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Directors Report of Dewan Housing Finance Corporation Ltd.

Mar 31, 2017

Dear Members,

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

KEY FINANCIALS

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

(Rs. in crore)

Particulars

Standalone Consolidated

2016 - 17

2015 -16

2016-17

2015-16

Gross Income

8,857.23

7,299.99

9,615.64

7,839.92

Less : Interest

6,653.61

5,490.03

6,674.37

5,491.95

Overheads & Provisions

777.93

683.49

1,477.01

1,197.24

Depreciation

23.30

24.30

43.46

29.84

Profit Before Tax and Exceptional item

1,402.39

1,102.17

1,420.80

1,120.90

Add : Exceptional item

1,969.43

-

1,855.45

-

Profit after Exceptional item and Before Tax

3,371.82

1,102.17

3,276.25

1,120.90

Less : Provision for taxation

475.37

372.97

479.90

376.75

Profit After Tax

2,896.45

729.20

2,796.35

744 .15

Add : Net share of profit from Associates

-

-

9.95

5 .15

Add : Balance brought forward from the previous year

643.68

575.56

731.89

639.74

Net Gain on dilution of Associate

-

-

3.45

3.93

Surplus available for appropriations

3,540.13

1,304.76

3,541.64

1,392.97

Appropriations

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

580.00

180.00

200.00

0.02

580.00

180.00

200.00

0.02

Transferred to General Reserve

200.00

200.00

Transferred to Debenture Redemption Reserve (DRR)

1,170.00

1,170.00

Dividend for Earlier Year

-

-

Interim Dividend(s)

31.30

175.07

31.30

175.07

Proposed Equity Dividend

-

58.36

-

58.36

Tax on Dividend

6.37

47.63

6.37

47.63

Adjustment pursuant to capital reduction scheme

-

-

270.18

-

Balance carried over to Balance Sheet

1,552.46

643.68

1,283.79

731.89

Total

3,540.13

1,304.76

3,541.64

1,392.97

Earnings Per Share

Basic (in ‘)

95.76

25.00

92.78

25.69

Diluted (in ‘)

95.44

23.10

92.47

23.73

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

TRANSFER TO RESERVES

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

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

PERFORMANCE

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

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

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

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

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

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

Standalone

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

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

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

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

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

Consolidated

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

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

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

DIVIDEND

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

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

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

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

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

Unpaid /Unclaimed Dividend

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

Unclaimed Deposits

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

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

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

LENDING OPERATIONS

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

Securitisation / Assignment of Loans

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

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

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

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

Buyout of Home loan pools

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

Loan Book

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

SHARE CAPITAL

(A) Authorized Share Capital

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

(B) Issued and Paid-up Share Capital

(1) Equity

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

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

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

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

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

(2) Preference Share Capital

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

RESOURCE MOBILISATION

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

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

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

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

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

Public Issue of Non-Convertible Debentures [NCDs]

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

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

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

Non-Convertible Secured Redeemable Debentures

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

Non- Convertible Subordinated Unsecured Debentures

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

Non- Convertible Perpetual Unsecured Debentures

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

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

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

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

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

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

Loans from Banks

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

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

Deposits

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

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

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

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

Refinance from National Housing Bank (NHB)

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

Commercial Papers

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

External Commercial Borrowings (ECBs)

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

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

SECURITY COVERAGE FOR THE BORROWINGS

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

CREDIT RATINGS

The Company’s borrowings enjoy the following Credit Ratings:

Nature of

Rating / Outlook

Borrowing

CARE

Brickworks

ICRA

CRISIL

Short-Term Debt / Commercial Paper

ICRA A1

CRISIL A1

Public (fixed) deposits/ Short Term Deposits

CARE AAA (FD); Stable

BWR FAAA; Stable

CRISIL A1

Subordinated

debt

CARE AA ; Stable

BWR AAA; Stable

-

-

NCDs

CARE AAA; Stable

BWR AAA; Stable

IPDIs

CARE AA; Stable

BWR AA ; Stable

-

-

Long-term bank loans

CARE AAA; Stable

-

-

-

Structured

obligations

CARE AAA(SO)

-

ICRA

AAA(SO)

CRISIL

AAA(SO)

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

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

CAPITAL ADEQUACY

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

Particulars

As on March, 31

2017

2016

2015

Capital Adequacy Ratio

19.12%

16.74%

16.56%

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

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

NON-PERFORMING ASSETS AND PROVISIONS FOR CONTINGENCY

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

(Rs. in crore)

Particulars

As of March 31

2017

2016

2015

Gross Non-Performing Assets

678.45

573.07

485.05

% of Gross NPA to Total Loan Portfolio

0.94%

0.93%

0.95%

Net Non-Performing Assets

419.43

361.02

345.95

% of Net NPA to Total Loan Portfolio

0.58%

0.58%

0.68%

Total cumulative provision- loans and other assets

714.19

583.02

430.15

Write-off

87.49

21.46

6.20

Recovery & Collections

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

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

INVESTMENTS

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

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

SUBSIDIARIES, JOINT VENTURE AND ASSOCIATE COMPANIES

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

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

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

Highlights of Performance of Subsidiaries

DHFL Advisory & Investments Private Limited (DAIPL)

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

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

DHFL Investments Limited (DIL)

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

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

Highlights of Performance of Joint Ventures

DHFL Pramerica Life Insurance Company Limited

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

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

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

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

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

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

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

Highlights of Performance of Associate Companies

Aadhar Housing Finance Limited (Aadhar)

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

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

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

DHFL Vysya Housing Finance Limited (DHFL Vysya)

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

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

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

Avanse Financial Services Limited (Avanse)

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

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

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

DHFL Ventures Trustee Company Private Limited (DHFL Ventures)

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

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

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

INFORMATION TECHNOLOGY

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

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

HUMAN RESOURCES

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

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

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

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

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

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

Learning and Development

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

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

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

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

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

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

EMPLOYEE REMUNERATION

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

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

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

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

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

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

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

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

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

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

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

A. Conservation of Energy

Your Company is not engaged in any manufacturing activity and thus its operations are not energy intensive. However, adequate measures are always taken to ensure optimum utilization and maximum possible saving of energy. During the financial year under review, your Company has made capital investment of approximately Rs.0.30 crore at various locations, towards the installation of energy conservation equipment’s such as replacement of CFL (Compact Fluorescent Lamp) with LED (Light- Emitting Diode) lights, energy saving Air-conditioners, replacement of normal tube lights with T5 lights at the new branches and in the renovated branches. The Company has also installed at 3 locations Solar panel systems which are used as an alternate source of energy. These initiatives have resulted in power saving on a daily basis. The Company on its lending side actively associates in all programmes and schemes of the Government and NHB, in promoting energy efficient homes.

B. Technology Absorption

Your Company actively engages itself towards technology advancements to serve its customers better and to create technology friendly environment for its employees which in turn helps them to manage the processes efficiently and economically.

The current technology transformation programme has been initiated to bring the Company’s technology platform to a new level. The programme aims to identify and implement best-fit solutions for all the processes and functions viz, loan origination and management, customer relationship management, financial accounting and management, collections management, property information management systems, business systems (enterprise) integration, business intelligence and advanced analytics.

C. Foreign Exchange Earnings and Outgo

There were no foreign exchange earnings during the year.

The information on foreign exchange outgo and expenditure is furnished at Note No. 34 in the Notes forming part of the audited (standalone) financial statements for the financial year ended March 31, 2017.

INSURANCE

Your Company has insured its various properties and facilities against the risk of fire, theft and other perils, etc. and has also obtained Directors’ and Officers’ Liability Insurance Policy which covers the Company’s Directors and Officers (employees in managerial or supervisory position) against the risk of financial loss including the expenses pertaining to defense cost and legal representation expenses arising in the normal course of business.

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

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

Your Company acts as a group administrator and is also registered with Insurance and Regulatory Development Authority of India (IRDAI) as a Corporate Agent for distribution and solicitation of life insurance products of the joint venture entity DHFL Pramerica Life Insurance Company Limited.

During the previous financial year, your Company entered into a Memorandum of Understanding with Cholamandalam MS General Insurance Co. Ltd. (Chola MS) where the Company serves as group administrators and managers for group health and/or personnel accident insurance policy. During the financial year 2016-17, your Company also became a Corporate Agent for Chola MS to ensure adequate insurance coverage for the properties financed during the tenure of the loan, your Company also educates its customers in relation to the insurance products suitable for them. During the financial year under review, Company has obtained a Corporate Agent- Composite license bearing registration no. CA0052 from IRDAI.

NATIONAL HOUSING BANK GUIDELINES

The Company has complied with the provisions of the Housing Finance Companies (NHB) Directions as prescribed by National Housing Bank (NHB) and has been in compliance with the various Circulars, Notifications and Guidelines issued by NHB from time to time. The Circulars, Notifications and Guidelines issued by NHB are also placed before the Audit Committee / Board of Directors at regular intervals to update the Committee/ Board members on the compliance of the same.

RISK MANAGEMENT

As a housing finance company, your Company continues to stay exposed to various risks associated with lending business including credit risk, market risk, liquidity risk, legal risks, interest rate risk, compliance risk and operational risk. Your Company has a very strong risk management team and a very robust credit operations structure to mitigate these risks. This is aided by sound technology, robust processes and specialized workforce. Your Company’s philosophy is to keep the risk management and underwriting functions separate from each other in order to keep the portfolio protected. These sustained efforts to strengthen the risk framework and portfolio quality have yielded significant results over the last few years.

Your Company places emphasis on risk management measures to ensure an appropriate balance between risk and return. Your Company has taken steps to implement robust and comprehensive policies and procedures to identify, measure, monitor and manage risks. Risk management is a Board driven function with the overall responsibility of risk management assigned to the Risk Management Committee of the Board of Directors. At the operational level, risk management is assigned to the Asset Liability Management Committee (‘ALCO’). Sensitive financial risks are monitored by the Risk Management Committee and also by Audit Committee of the Board. Your Company conducts risk profiling on a regular basis for the purpose of self-assessment.

During the financial year under review, the Company has setup Risk Containment Unit (RCU) at all major business locations. This unit is manned with risk specialists who work very actively to minimize bad loans from getting into the system. They also do a lot of analysis on bad loans to further strengthen the policies and processes prevalent in the organization. The Board is also at regular intervals updated on the risk management systems and processes.

Your Company has put in place a Business Continuity Plan. The risk management policies of the Company are reviewed and revised on regular basis to identify and mitigate attendant risks in a proactive manner under the changing business environment.

ASSET LIABILITY MANAGEMENT COMMITTEE (ALCO)

The Asset Liability Management Committee (ALCO) lays down policies and quantitative limits that involve assessment of various types of risks and shifts in assets and liabilities to manage such risks. ALCO ensures that the liquidity and interest-rate risks are contained within the limits laid down by the Board. The Company has duly implemented the NHB’s Asset Liability Management Guidelines.

CODES AND POLICIES & COMPLIANCES

Your Company has formulated various Policies and Codes in compliance with provisions of Directions and Guidelines issued by the National Housing Bank (NHB), Companies Act, 2013, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and other applicable laws to ensure high ethical standards in the overall functioning of the organization. The said Policies and Codes are periodically reviewed by the Board of Directors.

The key Policies and Codes as approved by the Board of Directors and the respective compliance thereunder are detailed herein below:

Policy on Know Your Customer & Anti Money Laundering Measures

Your Company has a Board approved Policy on Know Your Customer (KYC) & Anti Money Laundering Measures (AML) in place and adheres to the said Policy. The said Policy is in line with the NHB Guidelines, as issued from time to time.

Your Company has adhered to the compliance requirements in terms of the said policy including the monitoring and reporting of cash and suspicious transactions. The Company furnishes to Financial Intelligence Unit, India (FIU), in the electronic mode, information of all cash transactions of the value of more than Rupees ten lakh or its equivalent in foreign currency and suspicious transactions whether or not made in cash, in terms of the said Policy. Your Company is registered with FIU vide registration No. FIHFC00010. Your Company is also following the process as briefed out under the Guidance Note on Effective Process of STRs Detection and Reporting for Housing Finance Sector, issued by Financial Intelligence Unit -India in consultation with the Regulator viz., the National Housing Bank (NHB). During the financial year under review, KYC & AML Policy was revised from time to time to align the same with the circulars issued by the National Housing Bank.

The said policy is available on the website of the Company at the URL: http://www.dhfl.com/wp-content/uploads/2017/05/ KYC-AML-Policy-3rd-May-2017.pdf

Fair Practice Code

Your Company has in place a Fair Practice Code (FPC), which includes guidelines on appropriate staff conduct when dealing with the customers and on the organization’s policies vis-a-vis client protection. The FPC captures the spirit of the National Housing Bank guidelines on fair practices for Housing Finance Companies. Your Company and its employees duly comply with the provisions of FPC.

The said code is available on the website of the Company at the URL: http://www.dhfl.com/wp-content/uploads/2016/01/DHFL -Fair-Practice-Code.pdf

Policy on Disclosure of Material Events and Information

Your Company has in place Board approved Policy on Disclosure of Material Events and Information, formulated in accordance with Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 to determine the events and information which are material in nature and are required to be disclosed to the Stock Exchanges.

The said policy is available on the website of the Company at the URL: http://www.dhfl.com/wp-content/uploads/2015/12/ Policy-on-Disclosure-of-Material-Events-and-Information1. pdf.

Policy on Preservation of Documents and Records

Your Company has in place Board approved Policy on Preservation of Documents and Records formulated in accordance with Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Policy ensures that the Company complies with the applicable document retention laws, preservation of various statutory documents and also lays down minimum retention period for the documents and records in respect of which no retention period has been specified by any law/ rule/ regulation. The Policy also provides for the authority under which the disposal /destruction of documents and records after their minimum retention period can be carried out.

Code of Conduct for the Board of Directors and the Senior Management Personnel

Your Company has in place Code of Conduct for the Board of Directors and the Senior Management Personnel formulated in accordance with Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, which sets forth the guiding principles on which the Company and its Board and Senior Management Personnel shall operate and conduct themselves with multitudinous stakeholders, government and regulatory agencies, media and anyone else with whom it is connected.

Pursuant to the notification issued by Securities and Exchange Board of India, during the financial year under review, your Company amended the Code of Conduct for its Board of Directors and the Senior Management Personnel.

A declaration by Chief Executive Officer, with regard to the compliance with the said code, forms part of this Annual Report.

The said code is available on the website of the Company at the URL: http://www.dhfl.com/wp-content/uploads/2017/01/ Code-of-Conduct-for-the-Board-and-the-Senior-Mgmt-Personnel.pdf

Code of Conduct for Prohibition of Insider Trading

Your Company has in place a Code of Conduct for Prohibition of Insider Trading formulated in accordance with Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, which lays down the process of trading in securities of the Company by the employees and the connected persons and to regulate, monitor and report trading by the employees and the connected persons of the Company either on his/her own behalf or on behalf of any other person, on the basis of unpublished price sensitive information.

Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information

Your Company has in place Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information formulated in accordance with the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, which lays down the practices and procedures for Fair Disclosure of Unpublished Price Sensitive Information that could impact price discovery in market for its securities.

The said code is available on the website of the Company at the URL:http://www.dhfl.com/wp-content/uploads/2015/12/ DHFL-Code-of-Practices-Procedures-for-Fair-Disclosure-of-UPSI.pdf

Code of Business Ethics (COBE)

Your Company has adopted a Code of Business Ethics (COBE) which lays down the principles and standards that govern the activities of the Company and its employees to ensure and promote ethical behaviour within the legal framework of the organization.

Whistle Blower Policy (Vigil Mechanism)

Pursuant to the provisions of Section 177 (9) & (10) of the Companies Act, 2013 read with Rule 7 of Companies (Meetings of Board and its Powers) Rules, 2014 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has in place a Whistle Blower Policy, which provides for a vigil mechanism that encourages and supports its Directors and employees to report instances of illegal activities, unethical behavior, actual or suspected, fraud or violation of the Company’s Code of Conduct and Code of Business Ethics. It also provides for adequate safeguards against victimization of persons who use this mechanism and direct access to the Chairman of the Audit Committee in exceptional cases.

The said policy is available on the website of the Company at the URL: http://www.dhfl.com/wp-content/uploads/2016/02/ Whistle-Blower-Policy-Revised.pdf

Prevention, Prohibition & Redressal of Sexual Harassment of Women at Workplace

Your Company has in place a Policy on Prevention, Prohibition & Redressal of Sexual Harassment of Women at Workplace and an Internal Committee has been constituted thereunder. The primary objective of the said Policy is to protect the women employees from sexual harassment at the place of work and also provides for punishment in case of false and malicious representations.

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

(a) Number of complaints received in the year: 1

(b) Number of complaints disposed of during the year: 1

(c) Number of cases pending more than ninety days: Nil

(d) Number of workshops or awareness programme against sexual harassment carried out: During the financial year under review, there were various workshops and programmes conducted on spreading awareness with regard to Sexual Harassment at workplace, at various locations covering National Office, 6 zones, 32 regions and 226 locations.

(e) Nature of action taken by the employer or district officer: Pursuant to the enquiry initiated by the Internal Committee in respect of one complaint received during the financial year under review, basis the evidence/ proof including interrogation with complainant, office colleagues and defendant, no conclusive evidence of sexual harassment was found. The Internal Committee recommended that warning be issued to the defendant and the complainant be transferred to another department or location of the Company.

Comprehensive Risk Management Policy

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

Nomination (including Boards’ Diversity) Remuneration & Evaluation Policy (NRE Policy)

Your Company recognizes the importance and benefits of having a diverse Board. It endeavors to ensure diversity on the Board through varied skills, experience and background, gender, knowledge and other distinguishing qualities to enhance the overall effectiveness of the Board which in turn brings in valuable contribution to the Company’s business strategies, plans and future growth aspects.

Your Company also believes that the Board shall at all times represent an optimum combination of Executive and Non Executive Directors as well as Independent Directors

The Board has thus adopted Nomination (including Boards’ Diversity), Remuneration & Evaluation Policy, which, inter-alia, lays down the approach to diversity of the Board, criteria for identifying the persons who are qualified to be appointed as Directors and/or Senior Management Personnel of the Company, alongwith the criteria for determination of remuneration of Directors, KMPs and other employees and their evaluation and includes other matters, as prescribed under the provisions of Section 178 of Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. During the financial year under review, your Company has amended the NRE Policy to align the same with the regulatory requirements.

Additional details with respect to the said policy are given in the Report on Corporate Governance forming part of this Annual Report.

The said policy is available on the website of the Company at the URL: http://www.dhfl.com/wp-content/uploads/2017/06/ Nomination-Remuneration-Evaluation-Policy-Revised.pdf.

Policy on Fit and Proper Criteria for the Directors

During the financial year under review, your Company has formulated and adopted a Policy on Fit and Proper Criteria for the Directors, in accordance with Housing Finance Companies - Corporate Governance (National Housing Bank) Directions, 2016 which inter-alia, lays down the fit and proper criteria of the Directors at the time for their appointment/ reappointment and on a continuing basis.

Related Party Transaction Policy

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

During the financial year under review, the Related Party Transaction Policy was amended to align the same with the requirements of the amendments made to the relevant provisions of the Companies Act, 2013 and the rules thereunder.

Pursuant to Housing Finance Companies - Corporate Governance (National Housing Bank) Directions, 2016, the Related Party Transaction Policy of the Company forms part of this Board’s report as “Annexure - 4”.

The said policy is available on the website of the Company at URL http://www.dhfl.com/wp-content/uploads/2017/05/ Related-Party-Transaction-Policy.pdf

Corporate Social Responsibility (CSR) Policy

Your Company has in place Corporate Social Responsibility policy (CSR Policy), as per the provisions of the Companies Act, 2013 and Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended, which, inter-alia, lays down the guidelines and mechanism for undertaking socially useful projects for welfare and sustainable development of the community at large. As per the provisions of Section 135 of the Companies Act, 2013, your Company has constituted a Corporate Social Responsibility Committee. The Corporate Social Responsibility Committee assists the Board in fulfilling its duty towards the community and society at large by identifying the activities and programmes that can be undertaken by the Company, in terms of the CSR Policy of the Company. The composition of the CSR Committee and its terms of reference are given in the Report on Corporate Governance forming part of this Annual Report.

The said policy is available on the website of the Company at the URL: http://www.dhfl.com/wp-content/uploads/2015/11/ Revised-CSR-Policy.pdf

The Annual Report on CSR activities forms part of this Board’s report as “Annexure - 5”.

Dividend Distribution Policy

During the financial year under review, your Company has formulated and adopted Dividend Distribution Policy, in accordance with Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, which intends to ensure that a rationale decision is taken with regard to the amount to be distributed to the shareholders as dividend after retaining sufficient funds for the Company’s growth, to meet its long-term objective and other purposes. The Policy also lays down various parameters to be considered by the Board of Directors of the Company before recommendation/ declaration of dividend to the Members of the Company.

The said policy is available on the website of the Company at the URL http://www.dhfl.com/wp-content/uploads/2017/05/ Dividend-Distribution-Policy.pdf and forms part of this Board’s report as “Annexure - 6”.

Policy for Determining Material Subsidiary

During the financial year under review, your Company has formulated and adopted the Policy for determining Material Subsidiary in accordance with Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, which inter-alia, lays down the criteria for determining ‘material’ subsidiary(ies) and for ensuring compliance with respect to their governance and disclosure requirements.

The said policy is available on the website of the Company at the URL: http://www.dhfl.com/wp-content/uploads/2016/06/ Policy-on-determining-of-material-subsidiary.pdf

Internal Guidelines on Corporate Governance

During the financial year under review, your Company has formulated and adopted the Internal Guidelines on Corporate Governance in accordance with Housing Finance Companies

- Corporate Governance (National Housing Bank) Directions, 2016, which inter-alia, defines the legal, contractual and social responsibilities of the Company towards its various stakeholders and lays down the Corporate Governance practices of the Company.

The said policy is available on the website of the Company at the URL: http://www.dhfl.com/wp-content/uploads/2017/05/ Internal-Guidelines-on-Corporate-Governance.pdf

Policy on Open Architecture for Retail Insurance Business

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

Other Policies

Further in order to strengthen the internal procedures and systems and for better governance, your Company also has in place various other policies and manuals such as Conflict of Interest Policy, Information Security Policies, Investment Policy, Policy for private placement of Non-Convertible Debentures (NCDs), Model Code of Conduct for Distributors, brokers and intermediaries, Business Continuity Plan, Asset Liability Management Policy, NPA Management Policy, Comprehensive Outsourcing Policy and Staff Accountability Policy for ensuring the orderly and efficient conduct of Company’s business.

LISTING OF SHARES OF THE COMPANY

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

The Company has paid the listing fees as payable to the BSE Limited and the National Stock Exchange of India Limited for the financial year 2017-18 on time.

MARKETING AND BRANDING

Your Company through its focused branding and marketing effort has been continuously working towards fulfilling its Founder Chairman’s vision of enabling home ownership to every Indian. Your Company has also strengthened its reach and services, especially among the Lower and Middle Income (LMI). Your Company believes in handholding the consumer in his journey to fulfil his dream of owning a home of his own.

Therefore, your Company in its communication has been portraying itself as a flexible partner in making customers dream come true. Thus, the Tagline ‘Ghar Jaisa Loan’ was also created, which infers loan according to customer’s needs. In its communication journey your Company roped in Shah Rukh Khan as its brand ambassador, who has played the role of an elder brother/ advisor to the customers. Your Company started advertising in 2015 with its brand ambassador, by showing the importance of dreaming to buy a house of one’s own (Sapna) and post that pushed the envelope further by voicing the excuses which people give for not buying a house of their own (Bahana). In its latest communication, your Company has emphasized that the right time to buy a home is now (Home loan kab?).

Your Company has also ensured value driven communication, to reinforce the significance of home ownership, across TV, print, radio, digital and outdoor media. Additionally, your Company has leveraged digital media to generate awareness on the nuances of home loans and welfare schemes, including the Pradhan Mantri Awas Yojana (PMAY), using digital characters ‘Sharmaji & Vinodji’ launched in 2016 as a part of its consumer education initiative.

AWARDS AND RECOGNITIONS

Your Company has added yet another feather in its cap and kept up its record of displaying commendable performance in the housing finance service sector which is reflected by the awards won by the Company as recognition at various award forums:

- ”Industry Award” for the excellence in the Home Loan Banking.

- It has been recognised as the “Dream Companies to work in Housing Finance Sector” organized by Times Ascent and World HRD Congress.

- DHFL Home Loan Dilse Campaign won the 11th Indy’s award for the most creative Ad on television in the BFSI sector.

- It has won the Marketing Campaign of the year for its “HomeLoanDilSe” Campaign at the Global Marketing Excellence Awards endorsed by World Federation of Marketing Professional and CMO Asia.

- Your Company has won ‘Gold’ at the Asia Pacific Customer Engagement Forum & Awards for the Most Admired Customer Engaged Brand.

- Your Company has won ‘Gold’ at the Asia Pacific Customer Engagement Forum & Awards for Excellence in CSR.

- Your Company and Mr. Kapil Wadhawan (Chairman & Managing Director) were honored with the India’s Greatest Brands and Leaders Award 2015-2016 organized by AsiaOne and URS Media.

- Awarded the Best Housing Finance Company in the Financial Services Sector by CMO Asia and Stars Group.

- ”Bahana Campaign” has been awarded the Marketing Campaign of the year in the BFSI Sector presented and endorsed by CMO Asia.

- ”Bahana Campaign” has been awarded “Marketing Campaign of the Year” in the BFSI Sector at the National Awards for Marketing Excellence endorsed by World CSR day, Stars Group and CMO Asia.

- ”Wealth2Health Fixed Deposit” product awarded the “Brand Extension Award” in the BFSI Sector at the National Awards for Marketing Excellence endorsed by World CSR day, Stars Group and CMO Asia

- Your Company has won ‘Gold’ at the Asia Pacific Customer Engagement Forum & Awards for its Bahana Campaign.

- Your Company has won the Golden Peacock Innovative Product and Service Award 2016 for its innovative “Wealth2Health Fixed Deposit” product.

DISTRIBUTION NETWORK

The distribution network of your Company is designed to reach out to the LMI segment and tap a growing potential customer base throughout India. Your Company maintains a pan-India marketing and distribution network with a presence across 348 locations throughout India which includes 181 branches, 146 service centers, 18 circle/cluster offices, 2 disbursement hubs, 1 collection center as at March 31, 2017. Additionally, your Company has international representative offices located in London and Dubai.

Your Company’s network is grouped into circles and clusters located pan-India and is spread over Tier II and Tier III cities, town and its peripheral suburbs. Your Company believes that its business model allows it to deliver improved turnaround time and to improve customer satisfaction while maintaining asset quality. The distribution network includes direct selling teams (i.e. staff working with us on a contract basis), Direct Selling Agents [DSAs] and other business referral partners. Direct selling teams work under supervision of the employees of your Company and the payment for their services is a combination of fixed fee and variable commission based on the disbursement of loans sourced by them. The majority of the loans are sourced through the direct selling teams. Your Company has also entered into tie-ups with a number of Indian public and private sector banks to provide their customers access to the home loan solutions offered by your Company. The tie-ups with such banks allows your company an access to the ally banks’ customers and branch networks while providing them with the option to participate in the loan syndication programs with the Company.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Pursuant to the approval of the Members of the Company at the 32nd Annual General Meeting held on July 20, 2016, Dr. Rajiv Kumar (DIN: 02385076) was appointed as an Independent Director of the Company for a period of five years , effective from August 7, 2015.

Pursuant to the approval of the Members of the Company at the 31st Annual General Meeting held on July 23, 2015, Mr. Kapil Wadhawan (DIN: 00028528), was re-appointed as the Managing Director (designated as Chairman & Managing Director) of the Company and as Key Managerial Personnel for a further period of five years w.e.f. October 4, 2015, and his office was made liable to retire by rotation, pursuant to the provisions of the Companies Act, 2013 and rules made thereunder. In accordance with the provisions of Section 152 of the Companies Act, 2013 and Articles of Association, Mr. Kapil Wadhawan, Chairman & Managing Director being the longest in office among directors who are liable to retire by rotation, retires by rotation and being eligible; offers himself for reappointment at the ensuing Annual General Meeting.

