferred to IEPF during August 2013 after settlement of the claims received upto the date of completion of 7 years.

(ii) Unclaimed deposits

As required under Section 205C of "the Act”, the unclaimed and unpaid deposits with interest for the year 2005-06 amounting to Rs.6.13 Lakh (previous year Rs.7.62 Lakh) that remained unclaimed and unpaid for a period of 7 years were transferred to IEPF.

Particulars regarding conservation of energy, technology absorption and foreign exchange earnings and expenditure

Since the Company is a housing finance Company and does not own any manufacturing facility, the requirement relating to providing the particulars relating to conservation of energy and technology absorption stipulated in the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 required to be furnished u/s.217(1)(e) of "the Act”, are not applicable.

During the year, your Company did not earn any income or incur any expenditure in foreign currency.

Directors

Your directors wish to report that Mr.Anil Kumar Nayyar, resigned as a director with effect from December 31, 2012 on his superannuation as the General Manager of Canara Bank, the sponsor bank.

The Board of Directors appointed Mr.S.Krishna Kumar, General Manager, Canara Bank as an Additional Director with effect from February 20, 2013. Mr.S.Krishna Kumar is a degree holder in Commerce and a CAIIB. He started his career as a Probationary Officer in Canara Bank during November 1982. During his service in the Bank over a period of 30 years, he has served in different branches/offices across the Country and his forte is Credit, particularly, Corporate Credit.

Pursuant to Article 22 of the Articles of Association of the Company ("Articles”), read with Section 260 of "the Act”, Mr.S.Krishna Kumar would have held office up to the date of the ensuing Annual General Meeting. However, consequent to his transfer to Trichy Circle Office, he has tendered his resignation w.e.f. April 26, 2013.

Your directors wish to place on record their appreciation for the services rendered and contribution made by Mr.Anil Kumar Nayyar and Mr.S.Krishna Kumar during their tenure as directors and as members of certain committees of the Board.

The Board of directors appointed Mr.S.A.Kadur as an additional director w.e.f June 07, 2013. Further particulars relating to Mr.S.A.Kadur are provided in the explanatory statement on the related agenda, forming part of the notice of the ensuing annual general meeting.

In terms of the applicable provisions of Section 260 and all other applicable provisions, if any, of "the Act”, and Article 22 of the "Articles”, Mr.S.A.Kadur, director holds office as such only upto the date of the ensuing Annual General Meeting. Your Company has received a notice in writing from a shareholder, under Section 257 and all other applicable provisions, if any, of "the Act”, proposing the appointment of Mr.S.A.Kadur, as a director at the ensuing Annual General Meeting.

Your directors are of the opinion that the appointment of Mr.S.A.Kadur, as a director would be in the best interest of the Company.

Director(s) retiring by rotation

In terms of the provisions of Section 256 and all other applicable provisions, if any, of "the Act”, and the "Articles”, Mr.K.S.Madhava Murthy, Director, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The particulars relating to Mr.K.S.Madhava Murthy are mentioned in the Report of the Directors on Corporate Governance. Your directors recommend the re-appointment of Mr.K.S.Madhava Murthy as a director.

The agenda relating to re-appointment of Mr.K.S.Madhava Murthy is included in the notice convening the ensuing Annual General Meeting.

All the directors of the Company have confirmed that they are not disqualified for being appointed/re-appointed as directors in terms of Section 274(1)(g) of "the Act”.

Auditors

M/s K.P.Rao & Co., Chartered Accountants, Bengaluru, Statutory Auditors of the Company (Firm Registration No.003135S) appointed by the members at the 25th annual general meeting of the Company held on August 08, 2012 and other 26 firm of branch auditors appointed by the Board based on the approval of the members at the above annual general meeting, would retire at the ensuing Annual General Meeting and are eligible for re-appointment.

The Company has received a confirmation from M/s.K.P.Rao & Co., Statutory Auditors to the effect that their proposed appointment, if made, would be within the limits prescribed under Section 224(1B) of "the Act”.

Your directors recommend the re-appointment of the M/s.K.P.Rao & Co., as the Statutory Auditors. The resolutions seeking approval of the members for appointment of Statutory Auditors and fixation of their remuneration and authorisation to the Board of Directors for appointment of Branch Auditors and fixation of their remuneration have been included in the notice convening the ensuing Annual General Meeting. The above said appointment attracts the provisions of Section 224A, 228 and all other applicable provisions, if any, of "the Act”.

Directors'' responsibility statement

In accordance with the provisions of Section 217(2AA) of "the Act”, and based on the information provided by the Management, the Board of Directors report that:

(a) In the preparation of annual accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any;

(b) The Accounting Policies selected were applied consistently. Reasonable and prudent judgements and estimates were made so as to give a true and fair view of the state of affairs of the Company as at the end of March 31, 2013 and of the profit of the Company for the year ended on that date;

(c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of "the Act”, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(d) The annual accounts have been prepared on a going concern basis.

Management discussion and analysis report

The Management Discussion and Analysis Report prepared in terms of the Clause 49 of the listing agreement forms part of this Report.

Corporate governance

The Management Discussion and Analysis Report, Report of Directors on Corporate Governance and the Auditors Certificate on Corporate Governance issued by the Statutory Auditors of the Company for the year under review as required under "the Act” and in pursuance of Clause 49 of the Listing Agreements (placed with the Report of the Directors on Corporate Governance) forms part of this annual report.

Silver Jubilee Celebrations

Your Company commenced a year-long Silver Jubilee Year celebrations from December 27, 2011. As a part of customer initiatives your Company is popularising the new products/ facilities viz., Loans for Commercial Property (LCP), Mortgage Loans, ECS facility, SMS banking, effective functioning of Centralised Document Storage Centres (CDSC) at Bengaluru and Gurgaon for safe keeping of loan documents. The state-of-the-art IBS system is devised so as to provide data security. All branches celebrated customers'' meet whereat the customers, professionals and many others connected with the business participated.

Save green efforts

In recognition and support to the green initiative taken by the Ministry of Corporate Affairs (MCA), Government of India, your Company has been sending the notice, annual reports etc., to the registered e-mail IDs of the Members. As a step towards paperless banking, initiatives taken by your Company include ECS facility for repayment of loans, streamlining the systems and procedures for reporting by the branches and at the Registered Office through Integrated Business Suite (IBS), networking of branches with the Registered Office, harnessing solar energy for lighting and computer operations at certain branches and the like. Thus the usage of paper is brought to minimum.

Outlook for 2013-14

The Indian economy is one of the faster growing economies in the world and the GDP growth is expected to be around 5.7% in 2013-14 as per the estimates by the Reserve Bank of India. With the recent improvement in the demand for housing and real estate sectors, activities in the housing, real estate sectors and infrastructure sectors are expected to remain healthy in the coming years and expected to increase credit demand for housing. In the above scenario, the housing sector is a challenging sector. As such, a sharp increase in demand for residential units and commercial real estate are foreseen.

The Real Estate (Regulation & Development) Bill, mooted recently by the Housing and Poverty Alleviation Ministry, Govt. of India, is a welcome development for the housing companies. The Bill provides for sale of houses in residential projects on the basis of Carpet area or built-up area, registration of the projects by the builders with the Regulator before advertising or starting construction, levy of penalty upto 10% of the project cost for failure to comply with the requirements by the builders for the first time and imprisonment upto 3 years for repeated non-compliance.

Your Company would continue to give a more focussed attention for lending to individual loan segment, project loans and non-housing loans with an emphasis to further enhance its market share in the housing market segment with more emphasis on marketing and customer oriented business relationship.

Your Company expects to maintain a sustained growth in its performance levels during 2013-14 and has put in place a well drawn vision document. However, given the indications about the likely changes in cost of funds and expectations of borrowers for availing loans at reasonably lesser rates, the margins are expected to be under pressure.

Acknowledgements

Your directors would like to place on record the role of Canara Bank for their consistent support and guidance.

Your directors would like to acknowledge the role of all its stakeholders viz., the shareholders, depositors, lenders, borrowers and others for their continued support to the Company and the confidence and faith that they have always reposed in the Company.

Your directors acknowledge and appreciate the guidance and support extended by various regulatory authorities including National Housing Bank (NHB), Securities Exchange Board of India (SEBI), Ministry of Corporate Affairs, Registrar of Companies, Karnataka, the Stock Exchanges and the Depositories.

Your directors thank the Credit Rating Agencies, Government(s), local/statutory authorities, the Registrars and Share Transfer Agents of the Company and all others for their wholehearted support during the year and look forward to their continued support in the years ahead.

Your directors value the professionalism of all the employees of the Company who have worked in a challenging environment and whose efforts have stood the Company in good stead and taken the Company to greater heights.

For and on behalf of the Board of Directors

Sd/-

Place : Bengaluru S.R.IYER

Date : June 07, 2013 Chairman


Mar 31, 2012

The Directors are pleased to present the 25th Annual Report of the business and operations of the Company together with the audited accounts for the year ended March 31, 2012, the Silver Jubilee Year of your Company.