All Independent Directors have given declarations that they meet the criteria of independence, as laid down under Section 149(6) of the Companies Act, 2013 and the provisions of Regulation 16(1)(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

None of the Directors of your Company are related to each other, except for Mr. Dheeraj Wadhawan, Non-Executive Director who is the brother of Mr. Kapil Wadhawan, Chairman & Managing Director of the Company. Brief resume of the Director, proposed to be re-appointed, nature of his expertise in specific functional areas and names of other companies in which he holds Directorship alongwith the Membership/ Chairmanship of Committees of the Board as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Secretarial Standard (SS-2) on General Meetings are provided in the annexure to the Notice of the Thirty Third (33rd) Annual General Meeting being sent to the Members along with the Annual Report.

Based on the confirmations received, none of the Directors are disqualified for being appointed/ reappointed as directors in terms of Section 164 the Companies Act, 2013.

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

PERFORMANCE EVALUATION

The Nomination and Remuneration Committee of the Board of Directors has laid down the performance evaluation and assessment criteria/parameters for the Board (including Board Committees) and individual Directors. During the financial year under review, the Nomination and Remuneration Committee of the Board of Directors in light of the Guidance Note on Board Evaluation issued by Securities and Exchange Board of India reviewed and revised the performance assessment/ evaluation criterias. The Independent Directors in terms of Schedule IV of the Companies Act 2013 at its separate meeting evaluated the performance of the Chairman & Managing Director, Non-Executive Director and the Board as a whole. The Nomination and Remuneration Committee carried out the evaluation of every Director’s performance and the Board additionally carried out a formal evaluation of its own performance, Board Committees namely Audit Committee, Nomination and Remuneration Committee, Risk Management Committee, Stakeholders Relationship Committee, Corporate Social Responsibility Committee and Finance Committee and all the individual Directors without the presence of the Director being evaluated. The detailed process and manner of performance evaluation carried out basis the criteria/ parameters laid down for the purpose has been explained in the Report on Corporate Governance, forming part of this Annual Report.

BOARD MEETINGS

Your Company holds at least four Board meetings in a year, one in each quarter, inter-alia, to review the financial results of the Company and an annual calendar of meetings of the Board are finalized well before the beginning of the financial year after seeking concurrence of all the Directors. All the decisions and urgent matters approved by way of circular resolutions are placed and numbered and noted at the subsequent Board meeting. Incase of urgent matters, additional Board meetings are held in between the quarterly meetings.

During the financial year 2016-17, seven (7) Board Meetings were convened and held. The intervening gap between the Board Meetings was within the period prescribed under the Companies Act, 2013 and the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015. The details of the Board composition, its meetings held during the year along with the attendance of the respective Directors thereat are set out in the Report on Corporate Governance forming part of this Annual Report.

Board Committees

Your Company has a duly constituted Audit Committee as per the provisions of Section 177 of Companies Act, 2013 and provisions of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Board of Directors have constituted five other committees namely - Nomination and Remuneration Committee, Stakeholders’ Relationship Committee, Risk Management Committee, Finance Committee and Corporate Social Responsibility Committee which enables the Board to deal with specific areas / activities that need a closer review and to have an appropriate structure to assist in the discharge of its responsibilities.

The Board of Directors had constituted two committees with specific objectives, namely - Sub-Committee for Investment in Mutual Fund Sector (which was dissolved by the Board on May 4, 2016) and Allotment Committee (comprising of Independent Directors) for allotment of warrants convertible into equivalent number of equity shares of Rs.10/- each, to the promoter group entity (which was dissolved by the Board on October 17, 2016)

The details of the composition of the Audit Committee alongwith that of other Board committees and other details including their respective terms of reference are included in the Report on Corporate Governance forming part of this Annual Report.

The Audit Committee and other Board Committees meet at regular intervals and ensure to perform the duties and functions as entrusted upon them by the Board.

RELATED PARTY TRANSACTIONS

The Company in terms of the applicable provisions of Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 obtains prior approval of the Audit Committee before entering into any related party transaction. Approval of the Board of Directors in terms of Section 188 of the Companies Act, 2013 is also obtained for entering into Related Party Transactions by the Company, wherever applicable. A quarterly update on the related party transactions is provided to the Audit committee and the Board of Directors for their review and consideration.

During the financial year under review, the Company entered into one material related party transaction, the detailed disclosure of the same has been provided in Form AOC -2 as per the requirements of the Companies Act, 2013 and rules made thereunder which forms part of this Board’s report as “Annexure -7”.

All other related party transactions entered into by the Company in the ordinary course of business at arm’s length basis are mentioned in the notes to the accounts forming part of the audited (standalone) financial statements for the financial year ended March 31, 2017.

There were however, no materially significant related party transaction(s) entered by the Company with any of its Independent directors or senior management personnel or their relatives that may have potential conflict with the interest of the Company at large.

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

There were no significant and material orders passed by any Regulator or Court or Tribunal which would impact the going concern status of the Company and its future operations. Also, there were no penalties imposed on the Company by any regulator (including NHB).

INTERNAL AUDIT & INTERNAL FINANCIAL CONTROL AND ITS ADEQUACY

Your Company has an Internal Audit Department, which conducts comprehensive audit of functional areas and operations of the Company to examine the adequacy of and compliance with policies, procedures, statutory and regulatory requirements. Significant audit observations and follow up actions thereon are reported to the Audit Committee. The Audit Committee reviews and evaluates adequacy and effectiveness of the Company’s internal control environment and monitors the implementation of audit recommendations.

The audit function maintains its independence and objectivity while carrying out assignments. For ensuring independence of audits, the Internal Auditor reports directly to the Audit Committee of Board of Directors. The function also proactively recommends improvement in policies and processes and suggests streamlining of controls against various risks.

The Audit Committee and Board of Directors have approved a documented framework for the internal financial control to be followed by the Company and such policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to Company’s policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information and disclosures. The Audit Committee periodically reviews and evaluates the effectiveness of internal financial control system.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company had appointed Mrs. Jayshree S. Joshi Proprietress of M/s Jayshree Dagli & Associates, Practicing Company Secretaries, Mumbai, to undertake the Secretarial Audit of the Company for the financial year 2016-17. The Secretarial Audit Report for the financial year ended March 31, 2017, forms part of this Board’s report as “Annexure-8”. The said report does not contain any qualification, reservation or adverse remark.

STATUTORY AUDITORS

M/s. Chaturvedi & Shah, Chartered Accountants (Firm Registration Number 101720W) were appointed as the Statutory Auditors by the Members of the Company at the Thirty Second (32nd) Annual General Meeting held on July 20, 2016, to hold office from the conclusion of the 32nd Annual General Meeting until the conclusion of the 37th Annual General Meeting of the Company (subject to ratification of the appointment by the Members at every subsequent Annual General Meeting), in accordance with the provisions of the Companies Act, 2013.

Based on the recommendation of the Audit Committee, the Board of Directors, at their meeting held on May 3, 2017, recommended the ratification of appointment of M/s. Chaturvedi & Shah, Chartered Accountants as the Statutory Auditors of the Company and that the necessary resolution in this respect is being included in the notice of the Thirty Third (33rd) Annual General Meeting for the approval of the Members of the Company. M/s. Chaturvedi & Shah has furnished written consent and a confirmation to the effect that they are not disqualified to be appointed as the Statutory Auditors of the Company in terms of the provisions of Companies Act, 2013 and rules framed thereunder.

Notes to Accounts and Auditors Report

The notes to the accounts referred to in Auditors Report are self-explanatory and do not call for any further comments. The Statutory Auditors Report on the financial statements for the financial year 2016-17 does not contain any qualification, reservation or adverse remark.

DIRECTORS’ RESPONSIBILITY STATEMENT

Your Directors would like to inform that the audited (standalone) financial statements for the financial year ended March 31, 2017 are in conformity with the requirements of the Companies Act, 2013 and they believe that the financial statements reflect fairly the form and substance of transactions carried out during the year and reasonably present the Company’s financial condition and results of operations. These financial statements have been audited by M/s. Chaturvedi & Shah, Chartered Accountants (Firm Registration Number 101720W), the Statutory Auditors of the Company.

Pursuant to the provisions of Section 134(5) of the Companies Act, 2013, it is hereby confirmed that:

(a) in the preparation of the annual accounts for the financial year ended March 31, 2017, the applicable Accounting Standards had been followed along with proper explanation relating to material departures;

(b) the directors had 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 as at March 31, 2017 and of the profit of the Company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual financial statements on a going concern basis;

(e) the directors had 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 had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

REPORT ON CORPORATE GOVERNANCE & MANAGEMENT DISCUSSION AND ANALYSIS

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

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

The certificate by the Statutory Auditors confirming compliance with the conditions of Corporate Governance as stipulated in Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms part of this Board’s report as “Annexure-9”. The said certificate for the financial year 2016-17 does not contain any qualification, reservation or adverse remark.

BUSINESS RESPONSIBILITY REPORT

Pursuant to Regulation 34 (2) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended, a separate section titled ‘Business Responsibility Report (BRR)’ forms part of this Annual Report which describes the Company’s performance and activities from environmental, social and governance perspective. The BRR is also available on the website of the Company at URL: http://www.dhfl.com/wp-content/uploads/2017/06/Business-Responsibility-Report-FY-2016-17.pdf.

EXTRACT OF ANNUAL RETURN

Pursuant to Section 134(3)(a) and Section 92(3) of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014, the extract of the Annual Return as at March 31, 2017, in the prescribed form MGT 9, forms part of this Board’s report as “Annexure -10”.

FUTURE OUTLOOK

The affordable housing finance industry is at a very exciting stage. The Government’s policies and path-breaking initiatives on affordable housing and finance, has opened up significant growth opportunities for your Company. The environment is greatly supportive of growth for your Company to expand towards broad basing financial inclusion across the country. The positive industry outlook, coupled with favorable macroeconomic indicators continue to set your Company on a high growth trajectory. In an era of accelerated growth, your Company believes that its rich heritage, a well-defined vision and unmatched experience in catering to the Lower and Middle Income [LMI] segment will continue to sharpen its competitive advantages. Your Company has embarked upon several new strategic initiatives across marketing, IT which has already started to greater speed of response, higher efficiency and stronger market position. Your Company remains steadfast to maintain its leadership position amongst peers and continue to be regarded as ‘the most trusted partner of customers in the LMI and Economically Weaker Section segments, committed to transforming dreams of home ownership into a reality. Your Company looks forward with great excitement to another year of industry-leading growth in financial year 2017-18.

ACKNOWLEDGEMENTS

Your Directors wish to place on record their gratitude to the National Housing Bank, Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India, Ministry of Corporate Affairs, Registrar of Companies, Financial Intelligence Unit (India), the Company’s Customers, Bankers and other Lenders, Members, Debenture holders, Trustees, Depositors and others for their continued support and faith reposed in the Company. The Board also places on record its deep appreciation for the dedication and commitment of the employees at all levels as their hard work, co-operation and support had enabled the Company to maintain its consistent growth. The Directors would also like to thank the BSE Limited, the National Stock Exchange of India Limited, National Securities Depository Limited, Central Depository Services (India) Limited and the Credit Rating Agencies for their continued co-operation.

For and on behalf of the Board

Kapil Wadhawan

Chairman & Managing Director

(DIN-00028528)

Place : Mumbai

Dated: May 3, 2017


Mar 31, 2015

Dear Members,

The Board of Directors of your Company take pleasure in presenting the Thirty First Annual Report along with the Audited financial statements for the financial year ended March 31,2015.

FINANCIAL RESULTS

The Financial Performance of the Company for the financial year ended March 31,2015, is summarised below: -

(Rs. in crore) Standalone 2014-15 2013-14

Gross Income 5,981.64 4,967.68

Less : Interest 4,459.59 3,782.58

Overheads 553.49 439.08

Depreciation 25.52 10.91

Profit Before Tax 943.04 735.11

Less : Provision for taxation 321.75 206.11

Profit After tax 621.29 529.00

Add : Balance b/d from the previous year 411.08 362.28

Surplus available for appropriations 1,032.37 891.28

Appropriations

Transferred to Statutory Reserve under 160.00 160.00 Section 36(1)(viii) of the Income Tax Act, 1961 read with Sec 29 C of NHB Act, 1987

Transferred to General Reserve 200.00 200.00

Dividend for Earlier Year 0.09 0.03

Interim Dividend 51.46 38.50

Proposed Equity Dividend 29.14 25.69

Proposed 30th Anniversary Special Equity Dividend - 38.53

Tax on Dividends 16.12 17.45

Balance carried over to Balance Sheet 575.56 411.08

Total 1,032.37 891.28

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

Transfer to Reserves

During the year under review, your Company transferred Rs. 200.00 crore to the General Reserve and Rs.160.00 crore to the Statutory Reserve under Section 36(1 )(viii) of the Income Tax Act, 1961 read with Sec 29 C of NHB Act, 1987 out of the amount available for appropriation and an amount of Rs. 575.56 crore is proposed to be retained in the profit and loss account.

Deferred Tax Liability on the Special Reserve created during the current year has been appropriated from Profit & Loss Account amounting to Rs. 47.26 crore, in accordance with the National Housing Bank (NHB) Guidelines. National Housing Bank vide circular No. NHB (ND)/DRS/Policy Circular 65/2014-15 dated August 22, 2014 has clarified that deferred tax liability (contingent upon Company''s withdrawal Reserves under Section 36(1)(viii) of the Income Tax Act, 1961) in respect of the balance in special reserve as at April 1,2014 may be adjusted from the opening free reserves of the Company over a period of three years in the ratio of 25:25:50 respectively.

Your Company has proportionately adjusted its opening reserves as at April 1, 2014 with an amount of Rs. 41.62 crore being contingent deferred tax liability. The balance amount of Rs. 124.89 crore will be adjusted over the next two years against the free reserves of the Company as per the said ratio.

PERFORMANCE

Your Company has continued to live the vision of providing access to easy home and is proud to be one of the leading players in affordable home loan segment in the housing finance industry in the country. Through the Company''s focus on lower and middle income (LMI) segment, your Company has evolved its loan sourcing expertise, over a period of past 30 years to better identify the needs of customers in the LMI segment and estimate their income and repayment capabilities. Your Company has developed a suite of products that caters to different segments in various geographical territories of India. During the year under review, your Company created separate business verticals for housing and non-housing loans, in order to allow each vertical to focus on its core business and use its expertise in underwriting loans. The Company also identified Small and Medium Enterprises (SME) financing as an additional keyline of business for its growth and launched it by offering products such as medical equipment loans, plant & machinery loans and property term loans for the SME clients. The SME business has created a loan book of Rs. 365.52 crore as at the end of the financial year 2015.

Backed by robust processes and consistent performance over the years, your Company was also able to secure "CARE AAA" credit rating from Credit Analysis and Research Ltd. ("CARE") and a credit rating of "BWR AAA" (Stable) from Brickwork Ratings India Pvt. Ltd. ("Brickwork"), for its long term debts. These ratings indicate the highest or very strong degree of safety regarding timely servicing of financial obligations. This will help your Company to access funding at competitive rate of interest, which will bring down overall funding cost, gradually. The Company''s focused marketing efforts; improved service quality and expanded distribution network have enabled its brand to expand its reach to a much larger customer base.

During the year under review, your Company maintained its good performance, in all major businesses and on all operational parameters. Your Company earned Profit Before Tax of Rs. 943.04 crore for the financial year ended March 31, 2015 as against Rs. 735.11 crore in the previous financial year and the Profit After Tax of Rs. 621.29 crore as against Rs. 529.00 crore in the previous financial year. The total Income for the year under consideration was Rs. 5,981.64 crore and total expenditure was Rs. 5,038.60 crore. The Asset under Management (AUM) of your Company stood at Rs. 56,884.41 crore as at March 31, 2015 as against Rs. 44,676.48 crore in the previous financial year.

There are no material changes and commitments, affecting the financial position of your Company, which have occurred between the end of the financial year of the Company, i.e. March 31,2015 and the date of the Directors'' report i.e. April 29, 2015.

DIVIDEND

Your Directors in their meeting held on October 21, 2014 had declared an interim dividend for the financial year 2014-15 of Rs. 4/- (Rupees Four Only) per equity share, on the 12,86,50,594 fully paid up equity shares of Rs. 10/- each of the Company. Your Directors have further recommended a final dividend to be paid out of current year profits of Rs. 2/- (Rupees Two Only) per equity share to the equity shareholders. Thus, the total dividend for the financial year 2014-15 aggregates to Rs. 6/- (Rupees Six Only) per equity share.

The final dividend payable shall be subject to the approval of the Members at the ensuing Annual General Meeting. The total outgo on account of dividend (including dividend distribution tax) will be Rs. 96.82 crore as against Rs. 120.20 crore in the previous financial year (which included a Special 30th Anniversary celebration dividend of Rs. 3/- (Rupees Three Only) per equity share).

In terms of the Listing Agreement, your Company has also paid dividend aggregating to Rs. 0.09 crore towards Final Dividend for the year 2013-14 to the new members who were allotted shares prior to the book closure date for the dividend payment but after the date of Balance Sheet. Similarly, equity shares that may be allotted under Employee Stock Option Schemes or otherwise before the current date of the book closure for payment of dividend shall rank pari passu with the existing shares and shall be entitled to dividend for the financial year 2014-15.

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

Pursuant to the provisions of Section 205A (5) and Section 205C of Companies Act, 1956, (which are still applicable, as the relevant Sections under the Companies Act, 2013 are yet to be notified) the amounts pertaining to dividends/ deposits, etc. that remained unclaimed and unpaid for a period of seven years from the date it became first due for payment, have been transferred from time to time, to respective Investor Education and Protection Fund (IEPF) on the due dates, by the Company and no claims in this respect shall lie against the Company.

The Company has been intimating the members/ depositors to lodge their claim for payments due, if any, from time to time and such information is also being mentioned in the Annual Report every year. Such claims, as and when received have been settled. Despite constant and sincere efforts to pay the unclaimed dividend / deposits and interest thereon to such members / depositors, certain amount still remains unclaimed.

Unpaid /Unclaimed Dividend

During the financial year 2014-15, your Company has transferred unclaimed final dividend of Rs. 0.09 crore pertaining to the financial year ended 2006-07 and Rs. 0.05 crore unclaimed interim dividend for the financial year ended 2007-08, to the Investor Education and Protection Fund established by the Central Government.

Unclaimed Deposit

During the financial year 2014-15, an amount of Rs. 0.21 crore was transferred to Investor Education and Protection Fund (IEPF) being the amount of deposits along with interest thereon, that remained unclaimed and unpaid for a period of seven years from the date it became first due for payment.

Pursuant to the provisions of Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with Companies) Rules, 2012, your Company has uploaded the details of unpaid and unclaimed dividend / fixed deposit amounts (including interest thereon) lying with the Company as at July 24, 2014 (i.e. the date of 30th Annual General Meeting) on the Company''s website and has also filed the same with the Ministry of Corporate Affairs. Members / Depositors who have not yet claimed the previous year(s) dividend / fixed deposit amount may write to the Company or to the Registrar and Share Transfer Agent.

AMENDMENT IN MEMORANDUM & ARTICLES OF ASSOCIATION

During the year under review, pursuant to a special resolution passed on January 14, 2015, by means of postal ballot, the Members of the Company had approved an insertion of a new main object clause in the Memorandum of Association of the Company so as to enable the Company to, inter-alia, act as the co-sponsor and distributor of mutual fund business.

Pursuant to a special resolution passed on January 14, 2015, by means of postal ballot, the Members of the Company had also approved the adoption of new set of Articles of Association (AOA) of the Company (replacing the existing set of Articles of Association), in conformity with the provisions of the Companies Act, 2013.

LENDING OPERATIONS

The Sanctions and Disbursements of housing / other loans, during the year ended March 31, 2015, were Rs. 28,497.08 crore and Rs. 19,821.54 crore respectively, as against Rs. 22,377.61 crore and Rs. 16,647.45 crore, respectively, in the previous financial year. The cumulative loan disbursement of the Company since inception was Rs. 78,631.72 crore.

Sale/ Assignment of Loans

During the year, the Company has sold/ assigned a pool of housing loans aggregating to Rs. 1,937.03 crore and other non housing loans aggregating to Rs. 97.24 crore. The Company will, however, continue to collect the interest and EMI payments on these loans on behalf of the acquirer of the loans and remit the same after retaining its portion in terms of the individual agreements.

During the year, your Company has also securitised housing loan contracts amounting to Rs. 527.90 crore through the Special Purpose Vehicle (SPV) route. The Senior Series A1 Pass Through Certificate (PTCs) issued by such SPVs amounts to Rs. 512.07 crore and carry the highest rating of AAA (SO) by the external Credit Rating Agencies involved in the process.

Simultaneously, your Company has subscribed to an amount of Rs. 15.83 crore in Subordinate Pass Through Certificates (PTCs) issued by the aforementioned SPVs. These subordinate series A2 PTCs are rated AA (SO) by the same external credit rating agencies and are required to be invested in, in compliance with the Minimum Retention Requirement (MRR) prescribed by RBI in its Guidelines on Securitisation issued in 2012.

Loan Book

As at March 31, 2015, the loan book stood at Rs. 51,039.65 crore as against Rs. 40,451.04 crore in the previous year.

SHARE CAPITAL

(A) Authorised Share Capital

The Authorised Share Capital of the Company stands at Rs. 828,00,00,000 (divided into 74,80,00,000 Equity shares of Rs. 10/- each, 7,50,00,000 Redeemable Non Convertible Preference Shares of Rs. 10/- each and 5,00,000 Redeemable Non Convertible Preference Shares of Rs. 100/- each). During the year, there has been no change in the Authorised Share Capital of the Company.

(B) Paid-up Share Capital

(1) Equity

During the year under review, pursuant to a special resolution passed by the Members of the Company by means of postal ballot on February 23, 2015, your Company issued and allotted 1,69,31,102 (One Crore, Sixty Nine Lakh, Thirty One Thousand, One Hundred and Two ) Equity Shares of face value Rs. 10 each to Qualified Institutional Buyers (QIB) at a price of Rs. 478.18 per Equity Share (including share premium of Rs. 468.18 per Equity Share) aggregating to Rs. 809,61,14,354 (Rupees Eight Hundred Nine Crore, Sixty One Lakh, Fourteen Thousand, Three Hundred and Fifty Four only) in terms of Chapter VIII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 ("SEBI ICDR Regulations"), as amended.

During the year, your Company allotted in tranches 3,25,400 equity shares of Rs. 10/- each, upon exercise of stock options to the eligible employees of the Company under the Employee Stock Option Schemes - 2008 and 2009.

Post allotment of shares by way of Qualified Institutional Placement and exercise of Employee Stock Options, the paid up equity share capital of your Company has increased to Rs. 145,67,67,420 divided into 14,56,76,742 equity shares of face value of Rs. 10/- each, as at March 31,2015.

(2) Preference Share Capital

During the year under review, the Company has not issued preference share capital.

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

RESOURCE MOBILISATION

The Company''s borrowing policy is under the control of the Board. The Company has vide special resolution passed by means of postal ballot on June 12, 2014, under Section 180(1)(c) of Companies Act, 2013, authorised the Board of Directors to borrow money upon such terms and conditions as the Board may think fit in excess of aggregate of paid up share capital and free reserves of the Company upto an amount of Rs. 1,00,000 crore and the total amount so borrowed shall be within the limits as prescribed under the Housing Finance Companies (NHB) Directions, 2010.

Your Company continued to use a variety of funding sources to optimise funding costs, protect interest margins and maintain a diverse funding portfolio which further strengthened its funding stability and liquidity needs. Your Company continued to keep tight control over the cost of borrowings through negotiations with lenders and thus, raised resources at competitive rates from its lenders while ensuring proper asset liability match. The weighted average borrowing cost as at March 31,2015 was 10.28% as against 10.59% in the previous year. As at March 31, 2015, your Company''s sources of funding were primarily from banks and financial institutions (58.31%), non-convertible debentures (18.02%), public (fixed) deposits (7.62%), refinancing from NHB (2.95%), commercial papers (7.19%), subordinated debt (2.44%), multilateral agencies (3.09%) and perpetual debt (0.38%).

During the year under review, your Company diversified its resources profile by accessing funds from multilateral agencies such as the International Finance Corporation (IFC), Asian Development Bank (ADB) and Deutsche Investitions Und Entwicklungsgesellschaft MBH (DEG, Germany). Your Company continues to gradually reduce its reliance on the borrowings from banks and financial institutions and focus on capital market instruments with lower funding costs.

Your Company''s total borrowings amounted to Rs. 48,920.74 crore as at March 31, 2015, as against Rs. 39,486.89 crore a year earlier. The Company''s Asset-Liability Committee (ALCO), set-up in line with the guidelines issued by NHB, monitors asset-liability mismatches to ensure that there are no imbalances or excessive concentrations on either side of the Balance Sheet. Your Company continued to raise longer tenor borrowings in financial year 2014-15 as well. Another strategy adopted to keep a balanced ALM was to enter into strategic partnership with banks that are keen on good quality assets and assign long tenor receivables to them at mutually beneficial terms.

Loans from Banks

As part of its liability management, your Company endeavours to diversify its resource base in order to achieve an appropriate maturity structure and minimise the weighted average cost of borrowed funds.

Your Company continued to leverage on its long term relationship with banks and thus tied up fund based working capital limit to Rs. 824 crore as at the end of financial year. Your Company also raised additional term loans from banks to the extent of Rs. 5,375 crore during the year at competitive rates available in the market and continued its focus on domestic sources.

Refinance from National Housing Bank (NHB)

The outstanding balance of refinance loan from NHB as on March 31,2015 amounts to Rs. 1,441.13 crore.

Subordinated Debts

Your Company did not raise money through subordinate debt during the year. As at March 31, 2015, your Company''s outstanding subordinated debts were Rs. 1,191.50 crore. The debt is subordinated to present and future senior indebtedness of your Company. Based on the balance term to maturity, as at March 31, 2015, Rs. 959.42 crore being the discounted book value of subordinated debt is considered as Tier II under the guidelines issued by the National Housing Bank (NHB) for the purpose of capital adequacy computation. The subordinated debt have been assigned "CARE AA " credit rating from Credit Analysis and Research Ltd ("CARE") and a credit rating of "BWR AAA" (Stable) from Brickwork Ratings India Pvt. Ltd ("Brickwork").

Non-Convertible Debentures (NCDs)

Your Company continues to issue fully Secured Redeemable Non-Convertible Debentures on private placement basis. During the year under review, your Company has issued Secured Redeemable Non-Convertible Debentures (the "Debentures") amounting to Rs. 4,163.20 crore to banks and financial institutions by way of issue of NCDs and Zero Coupon NCDs (ZCDs). The outstanding balance of Debentures including accrued premium on ZCDs as on March 31, 2015 amounts to Rs. 8,817.36 crore. The proceeds of the aforesaid issue were utilised for making disbursement to meet the housing finance requirements of the borrowers of the Company, as well as for general corporate purposes Debenture Trust Agreement(s) in favour of GDA Trusteeship Limited and IDBI Trusteeship Services Limited for the aforesaid issues were executed.

Your Company has duly paid the interest due on the aforesaid Debentures on time. The Company''s NCDs have been assigned the rating of "CARE AAA" by CARE and "BWR AAA" by Brickwork.

Your Company being Housing Finance Company (HFC) is exempted from the requirement of creating Debenture Redemption Reserve (DRR) in case of privately placed debentures. Since the Debenture issues of the Company till date are through private placement, no DRR has been created.

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

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

Perpetual Debt Instrument

During the year under review, your Company did not issue any Innovative Perpetual Debt Instruments ("IPDI"). The outstanding as at March 31, 2015, amounts to Rs. 185.70 crore.

Commercial Paper

The Commercial Paper (CP) program of your Company has been rated by Credit Rating and Information Services of India Limited (CRISIL) and is assigned the rating of CRISIL A1 (A One Plus). As at March 31,2015, Commercial Papers outstanding amount stood at Rs. 3,515 crore.