FINANCIAL RESULTS

The financial performance for fiscal 2012 is summarised here below:

For the year ended For the year ended March 31, 2012 March 31, 2011 (Rs in lakh) (Rs in lakh)

Profit before Tax & Provisions 6830.88 5997.11

Less: Provision for Standard Assets 1100.00 -

Provision for Doubtful Debts - Housing Loans (361.16) 145.58

Prior Period adjustments (5.53) _

PROFIT BEFORE TAX 6097.57 5851.53

Tax expenses:

(a) Provision for Tax - Current Year 1780.00 1725.00

(b) Deferred Taxation (58.42) (75.07)

PROFIT AFTER TAX 4375.99 4201.60

Balance brought forward from previous year 936.89 480.50

5312.88 4682.10

Appropriations:

Transfer to Special Reserve u/s.36(1)(viii) 1350.00 1150.00 of the Income Tax Act, 1961

Transfer to General Reserve 2700.00 2000.00

Proposed Dividend 614.62 512.13

Tax on Distributed Profits 99.71 83.08

Provision for Contingencies - -

Balance carried forward 548.55 936.89

5312.88 4682.10

PERFORMANCE HIGHLIGHTS

SANCTIONS

During the year, the housing loans and other loans sanctioned were to the extent of Rs1105.41 crore registering a growth of 102.63% over the previous year. The cumulative loan sanctions since inception of the Company, as at the end of the financial year 2011 -12, was Rs7822.59 crore.

DISBURSEMENT

During the year, the loans disbursed were to the extent of T859.07 crore registering an increase of 81.71% over the previous year. The cumulative loan disbursements since inception of the Company as at the end of the financial year 2011-12 stood at Rs6661.06 crore.

LOANS OUTSTANDING

The cumulative loan(s) outstanding at the end of the year was Rs2674.39 crore as compared to Rs2207.51 crore (including the loan under "Securitised Assets" of Rs3.92 crore, repaid during 2011-12) in the previous year registering an increase of 21.15%.

NON PERFORMING ASSET (NPA)

During the year, your Company has reduced the gross NPA from T23.47 crore to Rs19.01 crore (a reduction of 19%) and the net NPA continued to be Nil (provision conversion ratio: 100%). Your Company has recovered Rs2.14 crore out of long pending core NPA accounts by way of one time settlements.

PROFITS

Your directors are pleased to inform that during the year under review your Company has recorded a Profit Before Tax (PBT) of T60.98 crore as against Rs58.52 crore during 2010-11 and Profit After Tax (PAT) of Rs43.76 crore after making provision for standard assets for Rs11 crore at a time as per the Directions of NHB. Excluding the provision for standard assets, the year-on-year growth of net profit for the year is 30.32%.

DIVIDEND

Your directors have discussed the subject in detail with specific reference to the present minimum required level of Capital Adequacy Ratio (CAR) at 12%, the additional requirement of funds to meet CAR as per the Guidelines/ Directions issued by the Regulators from time to time, future requirement of funds/capital for incremental business projected, further expansion of business and other relevant factors. Considering the above and in the long-term interest of the Company, it is considered prudent and expedient to conserve profits of the Company to the extent possible.

Appreciating the confidence reposed by the members in the Company and their continued support, the Board of Directors of your Company have recommended a dividend of Rs2.50 per equity share (25%) and being the Silver Jubilee Year, an additional dividend of Rs0.50 per equity share (5%) for the year ended March 31, 2012, aggregating to 30%. The tax on distributed profits u/s.115-0 of the Income Tax Act, 1961, at 16.22% is being paid by the Company.

BRANCH NETWORK EXPANSION

With a view to reach out to a large section of customers in need of housing as well as non-housing finance and to increase business performance level, your Company opened 18 new branches in different parts of the Country and the total branch network of the Company at the end of the financial year stood at 52 (previous year 41), 59 branches as of date, located in major cities of the Country. Your Company envisages to increase the number of branches to 70 by March 31, 2013.

SAVE GREEN EFFORTS

In recognition and support to the green initiative taken by the Ministry of Corporate Affairs (MCA), Government of India, your Company has been sending the annual reports including report of directors, report on corporate governance, general information to shareholders of the Company to the registered e-mail IDs of the shareholders. Other initiatives taken by your Company include ECS facility for repayment of loans, paperless banking, sending official communications by way of scanned images and harnessing solar energy for lighting and computer operations at Karur, Madurai, Salem and RN.Palayam branches of the Company.

SILVER JUBILEE CELEBRATIONS

Your Company commenced year-long Silver Jubilee Year celebrations from December 27, 2011. As a part of customer initiatives your Company has launched three new products viz., Loans for Rural Housing (LRH) with housing loans at 9.75% rate of interest, Loans for Commercial Property (LCP) and Loans to Childrens Education (LCE), introduction of ECS facility, establishing Document Storage Centres (DSC) at Bangalore and Gurgaon for safe keeping of loan documents. The state-of-the-art IBS system is devised so as to provide data security. The ambience of branches are being enhanced and media coverage and customers' meet are being held.

FINANCIAL RESOURCES DEPOSITS

The deposits outstanding (inclusive of interest accrued, but not due) as of March 31, 2012 were Rs143.89 crore as against Rs149.76 crore as at the end of the previous year.

As at March 31, 2012 a sum of Rs9.99 crore relating to 2057 accounts (Rs10.44 crore as at March 31, 2011 relating to 2148 accounts) was unclaimed. Out of the same, a sum of Rs3.25 crore relating to 506 accounts was claimed and renewed/settled as of date. The remaining depositors have been informed individually by the respective branches either to renew or claim their deposit amounts.

The Ministry of Corporate Affairs, Government of India, New Delhi, vide order F.NO.07/07/2009-CLA/I dated July 12, 2010 has granted an exemption to the Company from the applicability of the provisions of Section 58A(2)

(a) and (b) of the Companies Act, 1956 ("the Act") for a period of 3 years with effect from October 22, 2009, which enables the Company to publish abridged deposit advertisement(s) only during the period of validity of the Statutory Advertisement. The said approval is granted subject to certain conditions mentioned vide Paragraph nos. (i) to (vii) of the said Order viz., mentioning reference to the statutory advertisements published by the Company with date and name of the news paper, filing of the said abridged advertisement with the Registrar of Companies in Karnataka, within 15 days of its publication, that the exemption granted would be without prejudice to any legal rights available to any depositor or any share holder or creditor as per law in force in respect of recovery of any amount which has become due for repayment and the exemption granted does not convey approval of Central Government under any other provisions of "the Act". The statutory requirements, as applicable, are being complied with periodically.

RATING OF DEPOSITS

The deposit schemes of the Company continued to be rated as "MAA " (pronounced M double A plus) by the credit rating agency viz., ICRA Ltd., indicating high-credit-quality and the rated deposit programme carries low credit risk. The high credit quality rating takes into account the strong ownership, low operating cost structure, superior capital adequacy, its favourable liquidity position and comfortable asset quality indicators. The outlook on the rating has also been re-affirmed as "Stable".

LONG TERM FINANCIAL RESOURCES

REFINANCE FROM NATIONAL HOUSING BANK (NHB)

With the continued support by the NHB, during the year your Company availed refinance amounting to Rs280 crore against Rs253 crore availed during 2010-11 under the NHB's Refinance Scheme to Housing Finance Companies. The cumulative borrowings from NHB as of March 31, 2012 was Rs595.18 crore compared to Rs560.11 crore as at the end of the previous year.

MORTGAGE BACKED SECURITIES (MBS)

Your Company did not 30 in for fresh securitisation during the year or during the previous year considering its cost and funds available through alternative sources.

The entire amount of securitised outstanding as of March 31, 2011 amounting to Rs3.92 crore was paid in full to the investors as per the schedule of re-payment and the account was closed. As such there was no securitised assets outstanding as of March 31, 2012 (refer si.no.4 of Note no.21 on 'Notes on Accounts').

DEBENTURES

The Company had no outstanding on account of debentures as of March 31, 2012.

BORROWINGS FROM BANKS

Your Company borrowed Rs595 crore from banks during the year compared to Rs414 crore during the previous year. The aggregate of term loans from various banks outstanding at the end of the financial year stood at Rs1544.59 crore as against Rs1193.92 crore during the previous year and there were no short-term loans.

RATING OF TERM LOANS

During the year a Rating for the borrowings by the Company by way of Term Loans was obtained from CARE Ltd., and the Rating of CARE AA (Double A Plus) was assigned for long-term bank facilities indicating high safety for timely servicing of debt obligations. The above Rating was obtained by the Company as per Basel-ll requirements.

COMPLIANCE WITH DIRECTIONS/GUIDELINES OF NATIONAL HOUSING BANK (NHB) AND OTHER STATUTES

During the year, the National Housing Bank vide their letter dated August 05, 2011 issued Directions to the Housing Finance Companies for making a provision for Standard Assets at 0.40% of the standard assets outstanding (which was applicable only to the non-housing loans outstanding during the previous year). In view of the above and keeping in view the anticipated requirements for making a provision for standard assets, your Company has made a provision of Rs11 crore as of March 31, 2012, against the requirement of Rs10.62 crore.

Your Company has complied with the Guidelines and Directions issued by the NHB on asset classification of Credit/ Investments, Credit Rating, Fair Practices Code, Know Your Customer (KYC), Deposits and Anti Money Laundering Guidelines, Accounting Standards issued by the ICAI, New Delhi and the like.

CAPITAL ADEQUACY

The Capital Adequacy Ratio (CAR) maintained by your Company has been above the minimum required level of 12% prescribed by the National Housing Bank (NHB). During the year under review, the Risk Weight on housing loans sanctioned to individuals secured by mortgage of immovable property and classified as standard assets was modified. The Capital Adequacy Ratio of the Company as at March 31, 2012 was 17.44% as against 19.14% as at the end of the previous year.

RECOVERY ACTION UNDER SECURITISATION G> RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 (SARFAESI ACT)

The SARFAESI Act 2002, the proceedings under which are summary in nature has been made applicable to the housing finance companies from the year 2003. Your Company has been initiating action under the said Act for recovery of dues and could recover Rs1.35 crore out of 14 accounts that were classified as non-performing assets, by selling the secured assets (security), without intervention of Hon'ble Courts.

PARTICULARS OF EMPLOYEES

There are no such particulars to be furnished under the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975.

LISTING OF SECURITIES

The equity shares of the Company continue to be listed on the Bangalore Stock Exchange Ltd., (Bg.SE), Bangalore, Bombay Stock Exchange Ltd., (BSE), Mumbai and the National Stock Exchange of India Ltd., (NSE), Mumbai.

The Listing Fee payable to the above Stock Exchanges has been paid before the due dates.

The securities of the Company are actively traded on the BSE and NSE. The other related particulars are provided to the Members in the Report on Corporate Governance.

MAN POWER - HUMAN RESOURCES DEVELOPMENT

Your Company had 251 employees (excluding the Managing Director on deputation from Canara Bank) as of March 31, 2012 as against 223 employees (215 employees of the Company and 8 officers on deputation from Canara Bank) as at the end of the previous year. During the year, training was imparted to all the employees of the Company, including orientation training to the new recruits, by internal and external faculty.

In order to upgrade knowledge in the fast changing scenario, to enhance employee competencies and up- gradation of skills, all the employees at various levels were nominated for various external training programmes on subjects related to housing finance, taxation, information security, corporate governance, risk management and other related topics of importance.

80 Probationary Officers were appointed during the year. In recognition of the performance and as a motivational measure 55 eligible employees/Officers/Executives were promoted and incentive schemes like Employees Suggestion Scheme and education tour etc. were introduced.

TRANSFER OF UNCLAIMED AND UNPAID AMOUNTS TO THE INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

In terms of Section 205C of the Companies Act, 1956, the amounts (dividends, deposits etc.) that remained unclaimed and unpaid for more than 7 years from the date they became first due for payment, should be transferred to IEPF. In terms of the said Section no claim would lie against the Company or the IEPF after such transfer.

As an investor friendly measure, your Company has been intimating the respective shareholders/depositors/ investors to encash their dividend warrant/lodge their claim for payment due, if any, from time to time and claims made are settled. Certain amount still remains unclaimed despite constant and sincere efforts by the Company to pay such unclaimed amounts to the investors.

(i) UNCLAIMED DIVIDENDS

As of March 31, 2012 dividends aggregating to Rs53.85 lakh (previous year Rs51.81 lakh), relating to dividend declared during 2004-05 to 2010-11, of which Rs9.92 lakh related to dividend for the year 2011, had not been claimed by the shareholders of the Company. The Company has been intimating the shareholders to lodge their claim for dividend from time to time and the related details are being provided in annual reports every year.

The dividend pertaining to the financial year 2003-04 which remained unclaimed/unpaid amounting to Rs5.61 lakh (in respect of 1,308 shareholders) was transferred to IEPF during August 2011, after settlement of claims received in response to the individual reminder letters sent by the Company to the respective shareholders).

The dividend pertaining to the financial year 2004-05 remaining unclaimed and unpaid amounting to Rs7.32 lakh (in respect of 1680 shareholders) as at the end of the financial year would be transferred to IEPF during July 2012 after settlement of the claims received upto the date of completion of 7 years, The Company has sent individual reminder letters to the respective shareholders during April 2012 and with a request to submit their claim forms within a prescribed date.

(H) UNCLAIMED DEPOSITS

During the year, in terms of Section 205C of the Companies Act, 1956, the unclaimed and unpaid deposits with interest for the year 2004-05 amounting to Rs7,62 lakh (previous year Rs2.14 lakh) that remained unclaimed and unpaid for a period of 7 years were transferred to IEPF.

PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND EXPENDITURE

The requirement relating to providing the particulars relating to conservation of energy and technology absorption stipulated in the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 required ' to be furnished u/s.217 (1) (e) of the Companies Act, 1956 are not applicable since the Company is a housing finance Company and does not own any manufacturing facility.

During the year, your Company did not earn any income or incur any expenditure in foreign currency.

DIRECTORS

Your directors wish to report that Mr.Ashok Kumar Jain, director vacated his office with effect from January 19, 2012, by virtue of Section 283(1 Xg) of the Companies Act, 1956 and Mr.RR.Yagnik, director and Chairman of the Board of Directors resigned as a director with effect from January 30, 2012.

Your directors wish to place on record their appreciation for the services rendered and contribution made by Mr.Ashok Kumar Jain during his tenure as a director and Mr.P.R.Yagnik, during his tenure as a director and Chairman of the Board and certain Committees of Directors.

The Board of Directors appointed Mr.RB.Santhanakrishnan FCA, a Practising Chartered Accountant as an Additional Director with effect from February 16, 2012. Further particulars relating to Mr.RB.Santhanakrishnan are provided in the explanatory statement for the related agenda forming part of the notice of the ensuing annual general ' meeting.

In terms of the applicable provisions of Section 260 and all other applicable provisions, if any, of the Companies Act, 1956 and Article 22 of the Articles of Association of the Company, Mr.RB.Santhanakrishnan, director holds office as such only upto the date of the ensuing Annual General Meeting. Your Company has received a notice in writing from a shareholder, under Section 257 and all other applicable provisions, if any, of the Companies Act, 1956 proposing the appointment of Mr.RB.Santhanakrishnan, as a director at the ensuing Annual General Meeting.

Your directors are of the opinion that the appointment of Mr.RB.Santhanakrishnan, as a director would be in the best interest of the Company.

DIRECTOR(S) RETIRING BY ROTATION

In terms of the provisions of Section 256 and other applicable provisions, if any, of the Companies Act, 1956 and the Articles of Association of the Company, Mr.Anil Kumar Nayyar, Director, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The particulars relating to Mr.Anil Kumar Nayyar are mentioned in the Report on Corporate Governance. Your directors recommend the re-appointment of , Mr.Anil Kumar Nayyar as a director.

The agenda relating to re-appointment of MrAnii Kumar Nayyar is included in the notice convening the ensuing Annual General Meeting.

All the directors of the Company have confirmed that they are not disqualified from being appointed as directors in terms of Section 274(1 )(g) of "the Act".

AUDITORS

Ws.K.RRao S' Co., Chartered Accountants, Bangalore, Statutory Auditors of the Company having Registration No.003135S and also the branch auditors for branches in the States of Karnataka, Kerala, Goa, Gujarat, Maharashtra and the new branches, if any, to be opened during 2011 -12 and the Auditors for the other branches viz., M/s.L.U.Krishnan S' Co, Chartered Accountants, Chennai, M/s.K.RRao Associates, Chartered Accountants, Hyderabad and M/s.H.K.Chaudhry S' Co., Chartered Accountants, New Delhi, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment.

The Company has received confirmation from M/s.K.P.Rao & Co., Statutory auditors to the effect that their proposed appointment, if made, would be within the limits prescribed under Section 224(1 B) of the Companies Act, 1956.

Your directors recommend the re-appointment of the M/s.K.RRao S' Co., as the statutory auditors. The resolutions seeking approval of the members for appointment of Statutory Auditors and fixation of their remuneration and authorisation to the Board of Directors for appointment of Branch Auditors and fixation of their remuneration have been included in the notice convening the ensuing Annual General Meeting. The above said appointment attracts the provisions of Section 224A, 228 and all other applicable provisions, if any, of "the Act".

DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217(2AA) of the Companies Act, 1956 and based on the information provided by the Management, the Board of Directors report that:

(a) In the preparation of annual accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any;

(b) The Accounting Policies selected were applied consistently. Reasonable and prudent judgements and estimates were made so as to give a true and fair view of the state of affairs of the Company as at the end of March 31, 2012 and of the profit of the Company for the year ended on that date;

(c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(d) The annual accounts have been prepared on a going concern basis.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In terms of the Clause 49 of the listing agreement, the Management Discussion and Analysis Report forms part of this report.