External Commercial Borrowings (ECB)

During the year under review, your Company availed external commercial borrowings of up to US$ 125 million (Rs. 784.25 crore) from Asian Development Bank (ADB) Philippines, for a period of seven years for onward lending in the low cost affordable housing segment in India; 40% of the said proceeds have to be utilised for financing prospective owners of low cost affordable housing units in certain under- developed Indian states such as Uttar Pradesh, Madhya Pradesh, Rajasthan, Jharkhand, Chhattisgarh, Uttarakhand, Andhra Pradesh and West Bengal.

Further, your Company also availed external commercial borrowings of US$ 50 million (Rs. 311.34 crore) from Deutsche Investitions Und Entwicklungsgesellschaft MBH (DEG, Germany, Part of KFW Group), for a period of 8 years to finance prospective owners of individual units in the low cost affordable housing projects in India.

In Financial year 2014, your Company had availed external commercial borrowings of up to US$70 million (Rs. 418.25 crore) from International Finance Corporation (IFC), Washington, for a period of 8 years for onward lending in the segment of low cost affordable housing projects.

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

During the financial year 2014-15, the principal amount for all the ECB loans availed by your Company has been fully hedged and in financial year 2013-14, the principal amount and LIBOR have been hedged, in accordance with the guidelines prescribed by Reserve Bank of India.

Security Coverage for the Borrowings

The security details of the aforesaid secured borrowings made by the Company are mentioned at Note No. 5 in the Notes to accounts forming part of the audited financial statements for the year ended March 31,2015.

Deposits

Your Company being a Deposit accepting Housing Finance Company, registered with National Housing Bank, is governed by the provisions of Housing Finance Companies (NHB) Directions, 2010, as amended.

Your Company sees retail deposits as a major source for funding and has taken several initiatives during the year to make these deposits available through the length and breadth of the country. This is reflected in the robust growth seen in the fixed deposit portfolio of the Company. The total deposits grew by 43.65% to Rs. 3,728.30 crore as on March 31, 2015. The depositor accounts also grew by a robust 25% growth to 2,05,902. This is a significant testimony of increasing retail depositors confidence in your Company.

During the year under review, your Company launched a new deposit product ''Wealth2Health Fixed Deposit'' which gives the customers all the benefits of normal fixed deposits but also provides for liquidity in case of any health emergency, along with a host of other related benefits. Your Company has also centralised its fixed deposit operations for better control and monitoring. This will help us to service the customers in a much more effective and efficient manner. Several customer centric projects were undertaken during the year aimed at upgrading customer service levels, including automation of certain processes which will result in reduced turnaround time and lower cost.

Fixed Deposits accepted by the Company are secured appropriately to the extent of floating charge on approved securities and bank deposits created by way of Deed of Trust, as per the guidelines issued by the National Housing Bank. The security details in respect of the same are mentioned at Note No. 5.4 in the Notes to accounts forming part of the audited financial statements for the year ended March 31,2015.

As of March 31, 2015, 14,035 depositors aggregating to Rs. 39.98 crore (along with interest due thereon) had not claimed the deposits. Depositors have been intimated regarding the maturity of their deposits, with a request to either renew or claim their matured deposits.

Your Company has obtained due accidental death insurance cover for its depositors. The sum assured per depositor is Rs. 1 Lakh. The cover provides protection to the depositor''s family in case of untimely accidental death of the depositor. This coverage is given irrespective of the deposit amount.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013, apart from the loans made, guarantee given or security provided by the Company in the ordinary course of business are given in the Notes to accounts forming part of the Audited Financial Statements for the year ended March 31,2015.

CREDIT RATING

The Company''s borrowings enjoy the following Credit Ratings:

Rating / Outlook Nature of borrowing CARE Brickwork ICRA CRISIL

Short-term debt / commercial paper - - - CRISIL A1

Public (fixed) deposits CARE AAA(FD) BWR FAAA (Stable) - -

Subordinated debt CARE AA BWR AAA (Stable) - -

NCDs CARE AAA BWR AAA (Stable) - -

IPDIs CARE AA BWR AA (Stable) - -

Long-term bank loans CARE AAA - - -

Structured obligations CARE AAA(SO) - ICRA AAA CRISIL AAA (SO) (SO)



CAPITAL ADEQUACY

As required under National Housing Bank Directions, your Company is presently required to maintain a minimum capital adequacy of 12% on a stand-alone basis. The following table sets out Company''s capital adequacy ratios as at March 31, 2013, 2014 and 2015.

As on March 31 2015 2014 2013

Capital Adequacy Ratio 16.56% 17.16% 16.52%

The capital adequacy ratio (CAR) of your Company was at 16.56% as on March 31,2015, as compared to the regulatory requirement of 12%.

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

NON-PERFORMING ASSETS AND PROVISIONS FOR CONTINGENCY

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

As of March 31, Rs. in crore except % Particulars 2015 2014 2013

Gross Non-Performing 485.05 317.52 239.32

Assets

% of Gross NPA to Total 0.95% 0.78% 0.71% Loan Portfolio

Net Non-Performing 345.95 209.87 155.96 Assets

% of Net NPA to Total 0.68% 0.52% 0.46% Loan Portfolio

Total cumulative 430.15 331.35 262.67 provision - loans and other assets

Recovery & Collections

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI) has proved to be a useful recovery tool and the Company has been able to successfully initiate recovery action under this Act in the case of willful defaulters. The Company has acquired certain assets under SARFAESI which are being auctioned as per the rules and regulations of SARFAESI involving a loan outstanding of Rs. 80.93 crore.

In order to prevent frauds in loan cases involving multiple lending from different banks / housing finance companies, the Government of India has set up the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) under Section 20 of the SARFAESI Act 2002 to have a central database of all mortgages created by lending institutions. Your Company is registered with CERSAI and the data in respect thereto is being submitted, from time to time.

INVESTMENTS

The Investment Committee constituted by the Board of Directors is responsible for approving investments in line with the policy and limits as set out by the Board. The investment policy is reviewed and revised in line with the market conditions and business requirements from time to time. During the year, the Investment policy was reviewed and revised by the Board of Directors. The decisions to buy and sell upto the approved limit delegated by the Board are taken by the Chairman & Managing Director, who is assisted by Senior Executives of the Company. The investment function is carried out primarily to support the core business of housing finance to ensure adequate levels of liquidity and to maintain investment in approved securities in respect of public deposits raised as per the norms of National Housing Bank.

Considering the time lag between raising of resources and its deployment, the surplus funds are generally being parked with liquid fund schemes of mutual funds and short term deposits with banks. During the year, your Company earned Rs. 74.16 crore by way of Income from Mutual funds & Other Operations and Rs. 60.56 crore by way of interest on deposits placed with banks and bonds. At the end of the financial year, your Company maintained Rs. 736.46 crore by way of deposits with banks.

As per National Housing Bank guidelines, Housing Finance Companies are required to maintain Statutory Liquid Ratio (SLR) in respect of public deposits raised. Currently the SLR requirement is 12.50% of the public deposits. As at March 31,2015, your Company has invested Rs. 216.46 crore (book value - gross) in approved securities comprising of government securities, government guaranteed (State and Central) bonds, State Development Loans and by way of Bank Deposits for Rs. 228.33 crore. It is being maintained within the limits prescribed by National Housing Bank.

INVESTMENT IN ASSOCIATE COMPANIES Investment in DHFL Pramerica Life Insurance Company Limited (DPLI)

During the financial year 2014-15, your Company made further investment to the tune of Rs. 16.84 crore in the joint venture entity DPLI, by way of subscription to 1,68,43,092 equity shares of Rs. 10/- each of DPLI. However, the Company maintained its shareholding at 50% of equity share capital in DPLI. The Company also acts as a corporate agent for distribution of DPLI''s life insurance products as per Insurance Regulatory Development Authority of India (IRDA) guidelines.

Investmentin Avanse Financial Services Ltd. (Avanse)

Your Company made further investment in its associate company, Avanse, a Non Banking Finance Company registered with Reserve Bank of India, to the tune of Rs. 19.64 crore, by way of subscription to 42,69,639 equity shares of Rs. 10/- each at price of Rs. 46/- per share. However, the percentage of shareholding of your Company stood at 48.39% of the total paid-up share capital of Avanse.

As on date of this report, your Company does not have any subsidiary company.

The Statement in the prescribed format AOC-1, pursuant to Section 129(3) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, related to the associate companies and Joint Venture, is annexed as "Annexure-1" to this Report.

Disinvestments Arthveda Fund Management Pvt. Ltd. (Arthveda)

During the year under review, your Company disinvested its entire equity stake from Arthveda. The Company earned a profit of Rs. 1.18 crore on sale of shares of Arthveda. The proceeds from these disinvestments were ploughed back in the business activities of the Company.

Proposed investment in Asset Management Services

During the year under review, your Company entered into definitive agreements to acquire a 50.00% equity stake in each of Pramerica Asset Managers Private Limited (PAMPL) and Pramerica Trustees Private Limited (PTPL) from PGLH of Delaware, Inc., which is a wholly-owned, indirect subsidiary of Prudential Financial Inc. PAMPL develops, manages, markets and operates as an asset management company for Mutual Fund business. PTPL provides trusteeship services and ensures that the activities of PAMPL are in compliance with the SEBI (Mutual Funds) Regulations, 1996, as amended from time to time. The completion of this acquisition is pending the satisfaction of a few of conditions, including, among other things, receipt of approval from SEBI.

Through these entities, the Company aims to extend its strategy of providing comprehensive financial solution of loan, protection and thrift to households in different income and economic strata. Financial inclusion will be integral to this strategy.

INFORMATION TECHNOLOGY

During the year under review, your Company has initiated a technology transformation program (Tech2.0) in association with IBM to support Company''s growth, improve operational efficiency and optimise costs through the use of technology. This program is expected to establish a scalable and flexible technology landscape, improve customer centricity, enable faster decision making through automation and analytics, thereby taking the technology platform to a new level. Your Company aims to align its technology landscape to evolving business needs, which would support the Company in its growth targets. Under Tech2.0, your Company plans to replace its legacy systems and business application platforms with proven commercial-off-the-shelf products, which would provide best fit solutions to the business functions. Your Company has further upgraded its existing information technology infrastructure by increasing network bandwidth and bringing in new servers for the core applications, thereby improving its performance.

HUMAN RESOURCES

Your Company''s human resources are the cornerstone of growth and progress. The Company recognises that people are not just a valuable asset but play a critical role in achieving its goals too. Your Company has well experienced management team on whom the Company rely upon to anticipate industry trends and to capitalise on emerging new business opportunities. With a combination of Company''s reputation in the market, working environment and competitive compensation programs, it is able to attract and retain talented people.

The Company''s vision is to become an employer of choice by providing a compelling value proposition to its employees. Your Company strives to attract the best talent in the industry and continues to invest in employees'' development, retention, leadership, motivation and training The Company''s HR policies relating to hiring, deployment, transfers, promotion, training, including its performance- linked bonuses and employee stock options, have been designed with the clear aim of building a ''cadre-based organisation'', whose cadre understands the Company''s customers, their problems, issues and aspirations. The Company''s human resources policies and practices are focused on recruiting and training employees who can empathise and deal with potential and existing borrowers.

Your Company implemented a robust reward and recognition framework across all functions under which contributions to the business by the employees are rewarded. The Company also introduced an online library facility across India which is available to all employees.

Your Company also offers to its eligible employees the right to participate in Company''s employee stock option schemes in order to reward employees for their performance and motivate them to contribute to the growth and profitability of the Company.

The workforce strength of your Company as on March 31,2015 was 2,375. The total work force cost during the year was Rs. 196.33 crore as compared to Rs. 176.42 crore in the previous year. The increase in cost is mainly due to the increase in work force to meet the requirements of business on account of significant expansion in terms of geography as well as in business volumes and the salary revisions effected during the year.

Learning & Development

Your Company''s Learning & Development Team whose core responsibility is to provide learning solutions to every role within the organisation by designing comprehensive training frameworks to match the dynamic and ever evolving business trends.

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

During the financial year 2014-15, training was imparted to 1,712 employees, covering a wide range of functional areas including sales skill development programs. Employee trained under Credit analytical skills and appraisal techniques were 607. The total number of employees who underwent operational excellence training programs was 621, whereas Risk and fraud management was 455. "Aagman" the exclusive monthly Induction program for the new recruits was conducted to give an overall view of the company''s vision and mission. Similarly, program based on soft skills and monitoring techniques were also conducted. In keeping with its importance and in compliance to NHB norms trainings on KYC & AML Policies were also imparted at all levels within the organisation.

External training programs and cross functional exposures were utilised to provide an extra edge to employees for continuous and better performance through learning and job experience.

Your Company has partnered with the best in class leadership trainers of the country for corporate breakthrough workshop for key position holders and business managers.

To study the impact of training, your Company engages leading trainers from the industry to benchmark Company''s skills and for analysing the same with focus on measuring and improving employee engagement and learning quotient. Taking concrete steps based on the study findings is helping the organisation in building a stronger and more engaged workforce.

Your Company''s Human Resources initiatives and L&D systems are designed to ensure an active employee engagement process, leading to better organisational capability and vitality for maintaining a competitive edge and in pursuing its ambitious growth plans. Customer focus remains at the core of all L&D initiatives .

EMPLOYEE REMUNERATION

(A) . The ratio of the remuneration of each director to the

median employee''s remuneration and other details in terms of sub-section 12 of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are forming part of this report and is annexed as "Annexure - 2" to this Report.

(B) . The statement containing particulars of employees

as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and Rule 5 (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, forms part of this report. In terms of Section 136 of the Companies Act, 2013 the same is open for inspection at the Registered Office of the Company. Copies of this statement may be obtained by the members by writing to the Company Secretary.

EMPLOYEES STOCK OPTION SCHEME (ESOS)/ EMPLOYEE STOCK APPRECIATION RIGHTS (ESARs) Employees Stock Option Scheme (ESOS)

The Company has with the approval of Nomination & Remuneration Committee (previously known as Remuneration and Compensation Committee) of the Board of Directors of the Company and pursuant to the special resolution passed by the Members of the Company, at the Annual General Meeting held on July 27, 2007, formulated three employee stock option schemes, the Employee Stock Option Scheme - 2008 (ESOS 2008 - Plan I), ESOS -2009 - Plan II and ESOS 2009 - Plan III- in accordance with the provisions of Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

Employee Stock Appreciation Rights (ESARs)

During the year under review, the Members of the Company vide a special resolution passed through postal ballot on February 23, 2015, approved the Dewan Housing Finance Corporation Limited - Employee Stock Appreciation Rights Plan 2015 (DHFL ESAR 2015) in accordance with the provisions of Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and issuance of stock appreciation rights ("ESARs") through DHFL ESAR 2015, exercisable into 51,46,023 fully paid up equity shares in the aggregate having face value of ''10/- each, directly or through an Employee Welfare Trust.

During the year under review, your Company with the approval of Nomination & Remuneration Committee granted 15,50,100 ESARs under DHFL ESAR 2015 to the eligible employees of the Company conferring upon them a right to receive equity shares equivalent to the appreciation in the value of the shares of the Company as per terms of the DHFL ESAR Plan 2015.

The Nomination & Remuneration Committee of the Board of Directors of the Company, inter-alia, administers and monitors the Employee Stock Option Schemes/ Employee Stock Appreciation Rights Plan of the Company, in accordance with the SEBI Guidelines.

The Company has received a certificate from the Auditors of the Company that the Stock Options Schemes/ Employee Stock Appreciation Rights Plan have been implemented in accordance with the SEBI Guidelines and is as per the respective resolutions passed by the Members of the Company. The said Certificate would be placed at the ensuing Annual General Meeting for the inspection by members.

The applicable disclosures as stipulated under the SEBI guidelines, as applicable for financial year 2014-15, with regard to Employee Stock Option Schemes/Employee Stock Appreciation Rights are annexed as "Annexure - 3" to this Report.

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

OF THE COMPANIES (ACCOUNTS) RULES, 2014

A. Conservation of Energy

Your Company is not engaged in any manufacturing activity and thus its operations are not energy intensive. However, adequate measures are always taken to ensure optimum utilisation and maximum possible saving of energy. During the year, capital investment to the tune of Rs. 0.27 crore was made in the energy conservative equipments like LED (Light Emitting Diode) lights instead of CFL (Compact Fluorescent Lamp) and installation of Solar energy System at its various branches.

The Company on its lending side actively associates in all programmes and schemes of the Government and NHB, in promoting energy efficient homes.

B. Technology Absorption

Your Company actively pursues a culture oftechnology adoption, leveraging on the advancements in technology to serve customers better, manage process efficiently and economically and strengthen control systems. The Company has maintained a technology friendly environment for its employees to work in. In keeping with the current trends in the areas of digital marketing and social media, the Company has effectively used these avenues in positioning itself in the market place and gain better Customer engagement.

The current technology transformation program has been initiated to bring the Company''s technology platform to a new level. The program aims to identify and implement best-fit solutions in such areas as

(i) collaboration and employee communication portal to provide for internal communication, knowledge sharing and collaboration between employees;

(ii) customer relationship management, in particular in marketing, sales and customer service, to achieve higher customer satisfaction and enhanced marketing and sales effectiveness; (iii) digital channels to provide for effective interaction between the Company and its customers and business partners/agents, which will include creation of a customer portal and an agent portal; (iv) financial accounting ERP to establish unified accounting, financial management and accounting MIS at the Company; (v) imaging, workflow and DMS to facilitate the centralisation of data capture and validation of the Company''s loan, project finance and FD applications; (vi) loan origination and management;

(vii) collections management, project finance and property information management systems;

(viii) business systems (enterprise) integration; and

(ix) business intelligence and advanced analytics to build a platform and an operational data store to generate systematic, consistent and near real-time MIS reports and dashboards.

C. Foreign Exchange Earnings and Outgo

There were no foreign exchange earnings during the year.

The information on foreign exchange outgo and expenditure is furnished at Note No. 40 in the Notes forming part of the financial statements for the year ended March 31,2015.

INSURANCE

Your Company has insured its various properties and facilities against the risk of fire, theft and other perils, etc. and has also obtained Directors'' and Officers'' Liability Insurance Policy which covers the Company''s Directors and Officers (employees in managerial or supervisory position) against the risk of financial loss including the expenses pertaining to defense cost and legal representation expenses arising in the normal course of business. Further, your Company has obtained money policy to cover "money in safe and till counter and money in transit" for the Company''s branches and various offices. All the vehicles owned by the Company are also duly insured. Your Company also has in place a mediclaim policy for its employees and their dependent family members, group term life and group personal accident policies, which provide uniform benefits to all the employees.

NATIONAL HOUSING BANK GUIDELINES

The Company has complied with the provisions of Housing Finance Companies (NHB) Directions, 2010, as prescribed by NHB and has been in compliance with the various Circulars, Notifications and Guidelines issued by National Housing Bank (NHB) from time to time. The Circulars and the Notifications issued by NHB are also placed before the Audit Committee / Board of Directors at regular intervals to update the Committee/ Board members on the compliance of the same.

RISK Management

As a Housing Finance Company, your Company is exposed to various risks that are inherent in the lending business, with the major risks being credit risk, market risk, liquidity risk, legal risks, interest rate risk, compliance risk and operational risk. The Company has invested in people, processes and technology to mitigate risks posed by internal and external environment. It has in place a strong risk management team and an effective credit operations structure. Its risk management policies continue to segregate the functions of Risk and Credit to focus on portfolio management. Sustained efforts to strengthen the risk framework and portfolio quality have yielded significant results over the last few years.

The Company places emphasis on risk management measures to ensure an appropriate balance between risk and return. The Company has taken steps to implement robust and comprehensive policies and procedures to identify, measure, monitor and manage risks. Risk management is a board-driven function with the overall responsibility of risk management assigned to the Risk Management Committee of the Board of Directors which was constituted during the year. At the operational level, risk management is assigned to the Asset Liability Management Committee ("ALCO") and Operational Risk Management Committee ("ORMC"). Sensitive financial risks are monitored by the Risk Management Committee and also by Audit Committee of the Board. Your Company conducts risk profiling on a regular basis for the purpose of self-assessment.

The Company has envisaged the setting up of risk containment unit (RCU) at all major business locations. The Board and the Audit Committee on regular intervals are updated on the risk management systems, processes and minimisation procedures of the Company.

Your Company has put in place a Business Continuity Plan and adopts the practice of reviewing its risk management policies to be in step with the changing environment so as to identify and mitigate its attendant risks in a proactive manner on a continuous basis.

ASSET LIABILITY MANAGEMENT COMMITTEE (ALCO)

The Asset Liability Management Committee (ALCO) lays down policies and quantitative limits that involve assessment of various types of risks and shifts in assets and liabilities to manage such risks. ALCO ensures that the liquidity and interest-rate risks are contained within the limits laid down by the Board. The Company has duly implemented the NHB''s Asset Liability Management Guidelines.

CODES, STANDARDS AND POLICIES AND COMPLIANCES THEREUNDER Know Your Customer & Anti Money Laundering Measure Policy

Your Company has a Board approved Know Your Customer & Anti Money Laundering Measure Policy (KYC & AML Policy) in place and adheres to the said Policy. The said Policy is in line with the National Housing Bank guidelines. During the year under review, KYC & AML Policy was modified by the Board in line with the NHB amended guidelines.

The Company has also adhered to the compliance requirement in terms of the said policy including the monitoring and reporting of cash and suspicious transactions. The Company furnishes to Financial Intelligence Unit (FIU), India, in the electronic medium, information of all cash transactions of the value of more than Rupees ten lakh or its equivalent in foreign currency and suspicious transactions whether or not made in cash, in terms of the said Policy.

Fair Practice Code

Your Company has in place a Fair Practice Code (FPC), which includes guidelines on appropriate staff conduct when dealing with the customers and on the organisation''s policies vis-a-vis client protection. The FPC captures the spirit of the National Housing Bank guidelines on fair practices for Housing Finance Companies. Your Company and its employees duly comply with the provisions of FPC.

Code of Conduct for the Board of Directors and the Senior Management Personnel

Your Company has adopted a Code of Conduct for its Board of Directors and the Senior Management Personnel. The Code requires the Directors and employees of the Company to act honestly, ethically and with integrity and in a professional and respectful manner. During the year under review, the Code of Conduct was revised as per the revised Clause 49 of the Listing Agreement. A declaration by Chaiman & Managing Director with regard to compliance with the said code, forms part of this Annual Report.

Code for Prohibition of Insider Trading Practices

Your Company has in place a Code for Prevention of Insider Trading Practices in accordance with the Model Code of Conduct, as prescribed under Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, as amended and has duly complied with the provisions of the said code.

The Board of Directors at its meeting held on April 29, 2015 adopted (i) DHFL Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information and (ii) DHFL Code of Conduct for Prohibition of Insider Trading, as per Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, which shall become effective from May 15, 2015. The details of the same are provided in Corporate Governance Report forming part of this Annual Report.

Code of Business Ethics (COBE)

Your Company has adopted a Code of Business Ethics (COBE) which lays down the principles and standards that govern the activities of the Company and its employees to ensure and promote ethical behaviour within the legal framework of the organisation.

Whistle Blower Policy

Pursuant to the provisions of Section 177 (9) & (10) of the Companies Act, 2013 read with Rule 7 of Companies (Meetings of Board and its Powers) Rules, 2014 and Clause 49 of the Listing Agreement, the Company has adopted a Whistle Blower Policy, which provides for a vigil mechanism that encourages and supports its Directors and employees to report instances of unethical behaviour, actual or suspected, fraud or violation of the Company''s Code of Conduct or Ethics Policy. It also provides for adequate safeguards against victimisation of persons who use this mechanism and direct access to the Chairman of the Audit Committee in exceptional cases. The details of the same are provided in Corporate Governance Report forming part of this Annual Report.

Prevention, Prohibition &

Redressal of Sexual Harassment of Women at Workplace

The Company has in place a Policy on Prevention, Prohibition & Redressal of Sexual Harassment of Women at Workplace and an Internal Complaints Committee (ICC) has been constituted thereunder. The primary objective of the said Policy is to protect the women employees from sexual harassment at the place of work and also provides for punishment in case of false and malicious representations.

During the financial year 2014-15, one compliant was received by the ICC under the said policy and based on the recommendations of the ICC, strict actions were taken against the employee found guilty.

Comprehensive Risk Management Policy

Your Company has formulated and adopted a Comprehensive Risk Management Policy which covers a formalised Risk Management Structure, alongwith other aspects of Risk Management i.e. Credit Risk Management, Operational Risk Management, Market Risk Management and Enterprise Risk Management. The Risk Management Committee of the Board, on periodic basis, oversees the risk management systems, processes and minimisation procedures of the Company.

Nomination (including Boards'' Diversity) Remuneration & Evaluation Policy (NRE Policy)

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a Nomination ( including Boards'' Diversity), Remuneration & Evaluation Policy, which, inter-alia, lays down the criteria for identifying the persons who are qualified to be appointed as Directors and/or Senior Management Personnel of the Company, alongwith the criteria for determination of remuneration of Directors, KMPs and other employees and their evaluation and includes other matters, as prescribed under the provisions of Section178 of Companies Act, 2013 and Clause 49 of the Listing Agreement.

The details of the same are provided in Corporate Governance Report forming part of this Annual Report.

Related Party Transaction Policy

Related Party Transaction Policy, as formulated by the Company, defines the materiality of related party transactions and lays down the procedures of dealing with Related Party Transactions. The details of the same are provided in Corporate Governance Report forming part of this Annual Report.

Corporate Social Responsibility (CSR) Policy

The Company has framed Corporate Social Responsibility (CSR Policy), as per the provisions of the Companies (CSR Policy) Rules, 2015 which, inter-alia, lays down the guidelines and mechanism for undertaking socially useful projects for welfare and sustainable development of the community at large. As per the provisions of Section 135 of the Companies Act, 2013, the Company has constituted a Corporate Social Responsibility Committee. The Corporate Social Responsibility Committee assists the Board in fulfilling its duty towards the community and society at large by assisting in identifying the activities and programmes that can be undertaken by the Company, in terms of the CSR Policy of the Company. The composition of the CSR Committee and its terms of reference are given in the Corporate Governance Report forming part of this Annual Report.

The Annual Report on CSR activities is annexed as "Annexure - 4" to this Report.

Others Policies

Further in order to strengthen the Internal Procedures and Systems and for better Governance, during the year under review, Board of Directors of your Company had approved the following policies:

(a) Business Continuity Plan: The Company''s business continuity management programme is headed by a nodal body-Business Continuity Plan (BCP) Committee, comprising of Senior Management Personnel of the Company. This framework enables to identify impact of any disruption on the business/ operations of the Company and enables the company to timely manage the related risk and ensure business continuity at all times.

(b) Disclosure Policy: Disclosure Policy has been formulated, as per the requirements of Clause 36 of Equity Listing Agreement and guidance note issued in this respect by the Stock Exchanges. It, inter alia, provides an illustrative list and the manner and authority under which the material events that affect the business operations and performance of the Company and are price sensitive, are required to be disclosed to the Stock Exchanges.

Your Company also has in place various other policies and manuals such as NPA Policy, Operations and Credit Manual, Agency Manual, Comprehensive Outsourcing Policy, Policy on Appointment of Collection Agency, Investment Policy and Staff Accountability Policy for ensuring the orderly and efficient conduct of Company''s business.

LISTING OF SHARES OF THE COMPANY

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

The Company has paid the listing fees as payable to the BSE Ltd. and the National Stock Exchange of India Limited for the financial year 2015-16 on time.

Marketing and Branding

DHFL''s recognition as the leading housing finance company in India was reinforced through a unified marketing and product strategy. A series of brand awareness and customer engagement activities driven by customer centric product innovations across the product portfolio, were carried out during the year.

Your Company''s marketing function used a 360 degree approach to connect with the consumer at every touch point; through various grass root events, large industry forums & exhibitions and explicit online presence. Consistent creative themes and content across channels including digital, enhanced customer experience and generated greater awareness for brand ''DHFL''.

Highlights of the year

Brand & Media: On November 21,2014, your Company on boarded Shah Rukh Khan as its brand ambassador and the multi-media campaign''GharJaisa Loan''was launched shortly afterwards across TV, Print, Cinema, Outdoors & Digital Media. The campaign was also leveraged across all below the line and branch collaterals to seamlessly communicate & reinforce the trust & heritage of DHFL and establish a strong connect with Company''s core target audience. The campaign resulted in enhancement of the brand as both the Brand Awareness and Consideration scores of your Company doubled as per the Brand Track research by Nielsen.