CORPORATE GOVERNANCE

The Auditors Certificate on Corporate Governance issued by the Statutory Auditors of the Company for the year under review as required under "the Act" and in pursuance of Clause 49 of the Listing Agreements is annexed to the Report of the Directors on Corporate Governance.

OUTLOOK FOR 2012-13

The Indian economy is one of the fastest growing economies in the world and the GDP growth is expected to improve in 2012-13. The real estate sector witnessed a robust growth in the last few years. The demand for commercial property is being driven by the economic growth of the Country. The housing sector alone contributes to about 5-6 per cent of the Country's GDR

The demand for real estate is expected to grow at a Compounded Annual Growth Rate (CAGR) of 19% between 2010 and 2014. Urbanisation and growing household income are a few factors influencing the demand for residential accommodation and growth in the retail sector.

As such, a sharp increase in demand for residential units and commercial real estate are foreseen.

Your Company would continue to give a more focussed attention for lending to individual loan segment, project loans and non-housing loans with an emphasis to further enhance its market share in the housing market segment.

With a view to sustain and enhance its performance level your Company is offering housing as well as non-housing products, with more emphasis on marketing and customer oriented business relationship.

Your Company expects to maintain a sustained growth in its performance levels during 2012-13 and has put in place a well drawn vision document. However, given the indications about the likely changes in cost of funds and expectations of borrowers for availing loans at reasonably lesser rates, the margins are expected to be under pressure.

ACKNOWLEDGEMENTS

Your directors wish to place on record with thanks the role of Canara Bank for their consistent support and guidance.

Your directors would like to thank all its stakeholders viz., the shareholders, depositors, borrowers and others for their continued support to the Company and the confidence and faith that they have always reposed in the Company.

Your directors acknowledge and appreciate the guidance and co-operation extended by various regulatory authorities including National Housing Bank (NHB), Securities Exchange Board of India (SEBI), Ministry of Corporate Affairs, Registrar of Companies, Karnataka, the Stock Exchanges and the Depositories.

Your directors thank the Credit Rating Agencies, Government(s), local/statutory authorities, the Registrars and Share Transfer Agents of the Company and all others for their wholehearted support during the year and look forward to their continued support in the years ahead.

Your directors appreciate and acknowledge the professionalism displayed and the contributions made by the employees whose efforts have kept the CanFin Homes flag flying high.

For and on behalf of the Board of Directors

Sd/-

Place: Bangalore S.R.IYER

Date: June 12,2012 Chairman


Mar 31, 2011

TO THE MEMBERS

The Directors are pleased to present the 24th Annual Report of the business and operations of the Company together with the audited accounts for the year ended March 31, 2011.

FINANCIAL RESULTS

The financial performance for fiscal 2011 is summarised here below:

For the year ended For the year ended

March 31, 2011 March 31, 2010

(Rs.in lakh) (Rs.in lakh)

Profit before Tax & Provisions 5997.11 5400.17

Less: Provision for Doubtful Debts

- Housing Loans 145.58 83.48

Profit Before Tax 5851.53 5483.65

Provision for Tax (1725.00) (1624.68)

Deferred Taxation 75.07 60.00

Profit After Tax 4201.60 3918.97

Balance brought forward from previous year 480.50 160.86

4682.10 4079.83

Appropriations:

Transfer to Special Reserve u/s.36 (1)(viii) of the Income 1150.00 1070.00 Tax Act, 1961

Transfer to General Reserve 2000.00 1450.00

Proposed Dividend 512.13 409.70

Tax on Distributed Profits 83.08 69.63

Provision for contingencies - 600.00

Balance carried forward 936.89 480.50

4682.10 4079.83

PERFORMANCE HIGHLIGHTS

LENDING OPERATIONS

The cumulative loan sanctions of the Company, as at the end of the financial year 2010-11 was Rs.6717.18 crore as compared to Rs.6171.65 crore in the previous year. The housing loans and other loans sanctioned during the year ended March 31, 2011 were to the extent of Rs.545.53 crore as against Rs.652.86 crore sanctioned during the previous year.

DISBURSEMENTS

The cumulative loan disbursements at the end of the year stood at Rs.5801.99 crore as compared to Rs.5329.21 crore in the previous year. The loans disbursed during the year ended March 31, 2011 was to the extent of Rs.472.78 crore as against Rs.546.90 crore disbursed during the previous year.

LOANS OUTSTANDING

The cumulative loan(s) outstanding, (including the loan under "Securitised Assets" of Rs.3.92 crore), at the end of the year was Rs.2207.51 crore as compared to Rs.2106.65 crore in the previous year (with "Securitised Assets" amounting to Rs.6.90 crore).

PROFITS

Your directors are pleased to inform that during the year under review your Company has recorded a Profit Before Tax of Rs.58.52 crore as against Rs.54.84 crore during 2009-10 and Profit After Tax of Rs.42.02 crore as against Rs.39.19 crore during 2009-10.

DIVIDEND

Your Directors have discussed the subject in detail with specific reference to the present position of Capital Adequacy Ratio (CAR), the additional requirement of funds to meet CAR as per the Guidelines/Directions issued by the Regulators from time to time, future requirement of funds/capital for incremental business projected, further expansion of business and other relevant factors. Considering the above and in the long-term interest of the Company it is considered prudent and expedient to conserve profits of the Company to the extent possible. However, appreciating the confidence reposed by the members in the Company and their continued support, the Board of Directors of your Company have recommended a dividend of Rs.2.50 per equity share (25%) for the year ended March 31, 2011.

The Tax on distributed profits u/s.115-O of the Income Tax Act, 1961, at 16.22% is being paid by the Company.

FINANCIAL RESOURCES

DEPOSITS

The deposits outstanding (inclusive of interest accrued, but not due) as of March 31, 2011 were Rs.149.76 crore as against Rs.202.31crore as at the end of the previous year.

Out of the deposits fallen due for repayment up to March 31, 2011, a sum of Rs 10.44 crore (Rs.7.26 crore as of March 31, 2010) relating to 2148 depositors (1702 depositors) had not been claimed or renewed. Subsequently, deposits of Rs 3.05 crore (Rs.1.66 crore) relating to 527 depositors (468 depositors) have been repaid or renewed. The remaining depositors have been requested either to renew or claim their deposits and the branches are making a constant follow up on the subject.

Individual intimations are being sent periodically to the depositors by the respective branches about the maturity of the deposits, in advance, with a request to either renew or claim the said deposits.

The Ministry of Corporate Affairs, Government of India, New Delhi, vide order F.No.07/07/ 2009-CL/VI dated July 12, 2010 has granted exemption to the Company from the applicability of the provisions of Section 58A(2)(a) and (b) of the Companies Act, 1956 ("the Act") for a period of 3 years with effect from October 22, 2009, which enables the Company to publish abridged deposit advertisement(s) only during the period of validity of the Statutory Advertisement. The said approval is granted subject to certain conditions mentioned vide paragraph nos. (i) to (vii) of the said Order viz., mentioning reference to the statutory advertisements published by the Company with date and name of the news paper, filing of the said abridged advertisement with the Registrar of Companies in Karnataka, within 15 days of its publication, that the exemption granted would be without prejudice to any legal rights available to any depositor or any share holder or creditor as per law in force in respect of recovery of any amount which has become due for repayment and the exemption granted does not convey approval of Central Government under any other provisions of "the Act". The statutory requirement is being complied with periodically.

RATING OF DEPOSITS

The deposit schemes of the Company continued to be rated as "MAA " (pronounced M double A plus) by the credit rating agency viz., ICRA Ltd., indicating high-credit-quality and the rated deposit programme carries low credit risk. The high credit quality rating take into account the strong ownership, low operating cost structure, superior capital adequacy, its favourable liquidity position and comfortable asset quality indicators. The outlook on the rating has also been reaffirmed at 'Stable'.

LONG TERM FINANCIAL RESOURCES

REFINANCE FROM NATIONAL HOUSING BANK (NHB)

The NHB has an internal rating mechanism for Housing Finance Companies and your Company has been assigned the 5 Star rating for its refinance schemes by NHB. With the continued support by the NHB during the year your Company availed refinance amounting to Rs.253 crore against Rs.116 crore availed during 2009-10 under the NHB's Refinance scheme to Housing Finance Companies. The cumulative amount outstanding as on March 31, 2011 under the borrowings from the NHB was Rs.560.11 crore compared to Rs.526.03 crore as at the end of the previous year.

MORTGAGE BACKED SECURITIES (MBS)

After considering the availability of funds from other alternative sources at competitive rates, no fresh securitisation was done during the financial year 2010-11 or in the previous year.

The aggregate securitised assets outstanding as of March 31, 2011 was Rs.3.92 crore as against Rs.6.90 crore during the previous year (Refer Note no.2 of Schedule 15 to the Accounts) due to repayments made during the year. During the year the existing loans sold under the MBS issue continued to be serviced as per the schedule of repayment.

The securities issued under Mortgage Backed Securities (MBS) by the Company is rated as "AAA(SO)" by CRISIL, indicating High Safety.

DEBENTURES

The Company had no outstanding on account of debentures issued by the Company as of March 31, 2011.

BORROWINGS FROM BANKS

Your Company borrowed Rs.414 crore from banks during the year compared to Rs.384 crore during the previous year. The aggregate of term loans outstanding at the various banks at the end of the financial year stood at Rs.1193.92 crore (short term loans NiL) as against Rs.1136.97 crore during the previous year (including short term loans amounting to Rs.100 crore).

RATING OF TERM LOANS

As per the BASEL-II requirements, during the year a Rating for the borrowings by the Company by way of Term Loans was obtained from CARE Ltd., and the Rating of CARE AA (Double A Plus) was assigned for long-term bank facilities indicating high safety for timely servicing of debt obligations.

COMPLIANCE WITH GUIDELINES OF NATIONAL HOUSING BANK (NHB)

Your Company has complied with the Guidelines and Directions issued by the NHB on asset classification of Credit / Investments, Credit Rating, Fair Practices Code, Know Your Customer (KYC), Deposits and Anti Money Laundering Guidelines, Accounting Standards issued by the ICAI, New Delhi etc.

CAPITAL ADEQUACY

The Company has been maintaining the Capital Adequacy Ratio (CAR) above the minimum required level of 12% prescribed by the National Housing Bank (NHB) from time to time. During the year under review, the Risk Weight on housing loans sancioned to individuals secured by mortgage of immovable property and classified as standard assets was modified.

The Capital Adequacy Ratio of the Company as at March 31, 2011 was 19.14 % as against 17.11 % during the previous year.

RECOVERY ACTION UNDER SECURITISATION & RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 (SARFAESI ACT)

The SARFAESI Act 2002 has been made applicable to the housing finance companies vide Ministry of Finance, Banking Division, Government of India Gazette Notification (Extraordinary) dated November 10, 2003.

The proceedings under the said Act are summary in nature and are extremely helpful in realising the dues in the accounts classified as non-performing assets (NPA), by selling the Secured Asset (security), without the intervention of Hon'ble Courts.

By initiating action under the provisions of the SARFAESI Act, 2002 during the year, your Company could recover about Rs.3.48 crore out of the 258 accounts that were classified as non-performing assets.

PARTICULARS OF EMPLOYEES

There are no such particulars to be furnished under the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975.

BUSINESS OPERATIONS - DISTRIBUTION NET WORK

In order to reach out customers effectively, the Company's distribution net work extends to 41 branches located in major cities of the Country.

Your Company envisages opening more number of branches in due course and also availing the services of a few Direct Selling Agents (DSAs) to enhance its business performance further. Your Company ensures that the quality of loans extended is given utmost importance.

LISTING OF SECURITIES

The equity shares of the Company continue to be listed on the Bangalore Stock Exchange Ltd., (Bg.SE), Bangalore, Bombay Stock Exchange Ltd., (BSE), Mumbai and the National Stock Exchange of India Ltd., (NSE), Mumbai.

The Listing Fee payable to the above Stock Exchanges has been paid before the due dates.

The securities of the Company are actively traded on the BSE and NSE. The other related particulars are provided to the Members in the Report on Corporate Governance.

MAN POWER - HUMAN RESOURCES DEVELOPMENT

Your Company had 224 employees (215 employees of the Company, the Managing Director and 8 officers on deputation from Canara Bank) as at March 31, 2011 as against 205 employees (193 employees of the Company, the Managing Director, the Chief Financial Officer and 10 officers on deputation from Canara Bank) as at March 31, 2010.

Your Company places a strong emphasis on employees competencies and up-gradation of skills of its employees at various levels. During the year, besides providing orientation programme to the probationary officers and the employees were also nominated for various external prorammes on taxation, information security, International Financial Reporting Standards(IFRS), Risk Management and the like.

TRANSFER OF UNCLAIMED AND UNPAID AMOUNTS TO THE INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

In terms of Section 205C of the Companies Act, 1956, the amounts (dividends, deposits etc.) that remained unclaimed and unpaid for more than 7 years from the date they became first due for payment, should be transferred to IEPF (Fund). In terms of the said Section no claim would lie against the Company or the IEPF after such transfer.

The Company has been intimating the shareholders/ depositors/ investors to encash their dividend warrant/lodge their claim for payment due, if any, from time to time and claims made have been settled. Inspite of constant and sincere efforts to pay the unclaimed dividend and deposit amount to the respective shareholders/depositors, certain amount still remain unclaimed.

(I) UNCLAIMED DIVIDENDS

As of March 31, 2011 dividends aggregating to Rs.51.80 lakh (previous year Rs.51.73 lakh) had not been claimed by the shareholders (pertaining to 2003-04 to 2009-10) of the Company. The Company has been intimating the shareholders to lodge their claim for dividend from time to time and the said information is being provided in Annual Reports every year.

The dividend pertaining to the financial year 2002-03 which remained unclaimed/unpaid amounting to Rs.5,73,907.50 (in respect of 1,711) shareholders) was transferred to IEPF during August 2010, after settlement of claims received (before the due date, in response to the individual reminder letters sent to the respective shareholders).

The dividend pertaining to the financial year 2003-04 remaining unclaimed and unpaid amounting to Rs.6,46,550 (in respect of 1479 shareholders), as at the end of the financial year would be transferred to IEPF during July 2011 after settlement of the claims received upto the date of completion of 7 years. The Company has sent individual reminder letters to the respective shareholders during April 2011 and the same must be claimed by July 21, 2011 by the respective share holders, as it is required to be transferred to the IEPF within a period of 30 days from the said date. In terms of the said Section no claim would lie against the Company or the IEPF after such transfer.

(II) UNCLAIMED DEPOSITS

During the year, in terms of Section 205C of the Companies Act, 1956, the unclaimed and unpaid deposits for the year 2003-04 amounting to Rs.1,25,733/- together with interest amounting to Rs.87,791/- aggregating to Rs.2,13,524/-(previous year Rs.3,75,227/-) that remained unclaimed and unpaid for a period of 7 years were transferred to IEPF.

PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND EXPENDITURE

Since the Company does not own any manufacturing facility, the requirement relating to providing the particulars relating to conservation of energy and technology absorption stipulated in the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 required to be furnished u/s.217(3) of the Companies Act, 1956 are not applicable.

During the year your Company did not earn any income or incur any expenditure in foreign currency.

DIRECTORS

Your directors wish to report that Dr.K.K.Deb resigned as a Director and the Managing Director with effect from April 29, 2011 on his repatriation to Canara Bank.

Your directors wish to place on record their appreciation for the services rendered and contribution made by Dr.K.K.Deb during his tenure as a director and the Managing Director of the Company.

The Board of Directors appointed Mr.S.R.Iyer, Mr.K.S.Madhava Murthy, Chartered Accountant and Mr.K.R.Vijayendra as Additional Directors of the Company with effect from January 05, 2011, January 12, 2011 and January 29, 2011, respectively.

Mr. S.R.Iyer is an eminent banker and is the former Managing Director of State Bank of Mysore and State Bank of India. Mr.K.S.Madhava Murthy is a qualified and Practising Chartered Accountant in Bangalore. Mr.K.R.Vijayendra is an eminent banker and is the former General Manager of Union Bank of India.

Further, the Board of Directors appointed Mr.C.Ilango, Deputy General Manager, Canara Bank, as an Additional Director and as the Managing Director of the Company with effect from April 29, 2011, subject to approval of the members of the Company at the ensuing annual general meeting.

Mr.C.Ilango is a Post-graduate degree holder in Agricultural Science and a Certified Associate of the Indian Institute of Bankers (CAIIB). He is a senior banker with over 31 years of commercial banking experience having served across the Country.

Further particulars relating to the above directors are mentioned in the explanatory statement forming part of the notice of the ensuing annual general meeting.

Pursuant to the provisions of Section 260 and all other applicable provisions, if any, of the Companies Act, 1956 and Article 22 of the Articles of Association of the Company, Mr.S.R.Iyer, Mr.K.S.Madhava Murthy, Mr.K.R.Vijayendra, directors and Mr.C.Ilango Director and Managing Director hold office as such only upto the date of the ensuing Annual General Meeting. Your Company has received notices in writing from shareholder(s), under Section 257 of the Companies Act, 1956 proposing the appointment of Mr.S.R.Iyer, Mr.K.S.Madhava Murthy, Mr.K.R.Vijayendra, directors and Mr.C.Ilango Director and Managing Director, respectively, at the ensuing Annual General Meeting.

Your directors are of the opinion that the appointment of Mr.S.R.Iyer, Mr.K.S.Madhava Murthy, Mr.K.R.Vijayendra, as directors and Mr.C.Ilango as a Director and Managing Director of the Company would be in the best interest of the Company.