In October 2014, your Company took a strategic decision to offer Home Loans at par with industry to further broad- base the customers. The campaign was launched across markets in print & radio media.

DHFL ''Aao India Ghar Banayein'' Campaign in Q1 of FY2015 across TV, Print & Radio reinforced DHFL''s 30 year service to the Indian consumer. The Campaign was based on the Company''s Founding Vision of enabling access to home ownership. The campaign also used Mumbai Indian Players in this communication to reinforce the brand connect during the IPL season.

DHFL ''Mumbai Indians'' IPL association was leveraged through a mix of traditional and digital media along with newer engagement solutions. Your Company''s logo continues to be prominently displayed on all team T-shirts.

Enhancing DHFL''s Digital Footprint: Your Company engaged with two million unique lives digitally and through various innovations in the digital space. The website www.dhfl.com was redesigned and optimised for both Mobile and Tablet devices and visitors on the Company''s website increased by 23% over the previous year. Your company launched the MYDHFL Facebook App to enhance customer experience and easy access to DHFL and DHFL Facebook fans as on March 31, 2015 were at 1,69,067 - a 190% increase over last year. On Twitter, there are 1887 people following our handle - a 43% increase over last year & on YouTube where the Company has its own channel, the video of our brand campaign - Ghar Jaisa Loan generated 1.2 Mn likes.

Customer Engagement & Retail Promotion: Customer First Initiative has been launched aimed at driving the customer centric approach amongst employees and to encourage customer feedback. With regard to Customer Centric Retail Activities there have been Standardised Activation & Lead Generation activities across network locations. There have been Branch/Offices Launches (105 through Project Freedom), Product Launches (SME Loans & Wealth2Health Fixed Deposit) & Business Partner Meets for generating awareness.

Public Relations: Continuous media engagement efforts resulted in your company maintaining the highest visibility (single brand Share of Voice) through Public Relations (PR) across television and print. Customer Advocacy was further enhanced through authored articles and live Q&A sessions on digital medium.

Call Centre Support: As a result of the integrated marketing efforts a direct impact was seen in the business generated via DHFL Call Centre and a 30% increase was observed in the business generated as against the corresponding previous year.

Product Innovation & Support: With customer centricity at the core, your Company launched new products and schemes and Competitive benchmarking for all products & incentive schemes was carried out.

AWARDS AND RECOGNITIONS

During FY2014-15, your Company''s business excellence was also recognised at various award forums:

The Brand Trust Report India Study 2015, ranked your Company as India''s Most Trusted Housing Finance

Brand in a study covering 19,000 brands across 16 cities

Your Company ranked 271 amongst FE 500 India''s Finest Companies by Market cap

Your company won my FM stars of the Industry award for Excellence in Home Loan Banking (NBFC)

Mr. Kapil Wadhawan was featured amongst the Business Today''s India''s top 100 CEOs

Your Company won The Most Promising Brand of the Year [NRI Home Loan Services] in the Finance & Banking Sector (UAE)

Your Company was listed amongst Business World''s India''s 50 Biggest Financial Companies and

Your Company received a Certificate of Appreciation from NHB for its commitment and support in making the regulator''s Energy Efficient Homes Program a success

BRANCH NETWORK

To support the Company''s growth initiatives, your Company has established an integrated branch network that has helped it to optimise operational coverage and improve Company''s ability to deliver products and services to its customers effectively. Your Company has a presence at 360 locations throughout India which includes 188 branches, 150 service centres, 19 circle/cluster offices, 2 disbursement hubs, 1 collection center as at March 31,2015. The Company''s network is grouped into circles and clusters located pan-India. The Company''s distribution network in India is primarily spread over Tier II and Tier III cities and towns. Additionally, your Company has international representative offices located in London and Dubai.

Your Company has also entered into tie-ups with a number of Indian public and private sector banks to provide their customers access to Company''s home loan solutions. The Company''s tie-ups with such banks allow the Company to access the banks'' customers and branch networks while providing them with the option to participate in Company''s loan syndication programs. The Company''s partners include United Bank of India for eastern India, Central Bank of India for central India, and Dhanlaxmi Bank and Yes Bank Limited for pan-India. The alliance arrangements benefit your Company financially, and the additional points of sales through the ally banks'' networks provide the Company with an increased footprint at minimal cost. The Company''s strong network coverage is designed to provide increased penetration to cater to the evolving needs of Company''s existing customer base and tapping a growing potential customer base throughout India. In addition to the Company''s network and resources, your Company engaged independent direct selling associates ("DSAs''O and online sourcing platform providers who work with the Company on a commission basis. The DSAs and online sourcing platform share their own infrastructure and manpower on which your Company leverages for sourcing business. Your Board believes that such arrangements strengthen the Company''s geographical reach at minimum additional cost. Business sourced by the DSAs and online platforms is appraised by the Company in accordance with the Company''s underwriting standards and requirements, upon which the company''s employees undertake loan processing, appraisal and management of customer relationships post disbursement of loans.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Your Directors express their profound grief on the sad demise of Mr. R. P. Khosla, Independent Director of the Company, who passed away on July 5, 2014. Mr. R. P. Khosla was on the Board of the Company, as an Independent Director, since March 17, 1993. He was the Chairman of the Nomination & Remuneration Committee of the Board (erstwhile Remuneration & Compensation Committee). The Board pays glowing tribute to him and puts on record highest appreciation of his association with the Company, as a highly respected Director.

During the period under review, the nomination of Mr. Kaikhushru Vicaji Taraporevala (Nominee Director), was withdrawn by M/s. Caledonia Investments Plc, (Caledonia) with effect from November 22, 2014, in terms of their Shareholder''s Agreement with the Company. The Board places on record its appreciation for invaluable services rendered by Mr. Kaikhushru Vicaji Taraporevala.

Mr. Ajay Vazirani, Independent Director of the Company, resigned from the Board, with effect from October 31, 2014, due to his pre-occupation with other professional assignments. The Board of Directors places on record their appreciation for the contribution made by Mr. Ajay Vazirani during his long tenure on the Board of the Company, since January 4, 2008.

On the basis of the recommendation of Nomination & Remuneration Committee, the Board of Directors appointed Ms. Vijaya Sampath, with effect from August 26, 2014, as an Additional Director, in the category of Independent Director of the Company. Ms. Vijaya Sampath holds office up to the date of the ensuing annual general meeting. The Company has received a notice from a member under Section 160 of the Companies Act, 2013, along with a requisite deposit, proposing her candidature for the office of Independent Director, to be appointed as such, at the ensuing annual general meeting. Necessary resolution is being proposed in the notice of the ensuing Annual General Meeting for appointment of Ms. Vijaya Sampath as an Independent Director of the Company for the approval of the Members pursuant to Section 149 of the Companies Act, 2013 for a term of 5 consecutive years w.e.f. August 26, 2014.

In accordance with the provisions of Section 152 of the Companies Act, 2013 and Articles of Association, Mr. Dheeraj Wadhawan, Non- Executive Director of your Company retires by rotation and being eligible; offers himself for re- appointment at the ensuing Annual General Meeting.

The term of Mr. Kapil Wadhawan as the Chairman & Managing Director (designated as the ''Key Managerial Personnel), which was for a period of 5 years w.e.f. October 4, 2010 is to expire on October 3, 2015. It is proposed to re-appoint Mr. Kapil Wadhawan, as the Managing Director ( designated as Chairman & Managing Director ) of the Company and as Key Managerial Personnel, pursuant to the provisions of Section 203 of the Companies Act, 2013 and rules made thereunder, for a further period of 5 years w.e.f. October 4, 2015. Necessary resolution is being proposed in the Notice of the ensuing Annual General Meeting for the approval of the members, for reappointment and remuneration of Mr. Kapil Wadhawan, as Chairman & Managing Director for a period of 5 years and his terms of appointment are also mentioned in the Explanatory statement annexed to the Notice. In terms of the provisions of Section 152 of the Companies Act, 2013, it is proposed to make Mr. Kapil Wadhawan, liable to retire by rotation.

All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

None of the Directors of the company are related to each other, except for Mr. Dheeraj Wadhawan, Non Executive Director who is the brother of Mr. Kapil Wadhawan, Chairman & Managing Director of the Company. Brief resumes of Directors, proposed to be appointed/ re-appointed, nature of their expertise in specific functional areas and names of other companies in which they hold Directorship alongwith their Membership/Chairmanship of Committees of the Board as stipulated under Clause 49 of the Listing Agreement with Stock Exchanges, are provided in the annexure to the Notice of the Thirty First Annual General Meeting being sent to the members along with the Annual Report.

Based on the confirmations received, none of the Directors are disqualified for being appointed/ reappointed as directors in terms of Section 164 the Companies Act, 2013.

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

During the year under review, the Board of Directors appointed Mr. Harshil Mehta as the Chief Executive Officer, with effect from January 17, 2015, and designated him as the Key Managerial Personnel of the Company, as per the provisions of Companies Act, 2013.

Mr. Santosh Sharma - Chief Financial Officer and Ms. Niti Arya - Company Secretary who were employees even before the commencement of Companies Act, 2013, were designated as Key Managerial Personnel, as per the provisions of Companies Act, 2013.

PERFORMANCE EVALUATION

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, an annual performance evaluation of the Board, the directors individually as well as the evaluation of the working of the Board Committees including Audit Committee, Nomination & Remuneration Committee, Risk Management Committee, Stakeholders Relationship Committee, Corporate Social Responsibility Committee and Finance Committee of the Board of Directors of the Company, was carried out during the year. The details of evaluation process as carried out and the evaluation criteria have been explained in the Corporate Governance Report, forming part of this Annual Report.

BOARD MEETINGS

The Company holds at least four Board meetings in a year, one in each quarter, inter-alia, to review the financial results of the Company. The Company also holds additional Board Meetings to address its specific requirements, as and when required. All the decisions and urgent matters approved by way of circular resolutions are placed and noted at the subsequent Board meeting. Annual calendar of meetings of the Board are finalised well before the beginning of the financial year after seeking concurrence of all the Directors.

During the financial year 2014-15, six (6) Board Meetings were convened and held. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 and the Listing Agreement. The details of the Board meetings held during the year along with the attendance of the respective Directors thereat are set out in the Corporate Governance Report forming part of this Annual Report.

Audit Committee & Other Board Committees

The Company has a duly constituted Audit Committee as per the provisions of Section 177 of Companies Act, 2013 and Clause 49 of the Listing Agreement with the stock exchanges.

The Board of Directors has constituted five other committees namely - Nomination and Remuneration Committee, Stakeholders'' Relationship Committee, Risk Management Committee, Finance Committee and Corporate Social Responsibility Committee which enables the Board to deal with specific areas / activities that need a closer review and to have an appropriate structure to assist in the discharge of their responsibilities.

The details of the composition of the Audit Committee alongwith that of the other Board committees and their respective terms of reference are included in the Corporate Governance Report forming part of this Annual Report. The Audit Committee and other Board Committees meet at regular intervals and ensure to perform the duties and functions as entrusted upon them by the Board.

The details of the Audit Committee and other Board Committees are also set out in the Corporate Governance Report forming part of this Annual Report.

RELATED PARTY TRANSACTIONS

There were no materially significant related party transactions i.e. transactions of material nature, with its promoters, directors or senior management or their relatives etc. that may have potential conflict with the interest of company at large. Transactions entered with related parties as defined under the Companies Act, 2013 and Clause 49 of the Listing Agreement during the financial year 2014-15 were mainly in the ordinary course of business and on an arm''s length basis.

Prior approval of the Audit Committee is obtained by the Company before entering into any related party transaction as per the applicable provisions of Companies Act, 2013 and Clause 49 of the Listing Agreement. As per the provisions of Section 188 of the Companies Act 2013, approval of the Board of Directors is also obtained for entering into Related Party Transactions by the Company. A quarterly update is also given to the Audit Committee and the Board of Directors on the related party transactions undertaken by the Company for their review and consideration.

During the year, the Company has not entered into any material contract, arrangement or transaction with related parties, as defined under Clause 49 of the Listing Agreement and Related Party Transaction Policy of the Company.

The policy on Related Party Transactions as approved by the Board is uploaded on the Company''s website. None of the Directors have any pecuniary relationships or transactions vis-a-vis the Company.

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

There were no significant/material orders passed by any Regulator or Court or Tribunal which would impact the going concern status of the Company and its future operations.

INTERNAL AUDIT & INTERNAL FINANCIAL CONTROL SYSTEMS

The Company has an Internal Audit Department, headed by a Senior Management Personnel, who is a Chartered Accountant, designated as an Internal Auditor under the provisions of Section 138 of the Companies Act, 2013 who reports to the Audit Committee of the Board. The Internal Audit Department conducts comprehensive audit of functional areas and operations of the Company to examine the adequacy of and compliance with policies, procedures, statutory and regulatory requirements. Significant audit observations and follow up actions thereon are reported to the Audit Committee. The Audit Committee reviews adequacy and effectiveness of the Company''s internal control environment and monitors the implementation of audit recommendations. The audit function maintains its independence and objectivity while carrying out assignments. It evaluates on a continuous basis, the adequacy and effectiveness of internal control mechanism. The function also proactively recommends improvement in policies and processes, suggests streamlining of controls against various risks.

Your Company has laid down set of standards, processes and structure, which enables it to implement internal financial control across the Company and ensure that the same are adequate and operating effectively.

Additionally, practicing Chartered Accountant firms were engaged to conduct concurrent audit in branches covering more than 80% of the business during the financial year. Concurrent audit assesses and evaluates the operational effectiveness of checks and balances on a continuous basis with focus on regulatory guidelines and adherence to internal policies, procedures and guidelines issued by management from time to time.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company had appointed Mrs. Jayshree S. Joshi Proprietress of M/s Jayshree Dagli & Associates, Practicing Company Secretaries, Mumbai, to undertake the Secretarial Audit of the Company for the financial year 2014-15. The Secretarial Audit Report for the financial year ended March 31, 2015, is annexed as "Annexure - 5" to this report. The said report, does not contain any qualification, reservation or adverse remark, however, contains certain observations of the Secretarial Auditor which are self explanatory, and thus do not call for any further comments.

AUDITORS

At the Thirtieth (30th) Annual General Meeting held on July, 2014, the Members had appointed M/s. T. R. Chadha & Co., [Firm Registration No. 006711N] Chartered Accountants together with M/s Rajendra Neeti & Associates, Chartered Accountants, (Firm Registration No.006543C), as the Joint Statutory Auditors of the Company, by way of ordinary resolution under section 139 of the Companies Act, 2013, to hold office from the conclusion of Thirtieth (30th) Annual General Meeting until the conclusion of the Thirty Fourth (34th) Annual General Meeting of the Company, subject to ratification of the appointment by the members of the Company at every Annual General Meeting as per the provisions of the Companies Act, 2013.

Based on the recommendation of the Audit Committee, the Board of Directors at their meeting held on April 29, 2015, recommended the ratification of appointment of M/s. T. R. Chadha & Co., together with M/s. Rajendra Neeti & Associates, Chartered Accountants, as the Joint Statutory Auditors of the Company, and that, the necessary resolution in this respect is being included in the notice of the Thirty First (31st )Annual General Meeting for the approval of the Members of the Company. The Company has received consent from both the Joint Statutory Auditors and confirmation to the effect that they are not disqualified to be appointed as the Joint Statutory Auditors of the Company in terms of the provisions of Companies Act, 2013 and Rules framed thereunder.

Notes to Accounts and Auditors Report

The notes to the accounts referred to in Auditors Report are self-explanatory and do not call for any further comments.

The Joint Statutory Auditors Report does not contain any qualification, reservation or adverse remark.

DIRECTORS'' RESPONSIBILITY STATEMENT

Your Directors would like to inform that the audited accounts containing the Financial Statements for the year ended March 31, 2015 are in conformity with the requirements of the Companies Act, 2013 and they believe that the financial statements reflect fairly the form and substance of transactions carried out during the year and reasonably present the Company''s financial condition and results of operations. These Financial Statements are audited by M/s. T. R. Chadha & Co., Chartered Accountants together with M/s. Rajendra Neeti & Associates, Chartered Accountants, the Joint Statutory Auditors of the Company.

Pursuant to the provisions of Section 134(5) of the Companies Act, 2013, it is hereby confirmed that :

(a) in the preparation of the annual accounts for the year ended March 31, 2015, the applicable Accounting Standards had been followed along with proper explanation relating to material departures,

(b) the directors had 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 as at March 31,2015 and of the profit of the Company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual financial statements on a going concern basis;

(e) the directors had 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 had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

CORPORATE GOVERNANCE & MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to Clause 49 of the listing agreement with Stock Exchanges, a separate section titled ''Report on Corporate Governance'' and ''Management Discussion and Analysis'' forms part of this Annual Report.

The Report on Corporate Governance also includes certain disclosures that are required, as per Companies Act, 2013.

Auditors'' Certificate confirming compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement also forms part of this Annual Report.

FUTURE OUTLOOK

The key macro-economic indicators has been showing encouraging results for some-time now, which has induced the Reserve Bank of India to cut the repo rate twice during the last quarter of FY 2014-15. However, banks started lowering the base rates only in April on push from the Reserve Bank.

As per Government estimates, the Indian economic growth in 2015 is expected at 7.4% as against 6.9% in previous year based on the new formula the statistics department has started using to measure the economy. The GDP is expected to grow at 7.5%-8% in 2015-16 in the backdrop of improving macro-economic conditions. Indian wholesale prices fell 2.33% year-on-year in March of 2015 as petrol prices declined while food cost slowed. Consumer Price inflation dipped to 5.17%. CPI was lower on account of base effect on account of fall in prices in food, housing and clothing inflation. The Reserve Bank of India has a target of containing the inflation at 6% in 2015-16. Based on the current global and domestic outlook this target is expected to be achieved and would pave way for the RBI to further cut the policy rates bringing down the interest rates in the economy.

The lowering of the interest rates and revival of the economy is expected to give a lift to the housing finance market in 2015-16.

The real estate market in India is projected to post annual revenues of US$ 180 billion ('' 10,800 billion) by the year 2020. The demand for housing sector is anticipated to appreciate at compound annual growth rate (CAGR) of 22 per cent during 2013-2018.

As all key business enablers are currently showing favorable signs, your Company is positive and expects another year of healthy growth in 2015-16.

During the year under review, your Company has responded to an opportunity announced by RBI to consider licensing of certain differentiated banks under the category of Small Finance Bank (SFB) The Company has applied for converting itself into a SFB and is awaiting the outcome of the selection process of RBI. This opportunity is in keeping with the stated aspiration of your Company to become a diversified retail financial service provider and hence if selected it will be an added advantage.

EXTRACT OF ANNUAL RETURN

Pursuant to Section 134(3)(a) and Section 92(3) of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014,the extract of the Annual Return as at March 31,2015, in the prescribed form MGT 9,forms part of this report and is annexed as "Annexure - 6"

ACKNOWLEDGEMENTS

Your Directors wish to place on record their gratitude to the National Housing Bank, the Company''s Customers, Bankers and other Lenders, Members, Debenture holders, Depositors and others for their continued support and faith reposed in the Company. The Board also places on record its deep appreciation for the dedication and commitment of the employees at all levels. The Directors would also like to thank BSE Ltd., the National Stock Exchange of India Limited, National Securities Depository Limited, Central Depository Services (India) Limited and the Credit Rating Agencies for their co-operation.

For and on behalf of the Board

Kapil Wadhawan Place : Mumbai Chairman & Managing Director Dated : April 29, 2015 (DIN-00028528)


Mar 31, 2014

Dear Members

The Directors'' are pleased to present the Thirtieth Annual Report on the business and operations of your Company together with the Audited Accounts for the financial year ended March 31, 2014.

Financial Results

The Financial performance of the Company for the year ended March 31, 2014 is summarised below: -

(Rs. in crore)

2013-14 2012-13

Gross Income 4,969.69 4,078.94*

Less: Interest 3,782.58 3,119.36

Overheads 441.09 340.44*

Depreciation 10.91 8.46

Profit before tax 735.11 610.68

Less: Provision for taxation 206.11 158.83

Profit after tax 529.00 451.85

Add: Balance brought forward from the previous year 362.28 128.85

Addition on Amalgamation - 153.60

Surplus available for appropriations 891.28 734.30

Appropriations

Transferred to Statutory Reserve under 160.00 100.00 Section 36(1)(viii) of the Income Tax Act, 1961 read with Sec 29C of NHB Act, 1987

Transferred to General Reserve 200.00 200.00

Dividend for Earlier Year 0.03 0.08

Interim Dividend 38.50 23.42

Proposed Equity Dividend 25.69 38.47

Proposed 30th Anniversary Special Equity Dividend 38.53 -

Tax on Dividends 17.45 10.05

Balance carried over to Balance Sheet 411.08 362.28

Total 891.28 734.30

* Figures of the Previous Year has been regrouped as detailed under Note no. 21 of Notes forming part of the Financial Statement for the year ended March 31, 2014.

Appropriations from net profit is as detailed in the table given above.

Performance

Your Company was founded in 1984 with a vision to create a financial institution that believes in Inclusive Growth and which will transform the life of every Indian by enabling access to easy housing finance to fulfill his / her aspiration of home- ownership. Even after 30 years, your Company continues to remain committed to its original vision and thrive by serving the Lower and Middle Income (LMI) Group. Its systems and policies are dedicated to serving this socio-economic group.

In spite of wavering economic conditions during the year under review, your Company, in its 30th year of operations, maintained good performance across all major business and operational parameters. The interest rate levels remained elevated due to the tight monetary policy, which was mainly guided by the high inflationary scenario in the economy and volatile foreign exchange. This, coupled with an uncertain political scenario had an impact on the real estate market, which remained sluggish and saw price corrections at most locations. The new launches declined in the backdrop of subdued sales. Despite this, your Company earned Profit Before Tax of Rs. 735.11 crore for the financial year ended March 31, 2014 as against Rs. 610.68 crore in the previous financial year and the Profit After Tax of Rs. 529.00 crore as against Rs. 451.85 crore in the previous financial year. The Total Income for the year under consideration was Rs. 4,969.69 crore as against Total Income of Rs. 4,078.94 crore in the previous year. The Assets under Management (AUM) of your Company stood at Rs. 44,822.07 crore as at March 31, 2014 as against Rs. 36,116.45 crore in the previous financial year.

Dividend

Your Directors in their meeting held on January 20, 2014 had declared interim dividend of Rs. 3.00 per equity share for the financial year 2013-14, as compared to interim dividend of Rs. 2.00 per equity share for the previous financial year 2012-13. The interim dividend was paid to the members on February 8, 2014.

In recognition of the excellent performance of the Company, during the year under review, your Directors have further recommended a dividend to be paid out of current year profits of Rs. 2.00 per equity share to the equity shareholders as final dividend, along with an additional special 30th Anniversary celebration dividend of Rs. 3.00 per equity share. Thus, the total dividend for the financial year 2013-14 aggregates to Rs. 8.00 per equity share as compared to Rs. 5.00 per equity share for the financial year 2012-13.

The final dividend payable shall be subject to the approval of the Members at the ensuing Annual General Meeting. The total outgo on account of dividend (including dividend distribution tax) will be Rs. 120.20 crore as against Rs. 72.02 crore in the previous financial year.

The dividend on Equity Shares, if approved at the Annual General Meeting, will be paid to those members whose names shall appear on the Company''s Register of Members as at July 16, 2014. In respect of the shares held in dematerialised form, the dividend will be paid to members, whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited as beneficial owners as at that date.

In terms of the listing agreement, your Company has also paid dividend aggregating to Rs. 3 lakh towards Final Dividend for the year 2012-13 to the new members who were allotted shares prior to the book closure date for the dividend payment but after the date of Balance Sheet.

Similarly, Equity shares that may be allotted under Employee Stock Option Schemes or otherwise before the current date of the book closure for payment of dividend shall rank pari passu with the existing shares and shall be entitled to receive the dividend for the financial year 2013-14.

Lending Operations

The Sanctions and Disbursements of housing / other property loans, during the year ended March 31, 2014, were Rs. 22,377.61 crore and Rs. 16,647.45 crore respectively, as against Rs. 17,336.85 crore and Rs. 13,357.73 crore, respectively, in the previous financial year. The cumulative loan disbursement of the Company since inception were Rs. 58,810.18 crore.

Sale / Assignment of Loans

During the year, the Company has sold / assigned pool of housing loans aggregating to Rs. 1143.90 crore. The Company will, however, continue to collect the interest and EMI payments on these loans on behalf of the acquirer of the loans and remit the same after retaining its portion in terms of the individual agreements.

During the year, your Company has also securitised through the Special Purpose Vehicle (SPV) route, housing loans and Loan against Property contracts amounting to Rs. 1,472.37 crore. The Senior Series A1 Pass Through Certificate (PTCs) issued by such SPVs carry the highest rating of AAA (SO) by the external Credit Rating Agencies involved in the process.

Simultaneously, your Company has subscribed to an amount of Rs. 60.71 crore in a subordinate Pass Through Certificates (PTCs) issued by the aforementioned SPVs. These subordinate series A2 PTCs are rated as AA-(SO) and AA(SO) by the same external rating agencies and are required to be invested in, in compliance with the Minimum Retention Requirement (MRR) prescribed by RBI in its Guidelines on Securitization issued in 2012.

India''s first ever Mortgage Guarantee

Your Company has led the Indian mortgage market in availing of the country''s first ever mortgage guarantee. This is yet another pioneering move from your Company that provides the mortgage market a novel template for a securitisation transaction. Further, the Company''s vision of ensuring homes to every Indian, especially the low and middle income group customers across the country''s small towns also receives an impetus with a mortgage guarantee that releases the pressure of credit risk to a large extent. In one of the securitisation transactions, your Company has securitised a pool of priority sector housing loans with Principal Outstanding of Rs. 37.83 crore with a Mortgage Guarantee cover provided by India Mortgage Guarantee Corporation Private Limited (IMGC). IMGC is the country''s first mortgage guarantee company with major shareholders being NHB and Genworth Financial Inc, USA among others.

The pool has been rated AAA (SO) by CARE Ltd. This guarantee has enabled your Company to reduce the level of credit enhancement that would have otherwise been required for securitisation, thereby releasing capital which can be redeployed to earn higher returns.

Loan Book

As at March 31, 2014, the loan book stood at Rs. 40,596.63 crore as against Rs. 33,901.72 crore in the previous year.

Transfer of amounts to Investors Education and Protection Fund (IEPF)

Pursuant to the provisions of Section 205A (5) and Section 205C of Companies Act, 1956, the amounts (pertaining to dividends / deposits, etc.) that remained unclaimed and unpaid for a period of 7 years from the date it became first due for payment, have been transferred from time to time, to Investor Education And Protection Fund (IEPF) on the due dates, by the Company.

The Company has been intimating the members / depositors to lodge their claim for payments due, if any, from time to time and such information is also being mentioned in the Annual Report every year. Such claims as and when received have been settled. Despite constant and sincere efforts to pay the unclaimed dividend / deposits and interest thereon to such members / depositors, certain amount still remains unclaimed.

Unclaimed Dividend

In terms of Section 205C of Companies Act, 1956, during the financial year, your Company has transferred unclaimed dividend of Rs. 7.70 lakh for the financial year 2005-06 and Rs. 8.08 lakh unclaimed Interim Dividend for the financial year 2006-07 to Investor Education and Protection Fund (IEPF) established by the Central Government. As per the provisions of Companies Act, no claim would lie against the Company and that any person claiming to be entitled to any amount / shares as transferred to the said fund may apply to the authority for administration of the fund in accordance with the provisions as laid down by the Central Government.

Unclaimed Deposits

During the year 2013-14, in terms of Section 205C of the Companies Act, 1956, an amount of Rs. 18.87 lakh was transferred to Investor Education and Protection Fund (IEPF) being the amount of deposits along with interest thereon, that remained unclaimed and unpaid for a period of 7 years from the date it became first due for payment.