DIRECTORS RETIRING BY ROTATION

In terms of the provisions of Section 256 and other applicable provisions, if any, of the Companies Act, 1956 and the Articles of Association of the Company, Mr.P.R.Yagnik, Director and Chairman of the Board, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The particulars relating to Mr.P.R.Yagnik are mentioned in the Report on Corporate Governance. Your directors recommend the re-appointment of Mr.P.R.Yagnik, as a director.

The related agenda, together with the explanatory statements on the appointment of Mr.S.R.Iyer, Mr.K.S.Madhava Murthy, Mr.K.R.Vijayendra, directors and Mr.C.Ilango, Director and Managing Director and re- appointment of Mr.P.R.Yagnik as a director of the Company are included in the notice convening the ensuing Annual General Meeting.

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

AUDITORS

M/s K.P.Rao & Co., Chartered Accountants, Bangalore, Statutory Auditors of the Company having registration no.003135S and also the branch auditors for branches in the States of Karnataka, Kerala, Goa, Gujarat, Maharashtra and the new branches, if any, to be opened during 2010-11 and the Auditors for the other branches viz., M/s.L.U.Krishnan & Co, Chartered Accountants, Chennai, M/s.K.P.Rao Associates, Chartered Accountants, Hyderabad and M/s.H.K. Chaudhry & Co., Chartered Accountants, New Delhi, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment.

The Company has received confirmation from M/s.K.P.Rao & Co., Statutory and branch auditors, M/s.L.U.Krishnan & Co., M/s.K.P.Rao Associates and M/s.H.K.Chaudhry & Co., branch auditors to the effect that their proposed appointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956.

Your directors recommend the re-appointment of the above statutory/ branch auditors and suitable resolutions in that behalf have been included in the notice convening the ensuing Annual General Meeting. The above said appointment attracts the provisions of Section 224A of the Companies Act, 1956.

DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217(2AA) of the Companies Act, 1956 and based on the information provided by the Management, the Board of Directors report that:

(a) In the preparation of annual accounts, the applicable Accounting Standards have been followed;

(b) The Accounting Policies selected were applied consistently. Reasonable and prudent judgements and estimates were made so as to give a true and fair view of the state of affairs of the Company as at the end of March 31, 2011 and of the profit of the Company for the year ended on that date;

(c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(d) The annual accounts have been prepared on a going concern basis.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In terms of the Clause 49 of the listing agreement, the Management Discussion and Analysis Report is forming part of this report.

CORPORATE GOVERNANCE

The Auditors Certificate on Corporate Governance issued by the Statutory Auditors of the Company for the year under review as required under the Companies Act, 1956 and in pursuance of Clause 49 of the Listing Agreements is annexed to the Report of the Directors on Corporate Governance.

OUTLOOK FOR 2011-12

India's economy bounced back as a surge in industrial and infrastructure activity, especially the housing finance sector. New frontiers and new directions to strengthen Country's economic and social foundations are envisaged.

Based on certain indicators, the interest rate on loans, especially the housing finance, is likely to move upwards moderately during 2011-12. Though the demand in commercial real estate has been picking-up, a sharp increase in demand for residential units and housing finance could be foreseen.

Your Company would continue to give a more and continued focussed attention for lending to individual loan segment. Various strategies and steps are put in place to enhance its market share in the housing market segment.

With a view to sustain its performance level and enhance and accelerate its growth, your Company has a set of housing and non-housing products and planned to lay a greater stress on marketing and further enhanced business relationship.

Your Company expects a significant increase in business performance during 2011-12 with several planned initiatives already in place. However, given the indications about the likely increase in cost of funds, the margins are expected to be under pressure.

ACKNOWLEDGEMENTS

Your directors wish to place on record with thanks the role of Canara Bank for their consistent support and guidance.

Your directors would like to acknowledge the role of all its stakeholders viz., the shareholders, depositors, borrowers and others for their continued support to the Company and the confidence and faith that they have always reposed in the Company.

Your directors acknowledge and appreciate the guidance and co-operation extended by various regulatory authorities including National Housing Bank (NHB), Securities Exchange Board of India (SEBI), Ministry of Corporate Affairs, Registrar of Companies, Karnataka, the Stock Exchanges and the Depositories.

Your directors thank the Credit Rating Agencies, Government(s), local/statutory authorities and all others for their wholehearted support and look forward to their continued support in the years ahead.

Your directors appreciate and acknowledge the professionalism and contributions made by the employees whose efforts have stood the Company in greater heights.

For and on behalf of the Board of Directors

Bangalore P.R.YAGNIK

June 09, 2011 CHAIRMAN


Mar 31, 2010

The Directors have pleasure in presenting the 23rd Annual Report of the business and operations of your Company together with the Audited Financial Accounts for the year ended March 31, 2010.

FINANCIAL RESULTS

The financial performance for fiscal 2010 is summarised here below :

For the year ended For the year ended

March 31, 2010 March 31, 2009

(Rs.lakh) (Rs.lakh)

Profit before Tax S> Provisions 5400.17 4440.91

Less : Provision for Doubtful Debts - Housing Loans 83.48 (57.10)

Profit Before Tax 5483.65 4383.81

Provision for Tax (1624.68) (1237.64)

Provision for Fringe Benefit Tax - (6.25)

Deferred Taxation 60.00 13.00

Profit After Tax 3918.97 3152.92

Balance brought forward from previous year 160.86 37.27

4079-83 3190.19

Appropriations:

Transfer to Special Reserve u/s.36(1 ) (viii) 1070.00 900.00 of theIncome Tax Act, 1961

Transfer to General Reserve 1450.00 1650.00

Proposed Dividend 409.70 409.70

Tax on Distributed Profits 69.63 69.63

Provision for contigencies 600.00 -

Balance carried forward 480.50 160.86

4079.83 3190.19

PERFORMANCE HIGHLIGHTS LENDING OPERATIONS

The cumulative loan sanctions of the Company, as at the end of the financial year 2009-10 was Rs.6171.65 crore as compared to Rs.5518.79 crore in the previous year. The housing loans and other loans sanctioned during the year ended March 31, 2010 were to the extent of Rs.652.86 crore as against Rs.356.28 crore sanctioned during the previous year registering a growth of about 83%.

DISBURSEMENTS

The cumulative loan disbursements at the end of the year stood at Rs.5329.21 crore as compared to Rs.4782.30 crore in the previous year. The loans disbursed during the year ended March 31, 2010 was to the extent of Rs.546.90 crore as against Rs.300.54 crore disbursed during the previous year registering a growth of about 82%.

The cumulative loan(s) outstanding, (including the loan under "Securitised Assets"), at the end of the year was Rs.2106.65 crore (with Securitised Assets amounting to Rs.6.90 crore), as compared to Rs.1887.18 crore in the previous year, (with Securitised Assets amounting to Rs.18.26 crore) registering a growth of about 12%.

PROFITS

Your Directors are pleased to inform that during the year under review your Company has recorded a Profit Before Tax of Rs.54.84 crore as against Rs.43.84 crore during 2008-09 and Profit After Tax of Rs.39.19 crore as against Rs.31.53 crore during 2008-09.

DIVIDEND

Your Directors have discussed the subject in detail with specific reference to the present position of Capital Adequacy Ratio (CAR), the additional requirement of funds to meet CAR as per the Guidelines / Directions issued by the Regulators from time to time, future requirement of funds / capital for incremental business projected, further expansion of business and other relevant factors. Considering the above and in the long-term interest of the Company it is considered prudent and expedient to conserve profits of the Company to the extent possible. However, appreciating the confidence reposed by the members in the Company and their continued support, the Board of Directors of your Company have recommended a dividend of Rs.2/- per equity share (20%) for the year ended March 31, 2010.

The Tax on distributed profits u/s.115-0 of the Income Tax Act, 1961, at 16.60% is being paid by the Company.

FINANCIAL RESOURCES DEPOSITS

The deposits outstanding (inclusive of interest accrued, but not due) as of March 31, 2010 were Rs.202.31 crore as against Rs.165.35 crore as at the end of the previous year, registering an increase of about 22.35%.

Out of the deposits fallen due for repayment up to March 31, 2010, a sum of Rs.7.26 crore (Rs.7.97 crore as of March 31, 2009) relating to 1702 depositors (1,990 depositors) had not been claimed or renewed. Subsequently, deposits of Rs.1.66 crore (Rs.1.70 crore) relating to 468 depositors (386 depositors) have been repaid or renewed. The remaining depositors have been requested either to renew or claim their deposits and the branches are making a constant follow up on the subject.

The depositors are being periodically informed by the respective branches about the maturity of the deposits, in advance, with a request to either renew or claim the said deposits.

The Ministry of Corporate Affairs, Government of India, vide order F.No.07/07/2009-CLTVI dated July 12, 2010 has granted exemption to the Company from the applicability of the provisions of Section 58A(2)(a) and (b) of the Companies Act, 1956 ("the Act") for a period of 3 years with effect from October 22, 2009, which enables the Company to publish abridged deposit advertisement(s) only during the period of validity of the Statutory Advertisement. The said approval is granted subject to certain conditions mentioned vide paragraph nos. (i) to (vii) of the said Order viz., mentioning reference to the statutory advertisements published by the Company with date and name fo the news paper, filling of the said abridged advertisement with the Registrar of Companies in Kamataka, within 15 days of its publication, that the exemption granted would be without prejudice to any legal rights available to any depositor or any share holder or creditor as per law in force in respect of recovery of any amount which has become due for repayment and that the exemption granted does not convey approval of Central Government under any other provisions of "the Act".

RATING OF DEPOSITS

The deposit schemes of the Company continued to be rated as "MAA+" (pronounced M double A plus) by the credit rating agency viz., ICRA Ltd., indicating High Safety and has assigned a stable outlook to the Rating. The Rating indicates high credit quality and the rated deposit programme carries low credit risk. The high credit quality Rating take into account the strong ownership, low operating cost structure, superior capital adequacy, its favourable liquidity position and comfortable asset quality indicators.

LONG TERM FINANCIAL RESOURCES REFINANCE FROM NATIONAL HOUSING BANK

With the continued support by the National Housing Bank (NHB), your Company availed refinance amounting to Rs.116 crore during the year under reference against Rs.125 crore in the previous year. The cumulative amount outstanding as on March 31, 2010 under the borrowings frorr the NHB was Rs.526.03 crore compared to Rs.594.24 crore as at the end of the previous year.

MORTGAGE BACKED SECURITIES (MBS)

After considering the availability of funds from other alternative sources at competitive rates, no fresh securitisation was done during the financial year 2009-10 or in the previous year.

The aggregate securitised assets outstanding as of March 31, 2010 were Rs.6.90 crore as against Rs.18.26 crore during the previous year (Refer Note No.2 of Schedule 15 to the Accounts), due to repayments made during the year.

During the year the existing loans sold under the MBS issue continued to be serviced as per the schedule of repayment.

The securities issued under Mortgage Backed Securities (MBS), by the Company, are rated as :

MBS Issue Rating Rating Agency Indicating

MBS-I AAA(SO) CRISIL High Safety

MBS-II & III LAAA(SO) ICRA Ltd. Highest Safety

The amount raised through MBS-I and MBS-II were since redeemed during the year.

DEBENTURES

The Company had no outstanding on account of debentures as of March 31, 2010.

OTHER BORROWINGS

Your Company borrowed Rs.384 crore from banks during the year compared to Rs.307 crore during the previous year. The aggregate of term loans outstanding at the various banks at the end of the financial year stood at Rs.1131.29 crore (including short term loans amounting to Rs.100 crore) as against Rs.884.04 crore during the previous year (including short term loans amounting to Rs.3.67 crore).

RATING OF TERM LOANS

As per the BASEL-II requirements, during the year a Rating for the borrowings by the Company by way of Term Loans was obtained from M/s. CARE Ltd. and was assigned a Rating of CARE AA+ (Double A Plus) for long-term bank facilities indicating high safety for timely servicing of debt obligations.

COMPLIANCE WITH GUIDELINES OF NATIONAL HOUSING BANK (NHB)

Your Company has complied with the Guidelines and Directions issued by the NHB on asset classification of Credit / Investments, Credit Rating, Fair Practices Code, Know Your Customer (KYC), Deposits and Anti Money Laundering Guidelines, Accounting Standards issued by the ICAI, New Delhi etc.

CAPITAL ADEQUACY

The Company has been maintaining the Capital Adequacy Ratio (CAR) above the minimum required level prescribed by the National Housing Bank (NHB) from time to time. The rate prescribed for the present is 12%. During the year under review, the Risk Weight on housing loans continued to remain same.

The Capital Adequacy of the Company as at March 31, 2010was 17.11 % as against 16.08 % during the previous year.

ACQUISITION OF SHARES

During the year, Canara Bank viz., the sponsor bank of the Company has acquired through secondary market 4,00,017 nos. of equity shares in the Company aggregating to 1.95% (approx) of the total shares / voting rights. The share holding by Canara Bank as at the end of the year was 42.332%.

RECOVERY ACTION UNDER SECURITISATION 6» RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 (SARFAESI ACT)

The SARFAESI Act, 2002 has been made applicable to the housing finance Companies vide Ministry of Finance, Banking Division, Government of India Gazette Notification (Extraordinary) dated November 10, 2003.

The proceedings under the said Act are summary in nature and are extremely helpful in realising the dues in the accounts classified as non-performing assets (NPA), by selling the Secured Asset (security), without the intervention of Honble Courts.

By initiating action under the provisions of the SARFAESI Act, 2002 during the year, your Company could recover about Rs.4.26 crore out of the 40 accounts that were classified as non-performing assets.

PARTICULARS OF EMPLOYEES

There are no such particulars to be furnished under the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975.

BUSINESS OPERATIONS - DISTRIBUTION NET WORK

The business operations are carried on through its 40 branches in major cities of the Country to cater to the requirements of its customers.

LISTING OF SECURITIES

The equity shares of the Company continue to be listed on the Bangalore Stock Exchange Ltd., (Bg.SE), Bangalore, Bombay Stock Exchange Ltd., (BSE), Mumbai and the National Stock Exchange of India Ltd., (NSE), Mumbai.

The Listing Fee payable to the above Stock Exchanges has been paid before the due dates.

The securities of the Company are actively traded on the BSE and NSE. The other related particulars are provided to the Members in the Report on Corporate Governance.

MAN POWER - HUMAN RESOURCES DEVELOPMENT

Your Company had 205 employees (193 employees of the Company, the Managing Director, the Chief Financial Officer and 10 officers on deputation from Canara Bank) as at the end of 2009-10 as against 202 employees (189 employees of the Company, the Managing Director, the Chief Financial Officer and 11 Officers on deputation from Canara Bank) as at the end of 2008-09.

As in the previous years, some of the employees of the Company were deputed for selected training programmes / seminars on different subjects organised by reputed institutions, which were found to be useful.

PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND EXPENDITURE

Since the Company does not own any manufacturing facility, the particulars relating to conservation of energy and technology absorption stipulated in the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 required to be furnished u/s.217(3) of the Companies Act, 1956 are not applicable.

The Company did not earn any income or incur any expenditure in foreign currency.

TRANSFER OF UNCLAIMED AND UNPAID AMOUNTS TO THE INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

In terms of Section 205C of the Companies Act, 1956, the amounts (dividends, deposits etc.) that remained unclaimed and unpaid for more than 7 years from the date they became first due for payment, shall be transferred to IEPF (Fund). In terms of the applicable statutory provisions of the Companies Act, 1956 no claim would lie against the Company or the said Fund after such transfer to IEPF.

The Company has been intimating the shareholders / depositors / investors to lodge their claim for payment due, if any, from time to time and such claims have been settled. Inspite of constant and sincere efforts to pay the unclaimed dividend and deposit amount to the respective shareholders / depositors, certain amount still remain unclaimed.

(I) UNCLAIMED DIVIDENDS

As of March 31, 2010 dividends aggregating to Rs.51.73 lakh (previous year,Rs.61.66 lakh) had not been claimed by the shareholders (pertaining to 2002-03 to 2008-09). The Company has been intimating the shareholders to lodge their claim for dividend from time to time and such information is being mentioned in Annual Reports every year,

The dividend pertaining to the financial year 2001 -02 which remained unclaimed / unpaid amounting to Rs.5,63,312 (in respect of 1,271 shareholders) was transferred to IEPF during August 2009, after settlement of claims received (before the due date, in response to the individual reminder letters sent to the respective shareholders).

The dividend pertaining to the financial year 2002-03 remaining unclaimed and unpaid amounting to Rs.6,57,382 (in respect of 1,711 shareholders) as at the end of the financial year, would be transferred to IEPF during July 2010 after settlement of the claims received upto the date of completion of 7 years from the date of declaration of dividend. The Company has sent individual reminder letters to the respective shareholders during June 2010.

(ii) UNCLAIMED DEPOSITS

During the year, in terms of Section 205C of the Companies Act, 1956, the unclaimed and unpaid deposits for the year 2002-03 amounting to Rs.3,75,227/- together with interest amounting to Rs.1,06,789/- aggregating to Rs.4,82,016/- (previous year Rs.4,07,000), that remained unclaimed and unpaid for a period of 7 years from the date they became first due for payment, were transferred to IEPF.

DIRECTORS

Your Directors wish to report that Mr.S.Doreswamy, Director and Chairman of the Company resigned from the Board with effect from September 11, 2009.

The Board of Directors appointed Mr.P.R.Yagnik, as the Chairman of the Board with effect from October 14, 2009.

Your Directors also wish to report that Mrs.Mythili Krishnamurthy, Managing Director resigned as the Managing Director with effect from June 15, 2010 and as a Director with effect from July 15, 2010 on her repatriation to Canara Bank. Further, Mr.P.Santosh Kumar, Director resigned with effect from June 19, 2010 and Mr.J.S.Vasan, Director resigned with effect from June 30, 2010 on superannuating his services from Canara Bank.