Pursuant to the provisions of Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012, your Company has uploaded the details of unpaid and unclaimed dividend / fixed deposit amounts lying with the Company as at July 23, 2013 (i.e. the date of 29th Annual General Meeting) on the Company''s website and has also filed the same with the Ministry of Corporate Affairs. Members / Depositors who have not yet claimed the previous year(s) dividend / fixed deposit amount may write to the Company or to the Registrar and Share Transfer Agent.

Authorised Share Capital

The Authorised Share Capital of the Company stands at Rs. 828,00,00,000 (divided into 74,80,00,000 Equity shares of Rs. 10/- each, 75,000,000 Redeemable Non Convertible Preference Shares of Rs. 10/- each and 500,000 Redeemable Non Convertible Preference Shares of Rs. 100/- each). During the year, there has been no change in the Authorised Share Capital of the Company.

Paid-up Share Capital

During the year, your Company allotted in tranches 2,01,531 equity shares of Rs. 10/- each, upon exercise of stock options to eligible employees of the Company under the Employee Stock Option Schemes - 2008 and 2009.

In view of the above, the issued, subscribed and paid-up equity share capital of the Company stands increased to Rs. 128,42,02,400 divided into 12,84,20,240 equity shares of face value of Rs. 10/- each.

Resource Mobilisation

Despite tight liquidity conditions and subdued sentiments in the stock market, the Company''s fund mobilisation from banks, institutions, issue of non-convertible debentures and securitisation of receivables continued to be smooth on account of its innovative resource mobilisation techniques, good track record of debt servicing, investors'' confidence etc.

Your Company has been able to maintain the cost of borrowings, keeping abreast with the market scenario to pre-empt any adverse liquidity and interest rate movements. Your Company continued to keep tight control over the cost of borrowings through negotiations with lenders, thus raising resources at competitive rates from its lenders, ensuring proper asset-liability match. The borrowings through the issue of Commercial Papers and Short Term Loans from banks helped your Company to reduce the exposure to high cost working capital and corresponding interest cost.

Total debt funds as at March 31, 2014 amounted to Rs. 39,486.89 crore, as against Rs. 32,058.19 crore in the previous year, National Housing Bank (NHB) refinance constituted 5%, term loans from banks and financial institutions 69%, public deposits 7%, non-convertible debenture and other innovative debts instruments 12%, commercial paper 4% and short-term funds from banks and others 3%. The Company''s average cost of borrowings as at March 31, 2014 was 10.59% as against 10.63% in the previous year.

Loans from Banks

As a part of its liability management, your Company endeavours to diversify its resource base in order to achieve an appropriate maturity structure and minimise the weighted average cost of borrowed funds.

Your Company continued to leverage on its long term relationship with banks and thus tied up fund based working capital limit to Rs. 500.00 crore as at the end of the financial year. Your Company also raised term loans to the extent of Rs. 7,695.00 crore during the year at the competitive rates available in the market and continued its focus on domestic sources.

Refinance from National Housing Bank (NHB)

During the year, your Company has drawn refinance amounting to Rs. 350.00 crore under National Housing Bank''s Refinance Scheme to Housing Finance Companies.

Subordinated Debts

Subordinated Debts continue to be another source for funding the operations of the Company. Subordinated Debts represent long term source of funds for the Company and the Company raised Rs. 85.00 crore through the issue of long-term Unsecured Redeemable Non-Convertible Subordinated Debentures. The subordinated debt was assigned ''BWR AAA'' rating by Brickworks and ''CARE AA'' rating by CARE.

As at March 31, 2014, your Company''s outstanding subordinated debt were Rs. 1191.50 crore. The debt is subordinated to present and future senior indebtedness of your Company. Based on the balance term to maturity, as at March 31, 2014, Rs. 1048.12 crore of the book value (discounted) of subordinated debt is considered as Tier II under the guidelines issued by the National Housing Bank (NHB) for the purpose of capital adequacy computation.

Non-Convertible Debentures (NCDs)

Your Company continues to issue fully secured redeemable convertible debentures on private placement basis. During the year under review, your Company has issued Secured Redeemable Non-Convertible Debentures (the "Debentures") amounting to Rs. 2,057.90 crore from banks and financial institutions by way of issue of NCDs and Zero Coupon NCDs. The outstanding balance of Debentures including interest accrued and due as at March 31, 2014 amounts to Rs. 4,908.89 crore.

Debenture Trust Agreement(s) in favour of GDA Trusteeship Services Limited and IDBI Trusteeship Services Limited for the aforesaid issues were executed. The proceeds of the aforesaid issue were utilised for making disbursements to meet the housing finance requirements of the borrowers of the Company, as well as for general corporate purposes.

Your Company has duly paid the interest due on the aforesaid Debentures on time. The Company''s NCDs have been assigned the rating of CARE "AA " by CARE and "BWR AAA" by Brickworks.

Perpetual Debt Instrument

During the year under review, your Company issued Innovative Perpetual Debt Instruments ("IPDI") qualifying for Tier II capital to increase its Capital Adequacy Ratio and fund its growing business operations. Your Company has raised the IPDI of principal amount of Rs. 35.50 crore, which qualifies as Tier II capital of the Company. The outstanding as at March 31, 2014, amounts to Rs. 185.70 crore.

Commercial Paper

The Commercial Paper (CP) program of your Company has been rated by Credit Rating and Information Services of India Limited (CRISIL) and is assigned the rating of CRISIL A1 (A One Plus). During the year, your Company issued CPs to the extent of Rs. 5,320.00 crore in tranches and placed them with investors at competitive rates of interest. As at March 31, 2014, Commercial Papers outstanding amount stood at Rs. 1,470.00 crore.

External Commercial Borrowings (ECB)

Your Company has drawn ECB of USD 70 million during the FY 2013 -14. As liquidity in the international market improves, your Company will endeavour to mobilise much more long term funds under the ECB window for on-lending to borrowers in the housing sector. This will equip your Company with long term funds and enable to maintain a healthy asset-liability profile.

The security details of the secured borrowings made by the Company are mentioned at Note No. 5 in the Notes to accounts forming part of the financial statement for the year ended March 31, 2014.

Deposits

The financial year 2013-14 started off on a positive note with a Retail Liability portfolio base of Rs. 1,923.72 crore on March 31, 2013. In the year 2013-14, the Retail Liability portfolio scripted a year-on-year growth of 35% and has risen to the level of Rs. 2,595.45 crore as at March 31, 2014. Increase in depositors'' accounts to 1,65,055 numbers is significant testimony of increasing customer confidence in the Company. This reflects a year-on-year growth of 37%. Your Company sees retail liability as a major source for funding and plans to have a significant proportion of it in its diversified liability portfolio. To create further impetus on this front, the Company took several initiatives during the year to extend its reach by expanding network and connecting with the customers. Several focused projects were undertaken during the year towards enhancing the productivity of the branches and upgrading customer service levels including automation of few processes, thus helping in reducing turnaround time etc.

As of March 31, 2014, 13,481 depositors who did not claim the deposits (along with interest due thereon) were aggregating to Rs. 29.42 crore. Depositors have been intimated regarding the maturity of their deposits, with a request to either renew or claim their matured deposits. Additionally, a process has been initiated whereby from the Centralised Call Centre, courtesy calls are made informing depositors of their matured deposits. Fixed Deposits accepted by the Company are secured appropriately to the extent of floating charge on approved securities and bank deposits created by way of Deed of Trust, as per the guidelines issued by the National Housing Bank. The security details of the aforesaid secured borrowings made by the Company are mentioned at Note No. 5.4 in the Notes to accounts forming part of the financial statement for the year ended March 31, 2014.

Credit Rating

The Company''s borrowings enjoy the following credit ratings:

Nature of Borrowing Rating / Outlook

CARE Brickworks ICRA CRISIL

Short-Term Debt / Commercial Paper CRISILA1

Fixed Deposits CARE AA (FD) BWR FAAA - -

Subordinated Debt CARE AA BWR AAA - -

Non-Convertible Debentures CARE AA BWR AAA - -

Perpetual Debenture CARE AA- BWR AAA - -

Long-term Bank Loans CARE AA - - -

Structured Obligations CARE AAA(SO) ICRA AAA(SO) CRISIL AAA(SO)

Capital Adequacy

As required under National Housing Bank Directions, your Company is presently required to maintain a minimum capital adequacy of 12% on a stand-alone basis. In addition, the National Housing Bank Directions also require that your Company transfers minimum 20% of its annual profits to a reserve fund. The following table sets out our capital adequacy ratios as at March 31, 2012, 2013 and 2014.

Particulars As at March 31

2014 2013 2012

Capital Adequacy 17.16% 16.52% 17.42% Ratio

Your Company''s Capital Adequacy Ratio is at 17.16% as at March 31, 2014, which provides an adequate cushion to withstand business risks and is above the minimum requirement of 12% stipulated by the National Housing Bank.

Non-Performing Assets and Provisions for Contingency

Your Company adhered to the prudential guidelines for Non- Performing Assets (NPAs), issued by the National Housing Bank (NHB) under its Directions of 2010, as amended from time to time. The Company did not recognise income on such NPAs and further created provisions for contingencies on standard as well as non-performing housing loans and property loans, in accordance with the National Housing Bank Directions. The Company has also made additional provision to meet unforeseen contingencies.

The amount of Gross Non-Performing Assets (NPA) as at March 31, 2014 was Rs. 317.52 crore, which is equivalent to 0.78% of the loan portfolio of the Company, as against Rs. 239.32 crore i.e. 0.71% of the loan portfolio as at March 31, 2013. The net NPA as at March 31, 2014 has increased to Rs. 209.87 crore i.e. 0.52% of the loan portfolio vis-a-vis Rs. 155.96 crore i.e. 0.46% of the loan portfolio as at March 31, 2013. The total cumulative provision towards loan and other assets as at March 31, 2014 is Rs. 331.35 crore as against Rs. 262.67 crore in the previous year. During the year, the Company has written off Rs. 3.55 crore of loans / receivables as against Rs. 4.94 crore during the previous year.

In order to prevent frauds in loan cases involving multiple lending from different banks / housing finance companies, the Government of India has set up the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) under Section 20 of the SARFAESI Act 2002 to have a central database of all mortgages created by lending institutions. The object of this registry is to compile and maintain data relating to all transactions secured by mortgages. Accordingly, your Company is registered with CERSAI and the data in respect thereto is being submitted, from time to time.

The Securitisations and Reconstructions of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI) has proved to be a useful recovery tool and the Company has been able to successfully initiate recovery action under this Act in the case of willful defaulters. The Company has acquired certain assets under SARFAESI which are retained for the purpose of sale under the rules and regulations of SARFAESI involving Rs. 44.19 crore.

Investments

The Investment Committee constituted by the Board of Directors is responsible for approving investments in line with the policy and limits as set out by the Board. The investment policy is reviewed and revised in line with the market conditions and business requirements from time to time. During the year, the Investment policy was reviewed and revised by the Board of Directors. The decisions to buy and sell upto the approved limit delegated by the Board are taken by the Chairman & Managing Director, who is assisted by Senior Executives of the Company. The investment function is carried out primarily to support the core business of housing finance to ensure adequate levels of liquidity and to maintain investment in approved securities in respect of public deposits raised as per the norms of National Housing Bank.

Considering the time lag between raising of resources and its deployment, surplus funds are generally being parked with liquid fund schemes of mutual funds and short term deposits with banks. During the year, your Company earned Rs. 63.52 crore by way of Income from Mutual Funds & financial / commodity derivatives and Rs.38.26 crore by way of interest on deposits placed with banks. At the end of the year, your Company maintained Rs. 531.56 crore by way of deposits with banks.

As per National Housing Bank guidelines, Housing Finance Companies are required to maintain Statutory Liquid Ratio (SLR) in respect of public deposits raised. Currently, the SLR requirement is 12.50% of the public deposits. As at March 31, 2014, your Company has invested Rs. 150.87 crore (book value - gross) in approved securities comprising of government securities, government guaranteed bonds and by way of Bank Deposits for Rs. 158.83 crore. It is being maintained within the limits prescribed by the National Housing Bank.

Insurance Joint Venture

During the year under review, your Company and Prudential Financial, Inc. (PFI) entered into Joint Venture (JV), whereby your Company acquired 16,29,01,250 equity shares being 50% of equity stake in DLF Pramerica Life Insurance Company Ltd., a registered life insurance Company in India regulated by Insurance Regulatory Development Authority (IRDA) from DLF Ltd at deminimus value of Rs. 1. The Company however, has capitalised the expenses incurred in relation to the above acquisition, as cost of investment. Subsequently, the Company subscribed to 72,86,589 number of equity shares of Rs. 10/- each for Rs. 729 lakh, however, maintained its holding at 50%.

Consequently, the name of the life insurance company was changed to DHFL Pramerica Life Insurance Company Ltd. (DHFL Pramerica).

Your Directors are pleased to inform you that the operations of DHFL Pramerica has recorded a turnaround since your Company entered into the said venture and is expected to start generating returns from the next financial year. This has been possible due to the strong distribution network created by your Company.

Associate Company

During the year under review, your Company made further investment in Avanse Financial Services Ltd., a Non Banking Finance Company registered with Reserve Bank of India, to the tune of Rs. 24.39 crore. However, the percentage of shareholding in the said Company remained same at 48.50% of the total paid-up share capital of Avanse Financial Services Ltd.

As on date of this report, your Company does not have any subsidiary Company and hence no disclosure is required to be made, pursuant to Section 212 of the Companies Act, 1956.

Information Technology and Communications

During the financial year 2013-14, your Company took various steps to strengthen its IT platform, few of which are as under:

In line with the growing business, the data centre was outsourced to IBM, making the vendor responsible for 24 x 7 hosting, management and upgradation leaving the Company to focus on its core competencies.

The Company implanted a disaster recovery site at a seismically less active zone to avoid data loss and termination of business operations in case of a national disaster.

The Company has set up portals for the benefits of its fixed deposit brokers, helping them access information about their customers, saving crucial time and manpower allocation spends.

The Company strengthened its Regional Processing Unit with adequate back-up facilities; it further strengthened connectivity with a primary fast speed network with secondary back-up network connectivity.

Your Company is working with Tata Consultancy Services to create a 5 year IT roadmap that is expected to help in terms of capacity, flexibility, accessibility and stability. Your Company further expects to implement a rule-based business management solution along with an efficient management system.

Human Resources

Your Company''s vision is to become an employer of choice by providing a compelling employee value proposition which attracts the best talent in the industry and ensures their development, retention and contribution to the Company''s success. Your Company''s strategy from the people perspective can be defined at three levels:

Human Resources: Align competencies with business strategy. Increase focus on "how we achieve than what we achieve."

Knowledge Management: Build and align information systems with business strategy. Build and share intellectual capital. Create effective management processes, programs and reporting.

Organisation / Culture: Align culture with business strategy. Transform culture to align employee action with business objectives. Use culture to gain competitive advantage.

Thus, the key focus of your Company has always been towards development of the required skills of the employees, retention of talent, appropriate rewards and recognition policies, to organise employee engagement activities and to provide a fair performance management mechanism.

The commitment, competence and dedication of the employees of your Company have contributed to the business growth of the Company.

During the year, your Company focused on the cultural integration of erstwhile First Blue Home Finance Limited into the Company and the said integration process was completed successfully.

The workforce strength of your Company as at March 31, 2014 was 1,891. The total workforce cost during the year was Rs. 176.10 crore as compared to Rs. 140.69 crore in the previous year. The increase in cost is mainly due to the increase in workforce to meet the requirements on account of significant expansion in terms of geography as well as business volumes, and the salary revisions effected during the year.

Learning & Development

Your Company believes in investing in people to develop and expand their capability to maximise their potential. Learning & Development is thus a part of the Corporate HR function.

During the year 2013-14, your Company created stronger depth and focus in its skill-building efforts. Your Company has been able to support professional development and empower employees to deliver improved quality of service through its training intervention, and motivating them to perform with renewed vigor and enthusiasm. Teaching expertise has been nurtured in-house, in the form of dedicated Trainers, Facilitators, Content developers and subject matter experts from business teams.

Training imparted to employees during the year covered a wide range of functional areas including sales skill development programs, Credit analytical skills and appraisal techniques, Programs for operational excellence, Risk and fraud management and Induction program for new joinees i.e Aagman and other programmes based on business grooming and etiquettes and monitoring techniques. Training on KYC & AML Policies were also imparted at all levels.

Your Company has partnered with the best-in-class leadership trainers of the country for a corporate breakthrough workshop for key position holders and business managers. External training programs and cross-functional exposure provided to the employee throughout the year was an extra edge. Your Company has also initiated to build a learning infrastructure to ensure availability of skilled and empowered workforce.

A third-party framework, benchmarked as one of the best, has been hired for administering study and analysing it, with focus on measuring and improving employee engagement and learning quotient. Taking concrete steps based on the study findings will help the organisation in building a stronger and more engaged workforce.

Thus, the Human Resources initiatives and Learning & Development systems and processes are designed to enhance employee engagement, organisational capability and vitality so as to ensure that your Company is positioned for competitive superiority and is capable of achieving ambitious plans for growth.

Particulars of Employees

In accordance with the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are set out in the annexure to the Directors'' Report. In terms of the provisions of section 219(1)(b) (iv) of the Companies Act, 1956 the Directors'' Report is being sent to all the Members of the Company excluding the aforesaid information. Any Member interested in obtaining such particulars may write to the Company Secretary of the Company.

Employees Stock Option Scheme (ESOS)

Pursuant to the resolution passed by the Members at the Annual General Meeting held on July 27, 2007, your Company had introduced the Employee Stock Option Scheme 2008 and 2009 (referred to as "the Scheme") to enable the employees of your Company to participate in the future growth and financial success of the Company.

The Nomination & Remuneration Committee of the Board of Directors of the Company, inter-alia, administers and monitors the Employee Stock Option Schemes of the Company, in accordance with Securities & Exchange Board of India (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guideline 1999 (SEBI Guidelines).

The Company has received a certificate from the Auditors of the Company that the Scheme has been implemented in accordance with the SEBI Guidelines and the resolution passed by the Members. The said Certificate would be placed at the ensuing Annual General Meeting for inspection by members.

The particulars of options granted under the said Schemes are

Particulars ESOS-2008 ESOS 2009 ESOS 2009 Plan I Plan II

Options Granted 1422590 1275000 1234670 under the schemes

Options Exercised 1072084 797607 Nil up to 31.03.2014

Options Lapsed 251130 237723 277520 upto 31.03.2014

Options 99376 239670 957150 Outstanding at the end of the year

Options unvested at Nil Nil 493868 the end of the year

Options Exercisable 99376 239670 463282 at the end of the year

Conservation of Energy, Technology Absorption and Foreign Exchange Earning and Outgo

The particulars regarding foreign exchange earnings and expenditure appear at Note No. 40 in the Notes forming part of the financial statement for the year ended March 31, 2014.

Since the Company is not engaged in any manufacturing activity, the other particulars relating to conservation of energy and technology absorption as stipulated in the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are not applicable.

Insurance Coverage to Borrowers

Your Company is a Group Administrator / Master Policy Holder of Mortgage Reducing Term Assurance Products (MRTA) of leading insurers like ICICI Prudential LIC for ''Home Assure'' product, Bajaj Allianz LIC for ''DHFL Home Shield'' product, Kotak LIC for ''Group Assure'' product and DHFL Pramerica LIC for ''DHFL Home Shield'' product. All the above are single premium MRTA products. These products cover life risk of the borrowers to the extent of loan availed. In the event of the unfortunate demise of any borrower, the insurance Company settles the claim to the Group Administrator by paying an amount equivalent to the outstanding loan balance and remaining balance (if any) is paid to the nominee of the borrower.

In addition, your Company also offered ''Home Safe Plus'' a general insurance product from ICICI Lombard General Insurance Co. Ltd. to borrowers who have availed loan against property (LAP) to cover risk pertaining to accidental death of borrowers, damage to property, critical illness and loss of employment (upto 3 EMIs). The primary objective is to insure the loan portfolio against default due to unforeseen events with the borrowers.

Your Company has insured 94% of new customers acquired and insured 68% of total loan portfolio acquired in financial year 2013-14. The overall premium growth in financial year 2013-14 was 11% over financial year 2012-13.

Insurance of Company''s Property

Your Company has insured its various properties and facilities against the risk of fire, theft, etc., so that financials are not impacted in the unfortunate event of such incidents.

Directors'' and Officers'' Liability Insurance Policy

Your Company has taken Directors'' and Officers'' Liability Insurance Policy which covers the Board of Directors and Officers of the Company (employees in managerial supervisory position) against the risk of financial loss including the expenses pertaining to defense cost, legal representation expenses arising in the normal course of business.

Insurance Coverage to Employees

Your Company has in place a Mediclaim policy for its employees and their dependant family members and also has Group Personal Accident Policy, which provides uniform benefits to all the employees.

National Housing Bank (NHB) Guidelines

The Company has complied with the provisions of the Housing Finance Companies (NHB) Directions, 2010 as prescribed by NHB and has been in compliance with the various Circulars, Notifications and Guidelines issued by National Housing Bank (NHB) from time to time. The Circulars and the Notifications issued by NHB are also placed before the Audit Committee / Board at regular intervals to update Committee / Board members on the same.

Risk Management

Risk Management is an integral part of your Company''s business. With over three decades of experience in the lending business, your Company is successfully achieving growth while maintaining high standards of asset quality through risk management and mitigation practices that are actively focused on evaluation of credit, market and operational risk.

The risk strategy laid down by your Company helps foster a disciplined culture of risk management and control. In conjunction with these practices, your Company intends to optimise its capital needs through growth, by achieving highest returns on capital employed while managing risks appropriately.

Your Company has focused on promoting an independent Risk Management function handled by a Risk Management expert. The team is involved at all stages of the value chain - sourcing of transaction, analysing the proposals, suggesting suitable risk mitigates and risk mapping on portfolio and product levels from a risk-reward perspective. The risk management team works closely with the business team to develop a deep understanding of a rapidly evolving market environment, which helps the risk management function in optimising risk-adjusted return on capital.

Your Company continuously monitors portfolio concentration based on industry, borrower group, etc. and defines limits for the above. Portfolio level delinquency matrices are tracked at regular intervals with focus on detection of early warning signals of stress. These limits are periodically reviewed based on changes in the macro-economic environment, regulatory environment and industry dynamics. Existing credit exposure in the portfolio is continuously monitored and reviewed. Key sectors are analysed in detail to suggest strategies, considering both risks and opportunities. Corrective action, if required, is taken well in advance based on early warning signals.

Your Company follows the best industry standards for management of credit risk, market risk (comprising of liquidity risk, interest rate risk and exchange rate risk) and operational risk and has put in place a comprehensive Risk Management Policy envisaging a robust risk management programme.

Asset Liability Management Committee (ALCO)

The Asset Liability Management Committee (ALCO) lays down policies and quantitative limits that involve assessment of various types of risks and shifts in assets and liabilities to manage such risks. ALCO ensures that the liquidity and interest-rate risks are contained within the limits laid down by the Board. The Company has also implemented NHB''s Asset Liability Management Guidelines.

Codes, Standards & Policies

Know Your Customer & Anti Money Laundering Measure Policy

Your Company has a Board approved Know Your Customer & Anti Money Laundering Measure Policy (KYC & AML Policy) in place and adheres to the said Policy. The said Policy is in line with the National Housing Bank guidelines.

The Company has also adhered to the compliance requirement in terms of the said policy relating to the monitoring and reporting of cash / suspicious transactions. The Company furnishes to Financial Intelligence Unit (FIU), India, in the electronic medium, information of all cash transactions of the value of more than Rupees ten lakh or its equivalent in foreign currency and suspicious transactions whether or not made in cash, in terms of the said Policy.

Fair Practice Code

Your Company has in place a Fair Practice Code (FPC), which includes guidelines on appropriate staff conduct when dealing with the customers and on the organisation''s policies vis-a-vis client protection. The FPC captures the spirit of the National Housing Bank guidelines on fair practices for Housing Finance Companies.

During the year under review, FPC was modified by the Board and the grievance redressal mechanism within the Company was further strengthened.

Code of Conduct for Board Members and the Senior Management

Your Company has adopted a Code of Conduct for its Board Members and Senior Management personnel. The code requires the directors and employees of the Company to act honestly, ethically and with integrity and in a professional and respectful manner.

The declaration by the Chairman & Managing Director of the Company regarding compliance with the Code of Conduct for Board Members and Senior Management is annexed with the Corporate Governance report.

Code for Prevention of Insider Trading Practices

Your Company has formulated and adopted a Code for Prevention of Insider Trading Practices in accordance with the model code of conduct as prescribed under the SEBI (Prohibition of Insider Trading) Regulations, 1992, as amended. The code lays down guidelines, which includes procedures to be followed and disclosures to be made while dealing in the shares of the Company. The code is applicable to the promoters, directors, senior designated employees and their dependents and the said persons are restricted from dealing in the securities of the Company during the ''restricted trading periods'' notified by the Company, from time to time.

Code of Business Ethics (COBE)

During the year, your Company adopted a Code of Business Ethics [COBE] which lays down principles and standards that govern the activities of the Company and its employees to ensure and promote ethical and legal behaviour within the organisation.

Whistle Blower Policy

Your Company believes and is committed to adhere to high ethical standards and compliance with laws and regulations applicable to its business.

During the year, your Company adopted a Whistle Blower Policy which provides for a vigil mechanism that encourages and supports its Directors and employees to report to the management / Chairperson of the Audit Committee instances of unethical behaviour, actual or suspected, fraud or violation of the Company''s Code of Conduct or Ethics Policy.

The said policy, however, provides for adequate safeguards against the victimisation of the Whistle Blower who avail this mechanism. The policy also provides for direct access to the Chairperson of the Audit Committee in exceptional cases.

Sexual Harassment Policy

During the year under review, the policy on "Workplace Sexual Harassment" was formulated and an Internal Complaints Committee (ICC) was also constituted as per the provisions of "Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The said policy seeks to protect women employees from sexual harassment at the place of work. The primary objective of the same is to safeguard the interest of female employees in the Company and also provides for punishment in case of false and malicious representations.

The policy has been communicated to the employees and is also posted on the Company''s intranet. Few training sessions were also conducted during the year to create awareness amongst the employees on the same.

During the year, one complaint was reported to the ICC but post investigation of the matter the allegations could not be proved and thus no action was taken in the matter.

Listing of Shares of the Company

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

The Company has paid the listing fees as payable to the BSE Ltd. and the National Stock Exchange Limited for the financial year 2013-14.

Marketing

Your Company''s purpose as articulated by its Founder Chairman, Late Shri Rajesh Kumar Wadhawan is that, "every Indian should have a home of his own". During the year, your Company continued to reinforce this purpose through its various communication and engagement activities.

The highlights of the year included:

Touching tens of million of lives with our brand message via traditional advertising.

Engaging 1.2 million unique lives digitally; not only in India but also Non-Resident Indians (NRIs) residing across the globe.

Continuous media engagement efforts resulted in DHFL maintaining the highest visibility (single brand Share of Voice) through Public Relations (PR) across television and print.

Your Company leveraged the ''Mumbai Indians'' IPL association by adopting a mix of traditional and digital media, while innovating for newer engagement solutions.

- Your Company''s innovative brand engagement ideas continued throughout the year; like online chats with experts, direct-to- consumer FD communication etc.

- As a result of the integrated marketing efforts, direct impact was seen in the business generated via DHFL Call Centre and a 38 % increase was observed in the business generated as against the corresponding previous year.

- Your Company''s Chairman & Managing Director, Mr. Kapil Wadhawan, was recognised amongst the Top 100 CEOs in the Business Today listing.

- Mr. Kapil Wadhawan ranked 13th in the Business World Listing of India''s Most Valuable CEOs in FY 2014.

During the year, your Company''s business excellence was also recognised at various award forums, including:

- Best Employer Award at IPE BFSI Awards 2013-14.

- Excellence in Innovative Marketing Award at MCHI - MMR & BKC Expo 2013-14.

- Udyog Rattan Award 2013-14.

Your Company launched a festive campaign to promote home buying during the auspicious season. Launched as ''DHFL Express Loans'', this campaign highlighted your Company''s customer-centric approach and realtime home loan processing. This was further accentuated by a campaign that propagated the 30-year variant of the DHFL Express Loans.