Your Directors wish to place on record their appreciation for the services rendered and contribution made by Mr.S.Doreswamy, Mrs.Mythili Krishnamurthy, Mr.P.Santosh Kumar and Mr.J.S. Vasan during their tenure as the Chairman, Managing Director(s) and Directors, respectively and as member(s) of various committee(s) constituted by the Board.

The Board of Directors appointed Mr.Ashok Kumar Jain, Chartered Accountant as an Additional Director of the Company with effect from August 27, 2009.

Mr.Ashok Kumar Jain is a qualified and Practising Chartered Accountant in Agra. He is a Non-Official Director on the Board of Allahabad Bank since October 10, 2007 and presently the member of the Board of Directors and Chairman of Management Committee and Audit Committee of the Bank.

He was a non-official Director on the Board of Punjab National Bank from November 2001 to November 2004 and during the said period he was the Chairman / Member of various sub-committees of the Board. Mr.Ashok Kumar Jain has about 31 years of professional experience in conducting various audits of nationalised banks, Public Sector Undertakings and reputed organisations in private sector. Further particulars relating to MrAshok Kumar Jain are mentioned in the explanatory statement forming part of the notice of the ensuing annual general meeting.

The Board of Directors appointed Mr.Anil Kumar Nayyar, General Manager, Canara Bank as an Additional Director of the Company with effect from July 16, 2010.

Mr.Anil Kumar Nayyar is a degree holder in Science, a graduate in Law and a CAIIB.

Mr.Anil Kumar Nayyar started his career as an Officer in Canara Bank in the year 1972. During his service in the Bank over a period of about 38 years, he has served in different parts of the Country and headed Circle Office at Jalandhar Circle. Mr .Anil Kumar Nayyar has varied and rich experience of commercial banking. He is presently working as General Manager, Corporate Credit Wing, Canara Bank, Head Office, Bangalore.

Further, the Board of Directors appointed Dr.K.K.Deb, Deputy General Manager, Canara Bank, as an Additional Director and as the Managing Director of the Company with effect from June 15, 2010.

Dr.K.K.Deb is a Masters degree holder in Science, a graduate in Law and a CAIIB. He holds a Doctorate in Chemistry.

Dr.K.K.Deb started his career as an Officer in Canara Bank in the year 1979. During his service in the Bank over a period of 31 years, Dr.K.K.Deb has headed Regional Office and Circle Office at Meerut. He has good exposure to the matters relating to credit, retail loans, SMEs, etc. and also looking after the recovery & legal portfolio of Canara

Bank, Mumbai Circle. Dr.K.K.Deb has worked as a faculty at the Staff Training College of Canara Bank in Bangalore and also headed Regional Staff Training College at New Delhi. He has a varied experience in commercial Banking, having served in many branches across India.

Pursuant to the provisions of Section 260 and all other applicable provisions, if any, of the Companies Act, 1956 and Article 22 of the Articles of Association of the Company, MnAshok Kumar Jain, Director, Mr.Anil Kumar Nayyar, Director and Dr.K.K.Deb, Director and Managing Director hold office only upto the date of the ensuing Annual General Meeting, your Company has received notices in writing from shareholder(s), under Section 257 of the Companies Act, 1956 proposing the appointment of MnAshok Kumar Jain, MnAnil Kumar Nayyar and Dr.K.K.Deb, as Directors and Managing Directors, respectively, at the ensuing Annual General Meeting. The related agenda, together with the explanatory statements on the appointment of Mr.Ashok Kumar Jain, Mr.Anil Kumar Nayyar and Dr.K.K.Deb, as Directors and Managing Director, respectively, is forming part of the notice convening the ensuing Annual General Meeting.

Your Directors are of the opinion that the appointment of Mr.Ashok Kumar Jain, Mr .Anil Kumar Nayyar as a Directors, Dr.K.K.Deb, as a Director and Managing Director would be in the best interest of the Company.

DIRECTORS RETIRING BY ROTATION

In terms of the provisions of Section 256 and other applicable provisions, if any, of the Companies Act, 1956 and the Articles of Association of the Company, Dr.Ashok K.Mittal, Director, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The particulars relating to Dr.Ashok K.Mittal is mentioned in the Report on Corporate Governance. Your Directors recommend the re-appointment of Dr.Ashok K.Mittal, as a Director.

The Directors of the Company have confirmed that they are not disqualified from being appointed as directors in terms of Section 274(1 )(g) of the Companies Act, 1956.

AUDITORS

M/s. K.P.Rao S> Co., Chartered Accountants, Bangalore, Statutory Auditors of the Company and also the branch auditors for branches in the States of Karnataka, Kerala, Goa, Gujarat, Maharashtra and the new branches, if any, to be opened during 2010-11 and the Auditors for the other branches viz., M/s. L.U.Krishnan &> Co., Chartered Accountants, Chennai, M/s. K.P.Rao Associates, Chartered Accountants, Hyderabad and M/s. H.K. Chaudhry & Co., Chartered Accountants, New Delhi, will retire as the statutory and / or branch auditors, respectively, at the end of the forthcoming Annual General Meeting and they are eligible for re-appointment.

The Company has received confirmation from M/s. K.P.Rao S> Co., Statutory and branch auditors, M/s. LU.Krishnan & Co., M/s. K.P.Rao Associates and M/s. H.K.Chaudhry &• Co., branch auditors to the effect that their proposed appointment, if made, would be within the limits prescribed under Section 224(1 B) of the Companies Act, 1956.

Your Directors recommend the re-appointment of the above statutory / branch auditors and a suitable resolution in this behalf forms part of the agenda for the forthcoming Annual General Meeting, requiring approval of the shareholders. The above said appointment attracts the provisions of Section 224A of the Companies Act, 1956.

CORPORATE GOVERNANCE

The Auditors Certificate on Corporate Governance issued by the Statutory Auditors of the Company for the year under review, as required under the Companies Act, 1956 and in pursuance of Clause 49 of the Listing Agreements is annexed to the Report of the Directors on Corporate Governance.

OUTLOOK FOR 2010-11

Indias economy bounced back as a surge in industrial activity and strong services growth helped it regain the scorching expansion pace it kept before the global economic slow-down. The Indian economy is coming out of the slowdown and returning to normalcy. New frontiers and new directions to strengthen Countrys economic and social foundations are envisaged.

During the last few years though the growth was largely based on domestic efforts, foreign trade and capital inflows played a catalytic role. The likely growth for 2010-11 is expected to be about 8.5 per cent. With the revival of economy coupled with good monsoon this year is expected to result in the growth in double digit in 2011-12.

Based on certain indicators, the interest rate on loans, especially the housins finance, is likely to move slightly upward during 2010-11. Though the demand in commercial real estate has not picked up significantly, a sharp up-tick in demand for residential units and housing finance could be foreseen.

Your Company would continue to give a more and continued focussed attention to lending to individual loan segment keeping in view the encouragement received in the form of enhanced business performance during the year. Various strategies are put in place to enhance its marketing share in the housing market segment.

Your Company recorded a very good business performance during the year 2009-10 and the Company aims at building more and more quality assets in the years ahead.

With a view to sustain its performance level and to enhance and accelerate its growth, your Company has a range of housing and non-housing products and will lay greater stress on marketing and improved business relationship.

Your Company, with several planned initiatives is expecting a significant improvement in business performance for the year 2010-11. However, given the indications about the likely increase in cost of funds, the margins are expected to be under pressure.

DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217(2AA) of the Companies Act, 1956 and based on the information provided by the Management, the Board of Directors report that:

(a) In the preparation of annual accounts, the applicable Accounting Standards have been followed, together with proper explanation;

(b) The Accounting Policies selected were applied consistently. Reasonable and prudent judgements and estimates were made so as to give a true and fair view of the state of affairs of the Company as at the end of March 31, 2010 and of the profit of the Company for the year ended on that date;

(c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(d) The annual accounts have been prepared on a going concern basis.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In terms of the provisions of the listing agreement, the Management Discussion and Analysis Report forms a part of this report.

ACKNOWLEDGEMENTS

Your Directors wish to place on record the role of Canara Bank with thanks for their consistent support and guidance. They also wish to thank the National Housing Bank (NHB), shareholders, borrowers, depositors for their continued support to the Company, confidence and faith that they have always placed in the Company.

Your Directors acknowledge and appreciate the guidance and co-operation extended by various regulatory authorities including National Housing Bank (NHB), SEBI, Ministry of Corporate Affairs, Registrar of Companies, Karnataka, the Stock Exchanges and the Depositories.

Your Directors thank the Registrars and Share Transfer Agents of the Company, Credit Rating Agencies, Govemment(s), local / statutory authorities and all others for their whole hearted support and look forward to their continued support in the years ahead.

Your Directors appreciate and acknowledge the contributions made by the employees whose efforts made the Company to reach greater heights.

For and on behalf of the Board of Directors

P.R.YAGNIK

CHAIRMAN

Place: Bangalore Date: July 03, 2010

Find IFSC