Your Company also launched a Fixed Deposit campaign to promote deposit-taking during the festive season. This campaign reached out to small investors across the length and breadth of the country.

Your Company effectively used various mediums including print, radio and outdoors to communicate these value-driven messages across multiple locations. To propel existing demand, your Company organised various ground-level activities including ''Home Loan Melas'' and ''Spot Sanction Activities'' in the interiors of the country.

To render a thought-provoking message to consumers who were contemplating their home buying decision whilst living in rental accommodation, your Company launched ''Rent Banao EMI'' campaign in February 2014. Your Company, in its 30th year of operations has communicated and re-instilled the aspiration of owning a home as a critical element of one''s identity, safety and security - this campaign was a demonstration of this mission.

With India being a cricket-frenzy nation, association with Mumbai Indians in the IPL brought about higher brand recall for your Company. Your Company planned activations and engaged with the large Mumbai Indian fan-following through both traditional and digital channels. With ardent fans of Mumbai Indians and its customers getting the opportunity to meet their favourite squad, the association enhanced the Company''s brand connect.

To leverage customers in the digital space, your Company started specific activities in the World Wide Web to generate interest in sales. Campaigns like Express Home Loan, Rent Banao EMI and NRI Service Assurance were extended to the digital space making them 360° brand campaigns. Your Company has built a huge fan-following on various social platforms including Facebook, Twitter, LinkedIn and YouTube.

Your Company has received editorial interest from various leading national and regional newspapers, magazines and TV channels during the financial year 2013-14. It has garnered over 50% share of voice with respect to the total news on housing finance and your Company has been recognised as a leading player in the financial services sector in India.

Branch Network

Your Company has a strong distribution network of 162 Branches, 92 Service Centers, 19 Camp Locations, 20 Zonal / Regional Offices, 2 Disbursement Hubs and 2 Collection Centers in India. Additionally, your Company has international representative offices located at London and Dubai.

During the year, your Company shifted its Corporate Office to a new premise at TCG Financial Center, 10th Floor, BKC Road, Bandra-Kurla Complex, Bandra (E), Mumbai 400051.

The Company''s strong network coverage is designed to provide increased penetration to cater to the evolving needs of the existing customer base and tapping the growing potential customer base throughout India.

Alliances & Business tie-up

Your Company has entered into strategic housing loan distribution and syndication arrangements with public and private sector banks. The present allies are Punjab & Sind Bank for Northern India, United Bank of India for Eastern India, Central Bank of India for Central India and Yes Bank Limited for Pan India. This unique arrangement provides your Company a wider reach and access to the Banks'' network, where both partners are set to gain. The additional points of sales through ally banks'' strong network coverage are aimed at providing increased footprint to your Company for catering to the evolving needs of our existing customer base and tapping a growing potential customer base across India. The success of one alliance led to another and today your Company has emerged as a major player in all the locations of alliance and has more than Rs. 1,650 crore of assets generated through these alliances.

Your Company has taken pioneering steps during the year towards expansion of an existing alliance at Delhi NCR bringing with it large network of branches of the ally Bank, to source business. This expansion presently under operationalisation brings good potential for business. Further, improving upon its innovative business models under syndication route, implemented with Yes Bank Ltd. resulted in business benefits including fee income to your Company. Your Company also benefitted from a business generation arrangement with FedBank Financial Services Ltd.

The alliance arrangements not only reflect acknowledgement of your Company''s business models and standing in the financial circles, but also add significantly to the financials of the organisation. The initiatives are being lauded in the Banking and Finance industry and your Company expects to expand the existing alliances geographically and also enter into some new alliances.

Corporate Social Responsibility (CSR)

Your Company''s Business Model is based on financial inclusion and social betterment for the common man and thus it always endeavours to associate with programs having a larger social agenda. During the year, your Company participated in Mumbai Marathon in association with Mumbai Mobile Creches. Mumbai Mobile Creches, an NGO is in existence since 1972 and has been providing education, healthcare, nutrition and shelter for children living on construction sites, while their parents are at work.

During the year, your Company supported primary and secondary education of over 100 students from economically weaker sections of the society by contributing towards their education fees. This initiative was undertaken through Shri Rajesh Kumar Wadhawan Education Trust.

Your Company also organised Blood Donation Camps during the year, which saw tremendous participation from your Company''s employees.

During the year, your Directors approved a Corporate Social Responsibility Policy basis the recommendations received from the Corporate Social Responsibility Committee of the Board. The Corporate Social Responsibility Committee has been entrusted with the responsibility of recommending to the Board the activities / projects / programs to be undertaken by the Company as per its Corporate Social Responsibility Policy.

Directors

During the period under review, on account of the retirement of Mr. Anthony Hambro from M/s. Caledonia Investments Plc, (Caledonia) his nomination was withdrawn from the closing hours of July 23, 2013 and Mr. James Michael Beale Cayzercolvin was nominated by Caledonia as their Nominee Director with effect from July 24, 2013 in place of Mr. Anthony Hambro. However, due to the pre occupation of Mr. James Michael Beale Cayzercolvin, Caledonia withdrew his nomination and in his place Mr. Kaikhushru Vicaji Taraporevala was nominated as the Nominee Director of Caledonia effective October 21, 2013 and was appointed as an additional director on the Board of the Company. The Board places on record its appreciation for the valuable contribution made by Mr. Anthony Hambro and Mr. James Michael Beale Cayzcrcolvin during their tenure as Directors of the Company.

As per the provisions of Section 161 of the Companies Act, 2013, Mr. Kaikhushru Vicaji Taraporevala holds office only up to the date of the forthcoming Annual General Meeting (AGM) of the Company. The Company has received a notice in writing from a member proposing his appointment as a Director of the Company. The approval of members is being sought for appointment of Mr. Kaikhushru Vicaji Taraporevala as a Director of the Company.

In accordance with the provisions of Section 149 of the Companies Act, 2013, Members'' approval is being sought for the appointment of Mr. R. P. Khosla, Mr. G. P. Kohli, Mr. Ajay Vazirani, Mr. V. K. Chopra and Mr. Mannil Venugopalan as Independent Directors for a term of 5 consecutive years, upto March 31, 2019. The Company has received requisite notices in writing from the members proposing the names of Mr. R. P. Khosla, Mr. G. P. Kohli, Mr. Ajay Vazirani, Mr. V. K. Chopra and Mr. Mannil Venugopalan for appointment as Independent Directors. The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under section 149(6) of Companies Act, 2013 and Clause 49 of the Listing Agreement with the Stock Exchanges.

In accordance with the provisions of Section 152 of the Companies Act 2013 and Article of Association, Mr. Dheeraj Wadhawan, Director of your Company retires by rotation and being eligible; offers himself for re-appointment at the ensuing Annual General Meeting.

Necessary resolutions for the appointment / re-appointment of the aforesaid directors have been included in the notice of the ensuing Annual General Meeting.

Brief resume of the Directors proposed to be appointed / re- appointed, nature of their expertise in specific functional areas and names of companies in which they hold directorship and membership / chairmanship of Board committees, as stipulated under Clause 49 of Listing Agreement with the Stock Exchanges in India, are provided in the annexure to the Notice of the Thirtieth Annual General Meeting being sent to the members along with the Annual Report. All the directors of the Company have confirmed that they are not disqualified for being appointed / re-appointed as directors in term of sub section 2 of Section 164 the Companies Act, 2013.

Internal Audit

Your Company has a well-equipped internal audit department carrying out a regular independent evaluation of various activities undertaken by the Company through its branches, Regional Offices, Zonal Offices and National / Corporate Office. The Internal Audit Department is being headed by senior management personnel with reporting lines to the Audit Committee of the Board and dotted line reporting to the Chairman and Managing Director. The audit function maintains its independence and objectivity while carrying out assignments. It evaluates on a continuous basis, the adequacy and effectiveness of the internal control mechanism, adherence to policies and procedures, as well as regulatory and legal requirements. The function also proactively recommends improvement in operational processes and suggests streamlining of controls against various risks. The Audit Committee of the Board reviews the performance of the internal audit function on a quarterly basis, gives direction to its functionaries and reviews effectiveness of internal control systems.

Additionally, practicing Chartered Accountant firms are engaged to conduct concurrent audit in branches covering more than 80% of the business during the financial year. Concurrently, the audit assesses and evaluates the operational effectiveness of checks and balances on a continuous basis with focus on regulatory guidelines and adherence to internal policies, procedures and guidelines issued by the management from time to time.

Secretarial Audit Report

As a measure of good corporate governance practice, the Board of Directors of the Company appointed Mrs. Jayshree Joshi of M/s Jayshree Dagli & Associates, Practicing Company Secretaries, Mumbai to conduct Secretarial Audit of the Company. The Secretarial Audit Report for the financial year ended March 31, 2014, forms part of the Annual Report.

The Secretarial Audit Report confirms that the Company has complied with all the applicable provisions of the Companies Act, 1956, the Rules made under that Act and applicable Provisions of the Companies Act, 2013, Depositories Act, 1996 and the Regulations and Bye-Laws framed under that Act, Equity and debt Listing Agreements with the Stock Exchanges, Securities & Exchange Board of India (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines 1999 and all the Regulations and Guidelines of SEBI as applicable to the Company, including the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 2011, The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, Foreign Exchange Management Act, 1999 and relevant Rules, Regulations and Guidelines issued by Reserve Bank of India, and the Memorandum & Articles of Association of the Company.

Auditors

M/s. T. R. Chadha & Co., [Firm Registration No. 06711N] Chartered Accountants together with M/s Rajendra Neeti & Associates, Chartered Accountants, (Firm Registration No. 06543C), the Joint Statutory Auditors of the Company, hold office till the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment.

Certificates have been received from them as per the provisions of Section 139 of the Companies Act, 2013 and to the effect that their re-appointment as Auditors of the Company, if made, would be within the limits prescribed under Section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified for reappointment as Joint Statutory Auditors of the Company.

Based on the recommendation of the Audit Committee, the Board of Directors in their meeting held on April 30, 2014 recommended the appointment of M/s. T. R. Chadha & Co., and M/s. Rajendra Neeti & Associates, Chartered Accountants, as the Joint Statutory Auditors of the Company to hold office from the conclusion of this Annual General Meeting until the conclusion of the 34th Annual General Meeting of the Company, and that, the necessary resolution for appointing them as Joint Statutory Auditors of the Company is being included in the notice of the 30th Annual General Meeting for the approval of the Members of the Company.

Notes to Accounts and Auditors Report

The notes to the accounts referred to in the Auditors Report are self-explanatory and do not call for any further comments.

Directors'' Responsibility Statement

Your Directors would like to inform that the audited accounts containing the Financial Statement for the year ended March 31, 2014 are in conformity with the requirements of the Companies Act, 1956 and they believe that the financial statements reflect fairly the form and substance of transactions carried out during the year and reasonably present the Company''s financial condition and results of operations. These Financial Statements are audited by M/s. T. R. Chadha & Co., Chartered Accountants together with M/s. Rajendra Neeti & Associates, Chartered Accountants, the Joint Statutory Auditors of the Company.

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956, your directors confirm that to the best of their knowledge and belief :

1. In the preparation of accounts, the applicable accounting standards and the requirements as set out under Schedule VI of the Companies Act, 1956 have been followed and there is no material departure from the same.

2. 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 as at March 31, 2014 and of the profit of the Company for year ended on date.

3. The Directors have taken proper and sufficient care 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.

4. The Directors have prepared the annual accounts on a going concern basis.

Corporate Governance

Your Company adheres to the Corporate Governance norms and disclosures as laid down under the Listing Agreements with the Stock Exchanges. Pursuant to Clause 49 of the Listing Agreements, the following forms part of this Annual Report:

(i) Chairman & Managing Director''s declaration regarding compliance of Code of Conduct by Board Members and Senior Management personnel;

(ii) Management Discussion & Analysis;

(iii) Report on the Corporate Governance;

(iv) Auditors'' Certificate confirming compliance with the conditions of Corporate Governance as stipulated under Clause 49.

Future Outlook

The key macro-economic indicators for the last quarter of the financial year 2013-14 showed encouraging results and indicate signs of further recovery in 2014-15. The economic growth during 2014-15 is likely to accelerate from current levels as the current logjam on the domestic policy front is expected to clear post formation of the new Government after the General Elections. The headline inflation measured by Wholesale Price Index (WPI) and Consumer Price Index (CPI) is expected to moderate further from the current levels thus providing space for liberalising the monetary policy. On the global front, signs of recovery are emerging and global growth is expected to improve to 3.6% in 2014 from 2.9% in 2013 as per IMF estimates. Your Company does not expect any pressure on the liquidity front.

Real estate experts are also optimistic about the revival of the housing market in 2014-15, which has been sluggish over the past few quarters. The real estate market in India is projected to post annual revenues of USD 180 billion by the year 2020. The demand for housing sector is anticipated to appreciate at a compound annual growth rate (CAGR) of 22% during 2013-18.

As all key business enablers are currently showing favourable signs, your Company is positive and expects another year of healthy growth in 2014-15.

Acknowledgements

Your Directors wish to place on record their gratitude to the National Housing Bank, the Company''s Customers, Bankers, Members, Debenture holders, Depositors and others for the continued support and faith reposed in the Company. The Board also places on record its deep appreciation for the dedication and commitment of the employees at all levels. The Directors also would like to thank The BSE Limited, the National Stock Exchange of India Limited, National Securities Depository Limited, Central Depository Services (India) Limited and the Credit Rating Agencies for their co-operation.

For and on behalf of the Board

Place : Mumbai Kapil Wadhawan

Dated : April 30, 2014 Chairman & Managing Director


Mar 31, 2013

The Directors have pleasure in presenting the 29th Annual Report of your Company and the Audited Financial Statements for the year ended 31st March, 2013.

Financial results

The Financial performance of the Company for the year ended 31st March, 2013 is summarized below : -

(Rs. in Crore)

2012-2013 2011-2012

Gross Income 4,140.36 2,469.68

Less : Interest 3,119.36 1,799.23

Overheads 401.86 267.37

Depreciation 8.46 4.72

Profit before Tax 610.68 398.36

Less : Provision for taxation 158.83 92.00

Profit after Tax 451.85 306.36

Add : Balance b/fd from the previous year 128.85 69.97

Addition on Amalgamation 153.60 -

Surplus available for appropriations 734.30 376.33

Appropriations

Transferred to Special Reserve under

Section 36(1)(viii) of the Income Tax Act, 1961 100.00 100.00

Transferred to General Reserve 200.00 100.00

Dividend for Earlier Year 0.08 0.08

Interim Dividend 23.42 -

Proposed Equity Dividend 38.47 40.89

Tax on Dividends 10.05 6.51

Balance carried over to Balance Sheet 362.28 128.85

Total 734.30 376.33

The figures of the financial year 2012-13 include the results of the two erstwhile subsidiaries of the Company namely First Blue Home Finance Limited (a Housing Finance Company) and DHFL Holdings Private Limited, consequent upon their amalgamation with the Company. Accordingly, the standalone figures of the previous year (2011-12) are not comparable with the figures of financial year 2012-13.

Amalgamation Of Subsidiaries

In terms of the Scheme of Amalgamation ("the Scheme") of First Blue Home Finance Limited (First Blue) and DHFL Holdings Private Limited (DHFL Holdings) with the Company, as sanctioned by the Hon''ble High Courts of Bombay and Delhi, which became effective from the closing hours of 31st January, 2013, with Appointed Date as 1st April, 2011.

- First Blue and DHFL Holdings, both subsidiaries of the Company were amalgamated with the Company and the entire business and whole of the undertaking of the said transferor companies stood transferred to and vested in the Company;

- The shareholders of erstwhile First Blue were issued and allotted in aggregate 1,08,86,375 Equity Shares of Rs. 10/- each fully paid-up in the Company, in the ratio of 10 equity shares of Rs. 10/- each fully paid-up in the Company for every 97 equity shares of Rs. 10/- each fully paid-up in First Blue, at a premium of Rs. 311.50 per equity share;

- 21,99,45,206 equity shares of Rs. 10/- each representing, 67.56% of the paid-up share capital of First Blue, held by DHFL Holdings stands cancelled upon the Scheme becoming effective;

- The Equity Shares held by the Company in DHFL Holdings were cancelled without any exchange of shares in the Company, as its entire paid-up share capital was held by the Company;

- Consequent to the Scheme becoming effective, First Blue and DHFL Holdings stood dissolved without winding up.

Performance

Your Company is engaged in the challenging exercise of strengthening its brand across locations, products and market cycles. Your Company showcased this capability in the challenging year 2012-13; even as prevailing realty price lines were either sluggish or declined, your Company continued to command realisations higher than the sectoral and retrospective averages.

The Indian real estate market size is expected to touch US$ 180 billion by year 2020. Recent growth in the Indian economy has stimulated demand for land and developed real estate across the country. Demand for residential, commercial and retail space is rising throughout India, accompanied by increased demand for hotel accommodation and improved infrastructure. Though a slackened trend is noticed at times, the overall picture seems to be robust.

Global economic uncertainties have affected India''s economy, including the real estate market. Macroeconomic indicators such as fiscal deficit and interest rates are high, while the rupee is depreciating. All this does not bode well for any industry, especially real estate. High prices and interest rates have acted as dampeners. Demand has been stagnating in a few cities, even as supply remains high. Investors as well as end-users have been showing signs of weariness. Repeated increases in interest rates have led to a decline in sale of residential properties.

Flow of funds is a concern for developers. Real estate developers are reeling under high debt and foreign direct investment inflows have slowed.

The growth of the Indian economy is one of the fastest all over the world. This factor directly influences the real-estate sector of India. Major cities like Delhi NCR, Mumbai, Hyderabad, Chennai, Bangalore, Pune and Kolkata are greatly affected by the growth of Indian economy.

Therefore despite a number of challenges, your Company has managed to rake in substantial amount of revenues. The operating profit before charging depreciation and tax stood at Rs. 619.14 crore and Profit after Tax at Rs. 451.85 crore. The EPS improved to Rs. 38.47 as against Rs. 28.97 of the previous year.

The Company''s core business is providing housing finance. It also has associate companies which are involved in business verticals such as insurance and property services which are intimately intertwined with the core services meted out by the Company, thereby providing a gamut of financial products and services to the customers approaching DHFL.

Lending Operations

The housing /other property loans sanctioned during the year ended 31st March, 2013 were to the extent of Rs. 17,336.85 crore and disbursements were Rs. 13,357.73 crore as against Rs. 15,997.40 crore and Rs. 11,306.57 crore (consolidated), respectively in the previous financial year.

The cumulative loan disbursements of the Company since inception were Rs. 42,162.73 crore.

Sale / assignment of Loans

During the year, your Company has sold/securitised a pool of housing loans aggregating to Rs. 322.42 crore. Your Company will, however, continue to collect the interest and EMI payments on these loans on behalf of the acquirer of the loans and remit the same after retaining its portion in terms of the individual agreements.

During the year, your Company has also securitised a pool of housing loans comprising of 2,536 numbers of individual residential housing loans amounting to Rs. 330.98 crore spread in several states and transferred to a SPV Trust Series A1 Pass Through Certificate (PTCs) rated as ICRA AAA (SO) [pronounced as ICRA Triple A] and subscribed by various investors.

Instruments through which loans have been sold / assigned have been rated by external credit rating agencies and carry a rating indicating the highest degree of safety regarding timely servicing of financial obligations.

Simultaneously, your Company subscribed an amount of Rs. 33.10 crore in Series A2 Pass Through Certificate (PTCs) rated as ICRA A-(SO) [pronounced as ICRA A minus]. The said PTCs are redeemable after the extinguishment of Series A1 PTCs with aggregate tenure of 282 months.

Loan book

As at 31st March, 2013, the loan book stood at Rs. 33,901.72 crore as against Rs. 25,468.22 crore (consolidated) in the previous year.

Dividend

Considering the excellent performance during the year under review, your Directors have recommended a final dividend for the year ended 31st March, 2013 of Rs. 3.00 per equity share i.e. 30 per cent on 12,82,18,709 equity shares, including 1,08,86,375 equity shares of Rs. 10/- each fully paid-up, allotted to the shareholders of erstwhile First Blue Home Finance Limited pursuant to the Scheme of Amalgamation. This is in addition to the interim dividend of Rs. 2.00 per equity share i.e. 20 per cent already paid on 3rd November, 2012. The total dividend for the financial year 2012-13 will be Rs. 5.00 per equity share i.e. 50 per cent as compared to Rs. 3.50 per equity share (35 per cent) for the previous year ended 31st March, 2012. The final dividend payable shall be subject to the approval of the shareholders at the ensuing Annual General Meeting. The total outgo on account of dividend (including dividend distribution tax) will be Rs. 72.02 crore as against Rs. 47.48 crore in previous financial year.

The dividend on Equity Shares, if declared at the Meeting, will be paid to those members, whose names shall appear on the Company''s Register of Members on 15th July, 2013. In respect of the shares held in dematerialized form, the dividend will be paid to members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited as beneficial owners as on that date.

In terms of Listing Agreement, your Company has also paid dividend of Rs. 8 lakh to the new shareholders on account of Final Dividend for the year 2011-12, as those shares were allotted prior to the record date for the dividend payment and after the date of previous year balance sheet.

Equity shares that may be allotted under Employee Stock Option Schemes before the date of the book closure for payment of dividend shall rank pari passu with the existing shares and shall be entitled to receive the dividend for the financial year 2012-13.

Transfer to Investor Education and Protection Fund (IEPF)

In terms of Section 205C of the Companies Act, 1956, the amount (dividends / deposits, etc.) that remained unclaimed/ unpaid for more than 7 years from the date it became first due for payment, shall be transferred to IEPF.

The Company has been intimating the shareholders / depositors/ investors to lodge their claim for payments due, if any, from time to time and such information is being mentioned in the Annual

Report every year. Such claims as and when received have been settled. Despite constant and sincere efforts to pay the unclaimed dividend / deposits / interest thereon to such shareholders / depositors / investors, certain amount still remains unclaimed.

unclaimed dividend

As required under Section 205C of the Companies Act, 1956, during the year, your Company has transferred unclaimed dividend of Rs. 6.29 lakh for the financial year 2004-2005 and Rs. 5.79 lakh unclaimed Interim Dividend for the financial year 2005-2006 to Investor Education and Protection Fund (IEPF) established by the Central Government. As per Section 205B of the Companies Act, 1956, no claim would lie against the Company or the said fund after the transfer.

unclaimed deposits

During the year, in terms of Section 205C of the Companies Act, 1956, an amount of Rs. 5 lakh was transferred to IEPF being unclaimed/unpaid deposits along with interest thereon of erstwhile First Blue Home Finance Ltd., that remained unclaimed/ unpaid for a period of 7 years from the date it became first due for payment.

Pursuant to the provisions of Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012, your Company has uploaded the details of unpaid and unclaimed dividend/ fixed deposit amounts lying with the Company for the last seven (7) financial years on the Company''s website and has also filed the same with the Ministry of Corporate Affairs. Shareholders/ Depositors who have not yet claimed the previous year dividend/ fixed deposit amount / interest thereon may write to the Company and/or to the Company''s Registrar and Share Transfer Agent.

Authorised Share Capital

In terms of the Scheme of Amalgamation ("the Scheme") sanctioned by the Hon''ble High Courts of Bombay and Delhi, the Authorised Share Capital of First Blue Home Finance Limited and DHFL Holdings Private Limited, the Transferor Companies stands combined with that of your Company. Consequently, the Authorised Share Capital of the Company stands increased from Rs. 2,50,00,00,000 (divided into 17,50,00,000 Equity Shares of Rs. 10/- each and 7,50,00,000 Redeemable Non Convertible Preference Shares of Rs. 10/- each) to Rs. 8,28,00,00,000 (divided into 74,80,00,000 Equity shares of Rs. 10/- each, 7,50,00,000 Redeemable Non Convertible Preference Shares of Rs. 10/- each and 5,00,000 Redeemable Non Convertible Preference Shares of Rs. 100/- each.)

Paid-up Share Capital

During the year under review, your Company allotted equity shares as per details given below:

(a) allotment of Equity Shares under Employee Stock Option Schemes (ESOS)

During the year under review, your Company allotted in tranches 4,92,353 equity shares of Rs. 10/- each upon exercise of stock options to the eligible employees of the Company under the Employee Stock Option Scheme - 2008 and 2009.

(b) allotment of equity Shares pursuant to the sanctioned Scheme of amalgamation

Pursuant to the order dated 27th July, 2012, passed by the Hon''ble Bombay High Court and order dated 4th January, 2013, passed by Hon''ble Delhi High Court, and in terms of Scheme of Amalgamation of First Blue Home Finance Limited (First Blue) and DHFL Holding Private Limited with the Company, the Committee of the Board of Directors at its meeting held on Wednesday, 20th March, 2013, allotted 1,08,86,375 (One Crore Eight Lakh Eighty-Six Thousand Three Hundred and Seventy Five) equity shares of Rs. 10/- each at a share premium of Rs. 311.50 per equity share to the eligible shareholders of First Blue in the share exchange ratio of 10 (Ten) equity share of Rs. 10/- each of DHFL for every 97 (Ninety Seven) equity share of Rs. 10/- each held in First Blue.

In view of above, the issued, subscribed and paid-up equity share capital of the Company stands increased to Rs. 128,21,87,090 divided into 12,82,18,709 equity shares of face value of Rs. 10/- each.

Resource Mobilisation

Financial Year 2012-13 turned out to be a year of reckoning for most countries. Indian economy however started showing revival during the later half of the year. Keeping in mind the inflationary trend and to boost the country''s economy Reserve Bank of India had reviewed its monetary policy by reducing the key rates.

Total debt funds as on 31st March 2013 amounted to Rs. 32,058.39 crore, as against Rs. 24,678.04 crore (consolidated) in previous year, National Housing Bank (NHB) refinance constituted 7%, term loans from banks and financial institutions 70% and 23% from money market instruments. The Company''s average cost of borrowings for the year was 10.63% as against 10.85% in the previous year.

Loans from Banks

As part of its liability management, your Company endeavors to diversify its resource base in order to achieve an appropriate maturity structure and minimize the weighted average cost of borrowed funds.

Commercial Banks continued their support to the Company''s asset growth. As of 31st March, 2013, borrowings in the form of fresh term loans from commercial banks and financial institutions were Rs. 8,530.13 crore taking the total term loan outstanding to Rs. 22,522.07 crore.

Refinance From National Housing Bank (NHB)

During the year, your Company has drawn refinance amounting to Rs. 787.00 crore under NHB''s Refinance Scheme to Housing Finance Companies.

Subordinated debts

Subordinated Debts continue to be another source for funding the operations of the Company. Subordinated Debts represents long term source of funds for the Company and your Company raised Rs. 310.50 crore through the issue of long-term Unsecured Redeemable Non-Convertible Subordinated Debentures. The subordinated debt was assigned ''BWR AAA'' rating by Brickworks and ''CARE AA'' rating by CARE.

As at 31st March, 2013, your Company''s outstanding subordinated debt were Rs. 1,141.50 crore. The debt is subordinated to present and future senior indebtedness of your Company. Based on the balance term to maturity, as at 31st March, 2013, Rs. 1,064.58 crore of the book value (discounted) of subordinated debt is considered as Tier II under the guidelines issued by the National Housing Bank (NHB) for the purpose of capital adequacy computation.

Non-Convertible Debentures (Ncds)

Your Company continues to issue fully Secured Redeemable Non-Convertible Debentures on private placement basis. During the year, your Company has raised Rs. 1,296.00 crore from banks and financial institutions by way of issue of NCDs. The outstanding balance of Debentures including interest accrued and due as on 31st March, 2013 amounts to Rs. 3,463.99 crore. The Company has appointed IDBI Trusteeship Services Limited and GDA Trusteeship Limited to act as the Debenture Trustees for the redeemable non-convertible debentures issued by the Company to ensure that the interests of debenture holders are well protected. The Company''s NCD issues have been listed on the Wholesale Debt Market segment of the NSE. The Company''s NCDs have been assigned the rating of "CARE AA " by CARE and "BWR AAA" by Brickworks.

IDBI Trusteeship Services Limited acts as the Debenture Trustees for the NCDs issued by erstwhile First Blue and the same are listed with the Bombay Stock Exchange.

Perpetual debt Instrument (PDI)

During the year under review, your Company issued Perpetual Debt Instruments ("PDI"). Your Company has raised the PDI of principal amount of Rs. 25 crore. The outstanding as at 31st March, 2013, amounts to Rs. 150.20 crore.

Commercial Paper

The Commercial Paper (CP) of your Company has been rated by Credit Rating and Information Services of India Limited (CRISIL) and is assigned the rating of CRISIL A1 (A One Plus). During the year, your Company issued CPs to the extent of Rs. 4,214.63 crore in tranches and placed them with investors'' at competitive rates of interest. As at 31st March, 2013, Commercial Papers outstanding amounts to Rs. 525.00 crore.

Deposits

During the year, your Company has achieved an overwhelming year on year growth in deposits of 105%. The Outstanding Deposit as on 31st March, 2013 stood at Rs. 1,923.72 crore as compared to Rs. 938.81 crore in the previous year. The spectacular growth has increased the Investor footprints taking the Customer accounts to 1,20,472 Nos. which is year on year growth of 89%.

During the year, number of measures have been taken that has resulted in achieving the robust growth. Your Company has also focused on deposit retention as the maturity profile was fairly large.

In brief, the initiatives taken by your Company includes the following:

(1) Involved the Strategic Corporate FD Team to focus on Retail Liability Growth chasing the daily numbers. Due to this most of the zones accomplished in raising their FD portfolio to a larger extent.

(2) Broker Interface has been organized at various key locations with the objective of activating the intermediary channels as well as popularizing Company''s FD schemes among the broking community.

(3) Placed few resources in key locations under the monitoring of Regional / Location Sales Manager.

(4) Also ensured better staff participation, motivating their own savings by rolling out Internal scheme for investing in DHFL FD Schemes.

(5) Call Center''s services have been utilized to extend courtesy calls to depositors reminding them of their deposit maturities well in advance and providing them with interest updates.

(6) On the FD Operational initiatives, series of improvements are carried out, few among them being :

a. Repayment of Maturity proceeds electronically, thus reducing turn around time (TAT) and Cost.

b. New FD entry module for quick processing of FD Receipt to reduce TAT.

c. Fortnightly, Brokerage Payments to the satisfaction of Broking Community.

d. Periodical Interest servicing through ECS routes, to all depositors who opted for the same.

e. Shifting the brokerage payment process to ECS mode enabling timely credit to brokers'' bank account.

The FD portfolio has grown with well placed Fixed Deposit Schemes. Fixed Deposit Schemes are packaged under the name "Aashray Deposit" for periods ranging from 12 months to 84 months as per the regulatory guidelines. Specific Deposit Schemes are offered focusing on serving various investor segments such as trusts, women, individuals etc.

Schemes are also in operation for different tenures like 13 months, 40 months etc based on the customer''s preference.

As on 31st March 2013, 13,189 depositors had not claimed the deposits amounting to Rs. 18.12 crore. Depositors have been intimated regarding the maturity of their Deposits, with a request to either renew or claim their matured deposits. Fixed Deposits accepted by the Company are secured appropriately to the extent of floating charge on approved securities and bank deposits created by way of Deed of Trust, as per guidelines issued by NHB.

The security details of the aforesaid secured borrowings made by the Company are mentioned at Note No. 5 in the Notes to accounts forming part of the financial statement for the year ended 31st March, 2013.

Credit rating

The Company''s borrowings enjoy the following credit ratings:

Nature of Borrowing Rating / Outlook

CARE Brickworks ICRA CRISIL

Short-Term Debt / Commercial Paper - - A1 CRISIL A1

Fixed Deposits CARE AA (FD) BWR FAAA - -

Subordinated Debt CARE AA BWR AAA - -

Non-Convertible Debentures CARE AA BWR AAA - -

Perpetual Debenture CARE AA- BWR AA - -

Long-term Bank Loans CARE AA - - -

Structured Obligations - - ICRA AAA(SO) -

Capital Adequacy

As required under NHB Directions, your Company is presently required to maintain a minimum capital adequacy of 12%. In addition, the NHB Directions also require that your Company transfers minimum 20% of its annual profits to a reserve fund. The following table sets out the capital adequacy ratios of the Company as at March 31 2011, 2012 and 2013.

Particulars As on 31st March

2013 2012 2011

Capital Adequacy Ratio 16.52% 17.42% 19.39%

Your Company''s Capital Adequacy Ratio was at 16.52% as on 31st March, 2013, which we believe provides an adequate cushion to withstand business risks and is above the minimum requirement of 12% stipulated by the NHB.

Non-Performing Assets And Provisions For Contingency

Your Company adhered to the prudential guidelines for Non Performing Assets (NPAs), issued by the National Housing Bank (NHB) under its Directions of 2010, as amended from time to time. As per the prudential norms, the income on such NPAs is not to be recognised.

As per the prudential norms prescribed by the NHB, the Company has made provision for contingencies on standard as well as non-performing housing loans and property loans. The Company has also made additional provision to meet unforeseen contingencies.

The amount of Gross Non-Performing Assets (NPA) as on 31st March, 2013 was Rs. 239.32 crore, which is equivalent to 0.71% of the loan portfolio of the Company, as against Rs. 146.49 crore i.e. 0.76% of the loan portfolio as on 31st March, 2012. The net NPA as on 31st March 2013 has decreased to Rs. 155.97 crore i.e. 0.46% of the loan portfolio vis-a-vis Rs. 99.95 crore i.e. 0.52% of the loan portfolio as on 31st March, 2012. The total cumulative provision towards loan assets as on 31st March, 2013 is Rs. 262.67 crore as against Rs. 155.39 crore in the previous year. During the year, the Company has written off Rs. 4.94 crore of loans as against Rs. 2.36 crore during the previous year.

In order to prevent frauds in loan cases involving multiple lending from different Banks / Housing Finance Companies, the Government of India has set up the Central Registry of Securitization Asset Reconstruction and Security Interest of India (CERSAI) under Section 20 of the SARFAESI Act, 2002, to have a central database of all mortgages created by lending institutions. The object of this registry is to compile and maintain data relating to all transactions secured by mortgages. Accordingly, your Company is registered with CERSAI and submitted the data in respect of loans, from time to time.

The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) has proved to be a useful recovery tool and the Company has been able to successfully initiate recovery action under this Act in the case of willful defaulters. The Company has acquired certain assets under SARFAESI which are retained for the purpose of sale under the rules and regulations of SARFAESI involving Rs. 16.27 crore.

Credit risk Guarantee Fund Trust for Low Income housing (CRGFTLIH)

The Government of India has set up a Credit Risk Guarantee Fund Trust for Low Income Housing to address the housing needs of Economically Weaker Sections (EWS)/Low Income Group (LIG) in urban areas through sustainable credit mechanisms and improve home ownership and inclusive housing in the country.

Your Company has entered into an agreement with the "Credit Risk Guarantee Fund Trust for Low Income Housing". The Fund will provide protection to the lenders against default on housing loans from the borrowers in the Economically Weaker Sections/ Low Income Group. It will also act as a credit risk mitigate for the lenders and will help in capital relief with lower risk weight on these loans. The Fund Trust will facilitate flow of credit to the low-income households in the EWS / LIG category from the formal financial sector.

Investments

The Investment Committee constituted by the Board of Directors is responsible for approving investments in line with limits as set out by the Board. The decisions to buy and sell upto the approved limit delegated by the Board are taken by the Chairman and Managing Director, who is assisted by Senior Executives of the Company. The investment function is carried out primarily to support the core business of housing finance to ensure adequate levels of liquidity and to maintain investment in approved securities in respect of public deposits raised as per the norms of NHB.

Considering the time lag between raising of resources and its deployment, the surplus funds are generally being parked with liquid fund schemes of mutual funds and short term deposits with banks. During the year, your Company earned Rs. 50.96 crore by way of Income from Mutual funds / financial derivatives and Rs. 33.93 crore by way of interest on deposits placed with banks. At the end of the year, your Company maintained Rs. 321.28 crore by way of deposits with banks.

As per NHB guidelines, HFCs are required to maintain Statutory Liquid Ratio (SLR) in respect of public deposits raised. Currently the SLR requirement is 12.50% of the public deposits. As at 31st March, 2013, your company has invested Rs. 103.81 crore (book value-gross) in approved securities comprising of government securities, government guaranteed bonds and by way of Bank Deposits for Rs. 106.34 crore. It is maintained within the limits prescribed by NHB.

Your Company has acquired 48.50% of the total paid up equity share capital of Avanse Financial Services Private Limited (Avanse). Avanse is a new age Non-Banking Finance Company (NBFC) registered with the Reserve Bank of India, which is having focus towards providing education loans for higher studies in India and abroad. Along with dominant courses like engineering, business management, Avanse will also provide students the opportunity to explore new age courses like Aquaculture, Photo Journalism, courses in Music & Culture and many more.

Subsidiaries & associate Companies

Consequent upon the amalgamation of First Blue Home Finance Limited [First Blue] and DHFL Holdings Private Limited [DHFL Holdings] with the Company, First Blue and DHFL Holdings, ceased to be subsidiaries of the Company.

During the year under review, your Company disinvested its equity shareholdings in Aadhar Housing Finance Private Limited bringing it down to less than 15%. Disinvestments were also made in First Blue Financial Consultants Ltd. a wholly owned subsidiary of erstwhile First Blue Home Finance Limited to the existing promoters / promoter group of your Company.

However, the said Companies shall continue to be Associate/ Group Companies of your Company. As on date of this report, your Company does not have any subsidiary company and hence no disclosure is required to be made pursuant to Section 212 of the Companies Act, 1956.

Information Technology and Communications

During the financial year 2012-13, IT department has undertaken various projects, few of which are as under:

- Rollout of Customer Portal where customers can online access their account details. They can print their provisional income tax certificate and can also view their repayment schedule etc.

- An agreement was signed up with IBM to setup a Disaster Recovery Site which will be implemented soon. The Company plans to run applications from both the data centers on an Active - Passive application architecture for the core applications required to run the business.

- The Company''s IT function is also in the process of revamping the existing application along with integration of First Blue.

Other initiatives includes, investment in tools to improve the experience of the end users and in tools for monitoring of the end points along with Asset Management and Patch Management, upgrading the WAN bandwidth at selective locations to provide better connectivity to the primary datacenter at Bangalore.

human resources

The ever changing demands of the evolving economy necessitate companies to appreciate the importance of intangible assets. Principal among these is human intellect, human energy and human inventiveness. Today''s organization require a more sophisticated approach to managing and developing human capital, which gives the company the desired competitive advantage for survival in the long run.

During the year, the integration of erstwhile First Blue Home Finance Ltd. into the Company was a major exercise which was successfully completed. The integration process focused both on business as well as cultural integration.

The combined work force strength of your Company as on 31st March, 2013 was 1736. The total work force cost during the year was Rs. 140.69 crore for the merged entity as compared to Rs. 87.76 crore (standalone entity cost) in the previous year. This is mainly due to addition of merged entity work cost and the increase in work force to meet the requirements on account of significant expansion in terms of geography as well as in business volumes and the salary revisions effected during the year. Few additional positions are added at the corporate level for meeting business requirements and to give greater focus to functions like Credit Appraisal and Operations.

Learning & development (L&D)

In the year 2012-13, Learning and Development team persevered to deliver effective training sessions and ensured that the employees move along the Company''s vision. The Management acknowledged the strength and importance of the division; hence a separate vertical was designed with a vision to create a paradigm shift in its role and perception from "being limited to imparting training" to "catalysts of improvements".

With an approach to impart trainings at various levels; the team divided each department into different levels according to their ranks and vintage. The major focus of training (L&D) department is :

- To access and analyze the needs of trainings in the Company.

- To design and develop training modules for training to be conducted for the new joiners, existing agents and managers for improved performance and efficiency.

- To provide feedback and coaching to trainees & trainers alike.

- To prepare training reports including training feedback consolidation and class observations to the Management.

Highlights For 2012-13

With increased focus on training & development of employees, 13 new internal programs were introduced during the year on various new areas such as competency based programs, problem solving, art of selling, communication, customer relationship management, etc. This included the participation from all the departments.

Started with the new methodology for product trainings by designing the product session in a manner which included in depth knowledge on - Policy / Target Segment / Sourcing Avenues/ Marketing Activities required.

Outsourced Soft skills training sessions were conducted Pan India for employees. The Company also encourages its managers to attend seminar and conferences conducted by reputed institutions and the regulator- NHB, related to their job to keep themselves abreast of latest developments in their fields. Trainings on KYC and AML policies were also imparted at all levels.

Trainings were conducted on monthly basis in all branches covering the entire strength of the branch. All the trainings were followed by trainee''s assessment.

Particulars of Employees

In accordance with the provisions of Section 217(2A) of the Companies Act, 1956 and the rules framed thereunder, the names and other particulars of employees are set out in the annexure to the Directors'' Report. In terms of the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956 the Director Report is being sent to all the shareholders of the Company excluding the annexure. Any shareholder interested in obtaining a copy of the said annexure may write to the Company.

Employees Stock Option Scheme (ESOS)

Employees Stock Option Scheme (ESOS) namely ESOS-2008 and ESOS-2009 Plan I & ESOS-2009 Plan II were approved and implemented by the Company in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (''''the SEBI Guidelines'''').

The particulars of options granted under the said plans are as under :

Particulars ESOS-2008 ESOS-2009 ESOS-2009 Plan I PlanII

Options granted under the 14,22,590 12,75,000 12,34,670 schemes

Options exercised up to 9,90,626 6,77,534 - 31.03.2013

Options Lapsed 2,50,430 2,11,605 1,69,810 upto 31.03.2013

Options outstanding at the 1,81,534 3,85,861 10,64,860 end of the year

Options unvested at the end of the year 1,53,376 - 8,64,269

Options exercisable at the 28,158 3,85,861 2,00,591 end of the year

Conservation of Energy, Technology Absorption and Foreign Exchange Earning and Outgo

The particulars regarding foreign exchange earnings and expenditure appear at Note No. 38 in the Notes forming part of the financial statement for the year ended 31st March, 2013.

Since the Company is not engaged in any manufacturing activity, the other particulars relating to conservation of energy and technology absorption as stipulated in the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are not applicable.

Insurance Coverage to borrowers

Your Company is a Group Administrator (Master Policy Holder) of ''Home Assure'' a life insurance mortgage reducing term assurance product from ICICI Prudential Life Insurance Co. Ltd, whereby the borrowers are insured for the outstanding loan amount in the event of occurrence of death during the loan tenure.

In addition your Company also offered ''Home Safe Plus'' a general insurance product from ICICI Lombard General Insurance Co. Ltd to the borrowers availing loan against property to insure them against accidental death, property insurance, critical illness and loss of job which is covered upto 3 EMI''s.

The primary objective is to insure our loan portfolio from default due to unforeseen events with our borrowers. Your Company has insured 94% of all the new customer acquisitions and 72% of the total loan portfolio acquired in FY 2012-13.

Insurance of Company''s Property

Your Company has insured its various properties and facilities against the risk of fire, theft, etc., so that financials are not impacted in the unfortunate event of such incidents.

The employees of the Company are covered under the mediclaim facility against hospitalization.

Directors'' And Officers Liability Insurance Policy

This policy covers the Directors'' and Officers of the Company against the risk of third party actions arising out of their actions / directions which may have resulted in financial loss to any third party. The Company has appropriately insured itself to mitigate against such risk from any third party.

National Housing Bank (NHB) Guidelines

The Company has complied with the provisions of Housing Finance Companies (NHB) Directions, 2010 as prescribed by NHB and has been following the various Circulars, Notifications and Guidelines issued by National Housing Bank (NHB) from time to time. The Circulars and the Notifications issued by NHB are also placed before the Audit Committee / Board at regular intervals to update Board members on the same.

RISK MANAGEMENT

As a responsible lender, DHFL is having robust Risk Management in place and manages Credit, Market and Operational Risks effectively.

The credit risk is managed both at portfolio level i.e. diversification, risk based pricing, credit parameters as per risk appetite and ongoing portfolio analysis on various parameters for better and informed decision making, and at credit processing and delivery level by using credit prudence and due diligence on the documents submitted by the customers. The Credit Risk is also being managed effectively at transaction level by using services of in-house professionals for valuations and legal vetting.

Asset Liability Management Committee takes care of market risk emanating on account of interest rate fluctuations in the market, liquidity and funding risks. Risk relating to loan delivery and life cycle management (Operation risk) is taken care of by the Operations department.

To have a focused and comprehensive approach on Risk Management, a dedicated function headed by a Risk Management professional has also been established.

Asset Liability Management Committee (ALCO)

The Asset Liability Management Committee (ALCO), functioning under the supervision of the Board of Directors, lays down policies and quantitative limits that involve assessment of various types of risks and shifts in assets and liabilities to manage such risks. ALCO ensures that the liquidity and interest-rate risks are contained within the limits laid down by the Board. Being dynamic, the risk management framework will continue to evolve in line with the emerging risk perceptions. The Company has also implemented NHB''s Asset Liability Management Guidelines.

Know Your Customer (KYC) norms

Your Company has Board approved KYC & AML Policy in place. The said Policy is in the line of NHB guidelines. The Company furnishes to Financial Intelligence Unit (FIU), in the electronic mode, information of all cash transactions of the value of more than rupees ten lakh or its equivalent in foreign currency and suspicious transactions whether or not made in cash, in terms of said KYC & AML Policy.

Codes and Standards Fair Practice Code

Your Company has in place a Fair Practice Code (FPC), which includes guidelines on appropriate staff conduct when dealing with customers and on the organisation''s policies vis-a-vis client protection. The FPC captures the spirit of the NHB''s guidelines on fair practices for Housing Finance Companies.

Code of Conduct

Your Company has adopted a Code of Conduct for its Board Members and Senior Management personnel. The code of conduct has also been posted on the official website of the Company.

The declaration by the Chairman & Managing Director of the Company regarding compliance with the Code of Conduct for Board Members and Senior Management is annexed with the Corporate Governance Report.

Code for Prevention of Insider Trading Practices

Your Company has formulated and adopted a Code for Prevention of Insider Trading Practices in accordance with the model code of conduct as prescribed under the SEBI (Prohibition of Insider Trading) Regulations, 1992, as amended. The code is applicable to all directors, senior employees and their dependents. The said persons are restricted from dealing in the securities of the Company during the ''restricted trading periods'' notified by the Company, from time to time.

Secretarial audit report

As a measure of good corporate governance practice, the Board of Directors of the Company appointed Shri Mohd. Aabid of M/s Aabid & Co., Practicing Company Secretaries, to conduct

Secretarial Audit of the Company. The Secretarial Audit Report for the financial year ended 31st March, 2013, forms part of the Annual Report.

The Secretarial Audit Report confirms that the Company has complied with all the applicable provisions of the Companies Act, 1956, Depositories Act, 1996, Listing Agreements with the Stock Exchanges, Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and all the Regulations and Guidelines of SEBI as applicable to the Company, including the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992.

Listing of Shares of the Company

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

The Company has paid the listing fees as payable to the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited for the financial year 2012-13 on time.

Marketing

business generated through Call centre

The call centre played an important role this year in business generation and assigned leads received via all direct channels post screening to 110 branches across all locations. Approximately Rs. 2,800 crore worth of leads were generated by the call centre in the year, out of these, 5% leads were converted and disbursement for the same amounted to Rs. 171.79 crore. This conversion contributed to 3% of the overall home loan business generated in FY 2012-13.

Branch Network

Your Company has a strong marketing and distribution network. The acquisition of First Blue Home Finance Ltd. has substantially enhanced Company''s branch network and strengthened its presence across India. The Company''s branch network has increased to 166 as at 31st March, 2013 from 122 branches in the previous year.

Additionally, your Company has international representative offices located in London and Dubai to cater to the needs of non- resident Indians.

The Company''s strong network coverage is designed to provide increased penetration to cater to the evolving needs of the existing customer base and tapping a growing potential customer base throughout India.

On the International Women''s Day, your Company has opened Company''s first ''Mahila Branch'' at Vasai - Maharashtra. The new branch is managed by women staff only.

Alliances & Business Tie-Up

Your Company has entered into strategic housing loan distribution and syndication arrangements with public and private sector banks. The present allies are Punjab & Sind Bank for Northern India, United Bank of India for Eastern India, Central Bank of India for Central India and Yes Bank Limited for Pan India. This unique arrangement provides your Company a wider reach and access to the Banks'' network, where both partners are set to gain. The additional points of sales through ally banks'' strong network coverage are aimed at providing increased footprint to your Company for catering to the evolving needs of our existing customer base and tapping a growing potential customer base across India. The success of one alliance led to another and today your Company has emerged as a major player in all the locations of alliance and has more than Rs. 1100 crore of assets generated through these alliances.

Your Company has taken pioneering steps during the year towards further improving its innovative business models under syndication and novation route and implemented the same with Yes Bank Ltd. resulting in business benefits including fee income to your Company. Your Company also entered into business generation arrangement with FedBank Financial Services Ltd. especially for increasing presence among LMI clientele.

The alliance arrangements not only reflect acknowledgment of your Company''s business models and standing in the financial circles, but also add significantly to the financials of the organization. The initiatives are being lauded in the Banking and Finance Industry and your Company expects to expand the existing alliances geographically and also enter into some new alliances.

Branding

Last year saw your Company grow in brand value. During the year, the Company remained resolute in building the brand for the long term and will continue to invest in the brand to make it the top brand in the category.

Brand Campaign

The campaign was well planned and strategically timed this year to create a top of mind recall just before the IPL season 6 starting on 3rd April, 2013. The campaign went on air from 12th March, 2013 and continued for a period of three weeks till 2nd April, 2013. A healthy channel mix of General Entertainment channels, news channels and movie channels were complimented with a bouquet of regional channels in the same genres. The campaign garnered an overall ''Gross Rating Point'' (GRP^) of 554 against a target of 500 with a reach of 69% at average ''Opportunity To See'' (OTS#) of 8.0.

Sustainance Campaign

A well designed Print media plan sustaining for three weeks starting 10th December, 2012 carried a targeted Home Loan communication to increase product awareness. The campaign reached out across 14 publications, in 9 languages. The campaign resulted in 128% increase in enquiries and a total of 5737 enquiries were generated through the campaign, which were worth Rs. 225 crore.

Retail Participation: The year saw a focus on retail presence in various consumer exhibitions and trade fairs across regions. Your company participated in 29 such events which resulted in 1.36 lac leads.

business Associate Meets: In the year a clear focus was given to strengthen partnerships. 42 business associate meets were organised across all zones, where partnerships were strengthened and long term relationships nurtured.

Sports Sponsorship: The association with Mumbai Indian from last year was taken forth this year and a grand meet and greet event was organised which saw the presence of the Mumbai Indian players at the event. Employees showed great enthusiasm in meeting the players. An overwhelming response from the customers was received for various contests on various mediums, through which a select few got a chance to meet their idols. The event also saw the children from the Mumbai Mobile Creches (NGO for children of construction workers) meet their favourite players.

This year, your Company entered into the second year of association with the Mumbai Indians franchise of IPL as an Associate sponsor and the Official Home Loan Partner. The association is being leveraged to increase awareness for the brand and increase the brand equity by association. The same is being utilised to create engagement with the audience through the social media and digital platform. Various contest and opportunities have been created to increase the buzz in the digital space for customers and employees.

Online: Adapting to the changing scenario, this year your Company went in whole heartedly to gain prominence in the digital space. The Twitter handle was launched and currently has approx 500 followers. The Facebook page also has a strong fan following at approx 2600 which is expected to go further up leveraging on the MI association. The website continues to attract traffic and serves as first port of call. The online queries generated a business of approx Rs. 1897 crore Home loan in disbursements and Rs. 22 crore in deposits.

Awards and Recognition

This year saw a list of award being bestowed upon your company by various bodies that recognised the efforts and commitment of the Company towards its vision.

The Greatest Corporate Leaders of India Award for the year 2012-13 was awarded to your company by the Leadership Awards in Financial Services.

Your Company was awarded to be amongst the Most Trusted Financial Brands in India by the Brand Trust Report for the year 2012-13.

Your Company''s Marketing Head was awarded the Super Achievers Awards by the 11th Indira Super Achievers awards for Professional Executives.

Your Company''s Head, Human Resources won the HR warrior Awards Making Difference 2012.

Your Company has won the Marketer of the Year by the Realty Plus Excellence Awards for the year 2012.

Brand Values

The year saw a focus on press relation and re-inforcing the Company brand values and maintaining a positive reputation/ image. A focus on increasing the share of voice in industry, created a greater mind recall for brand DHFL, Aadhar & Avanse. Various product and events were promoted, which included the "DHFL All Women Branch", "interest rate updates", "Aadhar Awas Mela" and many more. "Avanse Education Loans" was launched through a press event. The efforts resulted in 603 articles across genres and generated a value of Rs. 6 crore worth of media.

Corporate Social responsibilities (CSR)

The Ministry of Corporate Affairs in July 2011 came out with the "National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business" and SEBI also made amendment to this effect in the listing agreement.

During the year under review, your Company has adopted Corporate Social Responsibility (CSR) Policy with an aim to ensure that the Company as a socially responsible corporate entity contributes to the society at large. In order to have a focused approach, the company has created a separate CSR unit to undertake the CSR programmes of the Company. Further, to oversee the activities of CSR, a CSR Committee of Directors has also been constituted.

Your Company has been established with a vision of enabling home ownership amongst the lower and middle income segment in 1984. Since then, your Company has been taking this vision forward and has been enabling financial access to a segment perceived as ''risk''. Your Company, today boasts of a successful ''business model'' based on ''financial inclusion. Counseling the ''ignorant'' weaker sections on the need of creating and maintaining a strong credit history, banking responsibly and managing risks has been the core of your Company''s business.

In FY 2012-13, your Company disbursed 21,132 loans under the ''Golden Jubilee Rural Housing Scheme'' of the Government of India. Your company has over-performed the Government Target by 138%.

Blood Donation

To once again commemorate our heroes on Independence Day, DHFL organised a Blood donation camp on August 15th, 2012 across 10 locations which saw a tremendous participation and 264 units of blood were collected on the day from the DHFL Family.

Joy Of Sharing

DHFL partnered with Mumbai Mobile Creches, an NGO working for the upliftment of children of construction workers. DHFL Employees volunteered wholeheartedly and spent time with children doing various activities including painting, singing, dancing, storytelling and book reading over 24 sessions. This resulted in a lot of knowledge transfer and was an enriching experience for all.

Joy of giving

In the spirit of giving, employees came forward and donated items like clothes, toys, rain wear, bed sheets etc towards the Donation Drive. The donated items were distributed in Vangani village. Employees came forward and whole heartedly supported this noble cause. The initiative was made possible with our NGO partner, Umang Foundation.

Mumbai Marathon

Your Company participated in Mumbai Marathon - on 20th January, 2013 for supporting the cause of Mumbai Mobile Creches, a NGO for children of construction workers.

Go green Initiatives

During the year 2012, we took an initiative with an aim of going green and minimizing our impact on the environment. Thus similar to the previous year, this year too we shall send the annual reports for the financial year 2012-2013 in the electronic format to the shareholders who have registered their e-mail ID with their Depository Participant.

Directors

Your Directors express their profound grief on the sad demise of Shri R. S. Hugar, an Independent Director of the Company who passed away on 30th January, 2013. Shri R. S. Hugar has been on the Board of the Company as an Independent Director since 31st July, 2002. He was also Chairman of the Audit Committee of the Board. The Board pays glowing tribute to him and puts on record highest appreciation of his association with the Company as a highly respected Director.

During the period under review Dr. P. S. Pasricha resigned from Directorship of the Company on 25th February, 2013. The Board places on record its appreciation for the valuable contribution made by him during his tenure as a Director of the Company.

Shri M. Venugopalan has been appointed as Additional Director on 25th February, 2013. Shri M. Venugopalan is an Independent Director. As per the provisions of Section 260 of the Act, he holds office up to the date of the forthcoming Annual General Meeting (AGM) of the Company. The Company has received notice under Section 257 of the Act, proposing his appointment as a Director of the Company. Resolution seeking approval of the members for the appointment of Shri M. Venugopalan as a Director of the Company has been incorporated in the Notice of the forthcoming Annual General Meeting.

In accordance with the provisions of the Companies Act, 1956 read with the Article 158 of the Articles of Association of the Company, Shri R. P. Khosla and Shri G. P. Kohli, Directors of your Company retire by rotation and being eligible; offer themselves for re-appointment at the ensuing Annual General Meeting. Necessary resolutions for the re-appointment of the aforesaid directors have been included in the notice of the ensuing Annual General Meeting.

Brief resume of the Directors proposed to be appointed / re-appointed, nature of their expertise in specific functional areas and names of companies in which they hold directorship and Membership / Chairmanship of Board committees, as stipulated under Clause 49 of Listing Agreement with the Stock Exchanges in India, are provided in the annexure to the Notice of the Twenty-Ninth Annual General Meeting being sent to the members along with the Annual Report. All the directors of the Company have confirmed that they are not disqualified for being appointed/ reappointed as directors in term of Section 274(1)(g) of the Companies Act, 1956.

Internal audit

Your Company has a well equipped internal audit department carrying out a regular independent evaluation of various activities undertaken by the Company through its Branches, Zonal Offices and Corporate Office. The Internal Audit Department headed by a senior management personnel with reporting lines to the Audit Committee of the Board and dotted line reporting to the Chairman and Managing Director. The audit function maintains its independence and objectivity while carrying out assignments. It evaluates on a continuous basis, the adequacy and effectiveness of internal control mechanism, adherence to policies, procedures as well as regulatory and legal requirements. The function also proactively recommends improvement in operational processes and suggests streamlining of controls against various risks. The Audit Committee of the Board reviews the performance of the internal audit on continuous basis, gives direction to its functionaries and reviews effectiveness of internal control systems.

Auditors

M/s. B M Chaturvedi & Co, [Firm Registration No.114317W] Chartered Accountants, who are the Statutory Auditors of the Company hold office, in accordance with the provisions of the Companies Act, 1956 upto the conclusion of the ensuing Annual General Meeting of the Company. From the regulatory perspective, M/s. B M Chaturvedi & Co., have not offered themselves for re-appointment as the Statutory Auditors of the Company for the financial year 2013 - 2014. The Board places on record its appreciation of the services rendered by M/s. B.M. Chaturvedi & Co., Chartered Accountants, the retiring Statutory Auditors of the Company.

Your directors are pleased to inform you that, pursuant to the amalgamation of erstwhile First Blue Home Finance Limited with the Company, the book size of the Company has increased tremendously. Further the operations of the Company have also been growing steadily over the past few years, this has resulted in substantial increase in the accounting and financial transactions. In response to this increased volume and to ensure all accounting compliances and on the basis of the recommendation made by the Audit Committee, the Board of Directors has at its meeting held on 7th May, 2013 recommended the appointment of M/s. T. R. Chadha & Co., [Firm Registration No. 006711N] Chartered Accountants together with M/s. Rajendra Neeti & Associates, [Firm Registration No. 006543C] Chartered Accountants as Joint Statutory Auditors of the Company for the financial year 2013-14 in place of the retiring auditors of the Company.

M/s. T. R. Chadha & Co., [Firm Registration No. 006711N] Chartered Accountants and M/s. Rajendra Neeti & Associates, [Firm Registration No. 006543C] Chartered Accountants have expressed their willingness to act as statutory auditors of the Company for the financial year 2013-14 and have further confirmed that the said appointment, if made, shall be within the prescribed limits under Section 224 (1B) of the Companies Act, 1956 and that they are not disqualified for appointment within the meaning of Section 226 of the said Act.

The notice convening the 29th Annual General Meeting contains the resolution for their appointment. Members are requested to consider their appointment as Joint Statutory Auditors of your Company to hold office from the conclusion of ensuing Annual General Meeting to the conclusion of next Annual General Meeting on remuneration to be decided by the Board of Directors based on the recommendation of the Audit Committee of the Board.

notes to Accounts and Auditors Report

The notes to the accounts referred to in Auditors Report are self- explanatory and therefore do not call for any further comments.

Directors'' Responsibility Statement

Your Directors would like to inform that the audited accounts containing the Financial Statement for the year ended 31st March, 2013 are in conformity with the requirements of the Companies Act, 1956 and they believe that the financial statements reflect fairly the form and substance of transactions carried out during the year and reasonably present the Company''s financial condition and results of operations. These Financial Statements are audited by the Statutory Auditors, M/s. B. M. Chaturvedi & Co., Chartered Accountants, Mumbai.

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

(i) in the preparation of accounts, the applicable accounting standards have been followed;

(ii) they 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 as at 31st March, 2013 and of the profit of the Company for year ended on date;

(iii) they have taken proper and sufficient care 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

(iv) they have prepared the annual accounts on a going concern basis.

Corporate governance

Your Company has complied with the provisions of Corporate Governance as under the Listing Agreement of the Stock Exchanges, where the Company''s shares are listed. Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, the following forms part of this Annual Report :

(i) Chairman & Managing Director''s declaration regarding compliance of Code of Conduct by Board Members and Senior Management personnel;

(ii) Management Discussion & Analysis

(iii) Report on the Corporate Governance;

(iv) Auditors'' Certificate regarding compliance of conditions of Corporate Governance.

Future Outlook

Your Company is positive in the outlook for the housing market in 2013-14 compared to the suppressed demand in 2012-13.

In 2013-14, the market is expected to grow much faster mainly on account of softening interest rates. There is a clear indication of falling interest rates. Going forward, the policy environment will support more growth and for which, lower interest rate will definitely be an important factor.

Secondly, there is huge unsold inventory in the market. With increased demand, the absorption (of demand) can also be better. Your Company envisages better outlook for housing finance market in FY 2013-14.

Above factors will lead to a rise in credit demand for housing. The liquidity conditions of your Company have remained comfortable during the year. Further your Company has tied up with International Finance Corporation (IFC) for External Commercial Borrowings (ECBs) up to US$ 70 million and $ 15 million (senior loan from IFC acting as implementing entity of the Canada Climate Change Program, "CCCP") respectively. The amount to be raised shall be utilized for onward lending in the segment of low cost affordable housing project and for creating a portfolio of eligible green mortgages in the affordable housing segment respectively. ECBs shall be availed by the Company subject to the necessary approvals.

Your Company does not expect any pressure on the liquidity front. This is because liquidity conditions in the banking system will continue to remain comfortable. A healthy demand for home loan coupled with comfortable liquidity conditions will lead to a rise in disbursement.

Acknowledgements

Your Directors wish to place on record their gratitude to the National Housing Bank, the Company''s Customers, Bankers, Shareholders, Debentureholders, Depositors and others for their assistance and co-operation and who have helped the Company in its endeavour. The Board also places on record its deep appreciation for the excellent support received from the employees at all levels during the year. The Directors would also like to thank the Bombay Stock Exchange, the National Stock Exchange, NSDL, CDSL and the Credit Rating Agencies for their co-operation.

For and on behalf of the Board

Place : Mumbai Kapil Wadhawan

Dated : 7th May, 2013 Chairman & Managing Director


Mar 31, 2012

Dear Shareholders,

The Directors are pleased to present the Twenty-Eighth Annual Report on the business and operations of your Company together with the Audited Statement of Accounts for the year ended 31st March, 2012.

FINANCIAL RESULTS

The Financial performance of the Company for year ended 31st March, 2012 is summarized below:-

(Rs. in Crore)

2011-2012 2010-2011

Gross Income 2,469.68 1,451.24

Less : Interest 1,799.23 973.13

Overheads 267.37 168.33

Depreciation 4.72 3.73

Profit before Tax & Exceptional Items 398.36 306.05

Add : Exceptional Items 0.00 35.43

Profit before Tax 398.36 341.48

Less : Provision for taxation 92.00 76.35

Profit after tax 306.36 265.13

Add : Balance b/d from the previous year 69.96 30.35

Surplus available for appropriations 376.32 295.48

Appropriations

Transferred to Special Reserve under Section 36(1)(viii) of the Income Tax Act, 1961 100.00 40.00

Transferred to General Reserve 100.00 100.00

Transfer to Contingency Reserve - 35.00

Dividend on Preference Shares - 0.02

Dividend for Earlier Year 0.08 6.59

Proposed Equity Dividend 40.89 36.57

Tax on proposed Dividend 6.51 7.34

Balance carried over to Balance Sheet 128.84 69.96

Total 376.32 295.48

Previous year figures have been regrouped as per Revised Schedule VI of the Companies Act, 1956 introduced by Ministry of Corporate Affairs vide notification dated February 28, 2011.

PERFORMANCE

Your Company registered a remarkable growth in its operations. The operating profit before charging depreciation and tax amounted to Rs. 403.08 crore as against Rs. 309.78 crore in the preceding year; representing a rise of 30%. Profit After Ta x (PAT) before extra ordinary items went up by 33% to Rs. 306.36 crore from Rs. 229.70 crore in the previous year. The EPS improved to Rs. 28.97 as against Rs. 26.43 of the previous year.

Besides Company's core business of providing housing finance, it also carries on vertical businesses such as insurance and property services. These vertical businesses are operated through Company's subsidiary /associate companies which have strong synergies with the Company and offer the customers wide range of financial products and services under DHFL brand.

The Proposed merger of subsidiary First Blue Home Finance Limited and DHFL Holdings Private Limited with the Company would further consolidate the Company 's position in the housing industry.

Lending Operations

The cumulative loan disbursements of the Company as at the end of financial year 2011-12 was Rs. 28,805 crore as compared to Rs. 19,739.76 crore in the previous year. The housing loans/other loan sanctioned during the year ended 31st March, 2012 were to the extent of Rs. 12,845.31 crore as against Rs. 8,949.48 crore sanctioned during the previous year.

Disbursement

The loan disbursed during the year ended 31st March, 2012 was to the extent of Rs. 9,065.24 crore as against Rs. 6,505.54 crore disbursed during the previous year.

Sale/assignment of Loans:

During the year, your Company securitized pool of housing and property loans and managed the joint syndicated loans where banks and others have participated aggregating to Rs. 1,637.78 crore. These assets have been de-recognised in the books of the Company. Your Company is responsible for collection and getting servicing of the securitized portfolio on behalf of the buyer investor. In terms of the securitization agreement, your Company pays to buyer/investor/participant on monthly basis the collection amount, subject to retention of agreed extra interest spread for the Company.

Instrument through which loans have been sold / assigned have been rated by external credit rating agencies and carry a rating indicating the highest degree of safety regarding timely servicing of financial obligations.

Loan Book:

As at 31st March, 2012, the loan book stood at Rs. 19,355.38 crore as against Rs. 14,121.98 crore in the previous year an increase of 37.06%.

DIVIDEND

In view of the overall performance of the Company and the objective of rewarding shareholders, while retaining capital to maintain a healthy capital adequacy ratio to support future growth, the Board of Directors has recommended a dividend of Rs. 3.50 per share (35%) on 11,68,39,981 equity shares of Rs. 10 each for the financial year ended 31st March, 2012, subject to approval of the shareholders at the ensuing Annual General Meeting, as compared to dividend of Rs. 3.50 per share (35%) for the financial year ended 31st March, 2011. This dividend shall be subject to tax on dividend to be paid by the Company. The total outgo on account of dividend (including dividend distribution tax) will be Rs. 47.53 crore as against Rs. 42.76 crore in the previous year.

Your Company has paid dividend of Rs. 8 lakh and Rs. 1 lakh as tax on distribution of dividend to new shareholders on account of Final Dividend for the year 2010-11 as required under the Listing Agreement as those shares were allotted prior to record date for the dividend payment and after the date of earlier year balance sheet.

Equity shares that may be allotted on allotment of equity shares under Employee Stock Option Scheme as well as allotment, if any, of shares pursuant to approval of Scheme of Amalgamation before the date of the book closure for payment of dividend shall rank pari passu with the existing shares will be entitled to receive the dividend for the financial year 2011-12.

UNCLAIMED DIVIDEND TRANSFERED TO INVESTORS EDUCATION AND PROTECTION FUND (IEPF)

In terms of Section 205C of the Companies Act, 1956, the amount (dividends) that remained unclaimed and unpaid for more than 7 years from the date become 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 to lodge their claim for payment due, if any, from time to time and such claims have been settled. Despite constant and sincere efforts to pay the unclaimed dividend to the respective shareholders, certain amount still remains unclaimed. The Company has been intimating the shareholders to lodge their claim for dividend from time to time and such information is being mentioned in the Annual Reports every year.

Unclaimed dividend amounting to Rs. 4.97 lakh that has not been claimed by shareholders for the financial year 2003-04 has been transferred to Investor Education and Protection Fund (IEPF) during the month of September, 2011, as per the provisions of the Companies Act, 1956. As per section 205(B) of the Companies Act, 1956, no claim would lie against the Company or the said fund after the transfer.

The unpaid and unclaimed amounts lying with company for the last seven (7) financial years has been uploaded on the Company's website. Shareholders who have not claimed the said dividend may write to Registrars and Share Transfer agents.

SHARE CAPITAL

During the year, the Company continued with its focus on measures to improve its net worth.

(a) Qualified Institutional Placement:

Pursuant to a special resolution passed under section 192A of the Companies (Passing of the resolution by postal ballot) Rules, 2011 by the shareholders of the Company on 19th January 2012, your Company issued 1,19,09,873 (One Crore Nineteen Lakh Nine Thousand Eight Hundred Seventy Three) equity shares of face value of Rs. 10/- each at a price of Rs. 255.50 per equity (including a premium of Rs. 245.50 per equity share) aggregating to Rs. 304,29,72,552 (Rupees Three Hundred Four Crore, Twenty Nine Lakh, Seventy Two Thousand, Five Hundred and Fifty Tw o Only) to Qualified Institutional Buyers (QIBs) in terms of Chapter VIII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 ("SEBI ICDR Regulations"), as amended. The QIP was opened for subscription to QIBs on Wednesday, 22nd February, 2012 and closed on Friday, 24th February, 2012. The allotment of equity shares to QIBs was made on 29th February, 2012. The BSE and the NSE had given trading permission for the equity shares issued to QIBs on 2nd March, 2012.

(b) Employee Stock Option Schemes:

During the year under review, the Company allotted in tranches 5,03,706 equity shares of Rs. 10/- each upon exercise of stock options to the eligible employees of the Company under the Employee Stock Option Scheme – 2008 and 2009.

In view of above allotments the paid-up equity share capital of the Company increased from 10,44,26,402 equity shares of Rs. 10/- each as on 31st March, 2011 to 11,68,39,981 equity shares of Rs. 10/- each as on 31st March, 2012.

(c) Equity Shares to be allotted pursuant to the sanctioned Scheme of Amalgamation

On sanction of the Scheme of Amalgamation of First Blue Home Finance Ltd and DHFL Holdings Private Ltd. with your Company (the Scheme) by the respective High Courts, the Company will be required to allot an aggregate of 1,08,86,375 fully paid up equity shares of Rs. 10/- each, to certain shareholders of First Blue Home Finance Ltd.

Post allotment of the aforesaid shares, the paid- up equity share capital of the Company will increase to 12,77,26,356 equity shares.

The Company has paid the listing fees payable to the BSE and the NSE for the financial year 2011-12 in time.

RESOURCE MOBILISATION

Financial Year 2011-12 turned out to be a year of reckoning for most countries. India witnessed rapid slowdown in growth, coupled with near double-digit inflation. Due to inflationary pressures, Reserve Bank of India had to tighten the monetary policy by increasing the key interest rates.

Subordinated Debt:

During the year, your Company raised Rs. 75 crore through the issue of long-term Unsecured Redeemable Non-Convertible Subordinated Debentures. The subordinated debt was assigned an 'BWR AAA' rating by Brickworks and rating by CARE 'AA '.

As at 31st March, 2012, your Company's outstanding subordinated debt stood at Rs. 655 crore. The debt is subordinated to present and future senior indebtedness of your Company and has been assigned the rating by CARE and Brickworks. Based on the balance term to maturity, as at 31st March, 2012, Rs. 582.00 crore of the book value of subordinated debt is considered as Tier II under the guidelines issued by the National Housing Bank (NHB) for the purpose of capital adequacy computation.

Non-Convertible Debentures (NCD):

During the year, your Company issued NCDs amounting to Rs. 730.20 crore on a private placement basis. The Company's NCD issues have been listed on the Wholesale Debt Market (WDM) segment of the NSE. The Company's NCDs have been assigned the rating of 'AA ' by CARE and 'BWR AAA' by Brickworks. As at 31st March, 2012, NCDs outstanding stood at Rs. 1,850.20 crore.

Innovative Perpetual Debt Instrument

During the year under review your Company has issued Innovative Perpetual Debt Instruments ("IPDI") qualifying for Tier II capital in to increase its capital adequacy ratio and fund its growing business operations. Your Company has raised the IPDI of principal amount of Rs. 125.20 crore, which qualify as Tier II capital of the Company, in conformity with NHB guidelines. The IPDI was assigned an 'AA-' rating by both CARE and Brickworks.

Commercial Paper:

The Commercial Paper (CP) program of your Company has been rated by Credit Rating and Information Services of India Limited (CRISIL) and is assigned the rating of P1 (P One Plus) having validity period of twelve months. During the year your Company issued CPs to the extent of Rs. 1,454.40 crore in tranches and placed them with investors' at the most competitive rates of interest. As at 31st March, 2012, commercial papers outstanding stood at Rs. 401.40 crore.

Loans from Banks:

As part of its liability management, your Company endeavors to diversify its resource base in order to achieve an appropriate maturity structure and minimize the weighted average cost of borrowed funds. During the year under review, fresh term loans of Rs. 4,045 crore were availed from the commercial banks and financial institutions, taking the total term loan outstanding to Rs. 13,855.39 crore

Refinance from National Housing Bank (NHB):

During the year, your Company has drawn refinance amounting to Rs. 228.00 crore under NHB's Refinance Scheme to Housing Finance Companies.

Deposits:

During the Year, the Company has achieved consistent Growth. The Outstanding Deposit as on the 31st March 2012, stood at Rs. 938.81 crore compared to Rs. 557.29 crore in the previous year. Consistent Increase in the Investor has also been witnessed taking the Customer Accounts to 63,867 Nos.

Deposit Growth can be sustained only when the existing customers are retained effectively. It becomes even more critical for investor customer as investment opportunities are ample. We have taken a structured approach in sustenance of fixed deposit growth by focusing on the renewal of maturing fixed deposit database with the help of Direct Channel. Based on an analysis of the maturing database, a detailed strategy has been formulated and accordingly an unique two-fold program was developed which involved sending an unique Direct Mailer that seeded the thought of reinvestment amongst the depositors

which was followed by a focused tele-calling activity thus reinforcing the need to reinvest amongst the customers. The opportunities that arose through these concentrated efforts were disseminated to the business teams for further fulfillment.

As on 31st March 2012, 975 depositors had not claimed the deposits amounting to Rs. 5.10 crore. Depositors have been intimated regarding the maturity of their Deposits, with a request to either renew or claim their matured deposits. Fixed Deposits accepted by your Company have been secured appropriately to extent of Floating Charge created by way of Deed of Trust, as per guidelines issued by NHB.

CREDIT RATING

Your Company has received an A1 credit rating from CRISIL, which was reaffirmed in May, 2012, for its Rs. 1,500 crore short-term debt program indicating a "very strong degree of safety regarding timely payment of financial obligations".

In April 2012, CARE reaffirmed credit ratings for our fixed deposits (CARE AA up to Rs. 1,000 crore), our non-convertible debentures (CARE AA up to Rs. 2,605 crore in aggregate for three instruments) and subordinated debt (CARE AA up to Rs. 980 crore) and our Innovative Perpetual Debentures (CARE AA- upto Rs. 300 crore). Your Company has also obtained credit ratings for its long term bank borrowings (CARE AA upto amount of Rs. 15,814 crore).

A credit rating of CARE AA indicates that instruments with that rating are considered by CARE to "have a high degree of safety regarding timely servicing of financial obligations" among rated instruments while a credit rating of CARE AA reflects the comparative standing within the CARE AA category.

In January, 2012, BWR reaffirmed credit ratings for our fixed deposits (BWR FAAA up to Rs. 1,000 crore), our non-convertible debentures (BWR AAA up to Rs. 1,000 crore) and our subordinate debt (BWR AAA for two instruments of Rs. 250 crore each) for an additional subordinated debt instrument (BWR AAA up to Rs. 400 crore) and our innovative perpetual debentures (BWR AA- upto Rs. 300 crore).

A BWR FAAA rating indicates the "highest safety in terms of timely servicing of interest and principal" for our fixed deposits and a BWR AAA credit rating indicates the "highest degree of safety regarding timely servicing of financial obligations", as compared to other rated instruments.

CAPITAL ADEQUACY

As required under NHB Directions your Company is presently required to maintain a minimum capital adequacy of 12% on a stand-alone basis. In addition, the NHB Directions also require that your Company transfers minimum 20% of its annual profits to a reserve fund. The following table sets out our stand- alone capital adequacy ratios as at March 31 2010, 2011 and 2012.

Particulars As on 31st March

2012 2011 2010

Capital Adequacy 18.24% 19.39% 17.26% Ratio (Stand-alone) (Approximately)

Your Company's stand-alone capital adequacy ratio was at 18.24% approximately as on 31st March, 2012, which we believe provides an adequate cushion to withstand business risks and is above the minimum requirement of 12% stipulated by the NHB.

NON-PERFORMING ASSETS AND PROVISIONS FOR CONTINGENCY

Your Company adhered to the prudential guidelines for Non performing Assets (NPAs), issued by the National Housing Bank (NHB) under its Directions of 2010, as amended from time to time. As per the prudential norms, the income on such NPAs is not to be recognised.

As per the prudential norms prescribed by the NHB, the Company has made provision for contingencies on standard as well as non-performing housing loans and property loans. The Company has also made additional provision to meet unforeseen contingencies.

The National Housing Bank (NHB) vide its circular dated 5th August, 2011 read with circular dated 19th January, 2012 has introduced additional contingency provisioning requirements. The Company has met this requirement by utilising excess reserve created in earlier year and by making further provision during the year. As a matter of prudent risk management and based on experience, the Company has created on its own in the past, additional reserve on its standard assets towards contingencies beyond the NHB requirements. The Company has fully utilised these additional contingency reserve for meeting the additional requirements of NHB and has also provided for the balance.

The Securitizations and Reconstructions of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI) has proved to be a useful recovery tool and the Company has been able to successfully initiate recovery action under this Act in the case of willful defaulters. The Company has acquired certain assets under SARFAESI which are retained for the purpose of sale under the rules and regulations of SARFAESI involving Rs. 14.03 crore.

BRANCH EXPANSION & BUSINESS TIE- UP

Your Company has a strong marketing and distribution network. The Company has its registered office in Mumbai and has 122 branches, 72 service centres, 24 camp locations, 8 regional processing units and 4 central processing units in India, spread across the length and breadth of India. Additionally, your Company has international representative offices located in London and Dubai to cater to the needs of non-resident Indians. Your Company has entered into strategic housing loan distribution and syndication arrangements with public and private sector banks, including Punjab & Sind Bank to cater to the northern India, United Bank of India for eastern India, Central Bank of India for central India and Yes Bank Limited for across India. This gives us wider reach and access to the Banks' network, where both are set to gain. Our strong network coverage is designed to provide increased penetration to cater to the evolving needs of our existing customer base and tapping a growing potential customer base throughout India.

INVESTMENTS

The Investment Committee constituted by the Board of Directors is responsible for approving investments in line with limits as set out by the board. The decisions to buy and sell upto the approved limit delegated by the board are taken by the Chairman &

Managing Director, who is assisted by two Senior Executives i.e. Sr. GM Account & Taxation and GM (Finance & Resources). The investment function is carried out primarily to support the core business of housing finance to ensure adequate levels of liquidity and to maintain investment in approved securities in respect of public deposits raised as per the norms of NHB.

Considering the time lag between raising of resources and its deployment, the surplus funds are generally being parked with liquid fund schemes of mutual funds and short term deposits with banks. During the year, your Company earned Rs. 1.82 crore by way of Income from Mutual funds and Rs. 13.56 crore by way of interest on deposits placed with banks. At the end of the year, your Company maintained Rs. 358.41 crore by way of deposits with banks.

As per NHB guidelines, HFCs are required to maintain Statutory Liquid Ratio (SLR) in respect of public deposits raised. Currently the SLR requirement is 12.50% of the public deposits. As at 31st March, 2012, your company has invested Rs. 48.48 crore in approved securities comprising of government securities, government guaranteed bonds and by way of Bank Deposits for Rs. 47.18 crore. It is maintained within the limits prescribed by NHB.

INSURANCE OF PROPERTY

Your Company has insured its various properties and facilities against the risk of fire, theft, etc., so that financials are not impacted in the unfortunate even of such incidents.

The employees of the Company are covered under the mediclaim facility against hospitalization.

DIRECTOR'S AND OFFICER LIABILITIES

This policy covers the Director's and officer of the Company against the risk of third party actions arising out of their actions /directions which may have resulted in financial loss to any third party. The Company has appropriately insured itself to mitigate against such risk from any third party.

INSURANCE COVERAGE TO BORROWERS

All the borrowers of the Company were insured against the risk of accidental death, property insurance and loss of employment (upto 3 EMI's) by Future Generali General Insurance Co. Ltd.

Your Company is a Group Administrator (Master Policy Holder) of 'Home Assure' a life insurance mortgage reducing term assurance product from ICICI Prudential Life Insurance Co. Ltd, whereby the borrowers are insured for the outstanding loan amount in the event of occurrence of death during the loan tenure.

In addition your Company also offered 'Home Safe Plus' a general insurance product from ICICI Lombard General Insurance Co. Ltd to borrowers availed loan against property to insure against accidental death, property insurance, critical illness and loss of employment (up to 3 EMI's).

The primary objective is to insure our loan portfolio from default due to unforeseen events with our borrowers. Your Company has insured 96% of all the new customer acquisitions and 81% of the total loan portfolio acquired in FY 2010-11. The overall fee income growth in FY 2011-12 was 52% over last FY 2010-11.

NHB GUIDELINES

The Company has been following the various Circulars, Notifications and Guidelines issued by National Housing Bank (NHB) from time to time. The Circulars and the Notifications issued by NHB are also placed before the Audit Committee / Board at regular intervals along with the compliance of the same.

During the year under review, NHB has conducted an inspection of the Company under Section 34 of the NHB Act, 1987 and Company has furnished the replies to the same.

KYC & AML STANDARDS

During the year under review, the National Housing Bank has issued revised comprehensive Know Your Customer (KYC) Guidelines and Anti Money Laundering Standards in the context of recommendations made by the Financial Action Task Force on Anti Money Laundering Standards and on Combating Financing of Terrorism Standards. During the year, the Board reviewed and noted the amendments to the Company's KYC and Prevention of Money Laundering Policy as stipulated by NHB. Your Company has adhered to the compliance requirements in terms of the said policy for monitoring and reporting cash/ suspicious transactions.

The Fair Practices Code framed by NHB seeks to promote good and fair practices by setting minimum standards in dealing with customers, increase transparency so that customers have a better understanding of what services they can reasonably, encourage market forces through competition to achieve higher operating standards, promote fair and cordial relationships between customers and the housing finance company and foster confidence in the housing finance system. During the year, your Company has adhered to the Fair Practices Code as approved by the Board of Directors.

CODE OF CONDUCT:

Your Company has adopted a revised Code of Conduct for its Board Members and Senior Management personnel. The code of conduct has also been posted on the official website of the Company. A copy of the code of conduct has been circulated to the directors and senior Management.

The Declaration by the Chairman & Managing Director of the Company regarding compliance with the Code of Conduct for Board Members and Senior Management is annexed with the Corporate Governance report.

RISK MANAGEMENT FRAMEWORK:

Your Company has a Risk Management Framework, which provides the mechanism for risk assessment and mitigation. The ALCO Management Committee (AMC) comprises the Chairman & Managing Director, the Chief Executive Officer, Chief Operating Officer and other members of senior management.

During the year, the AMC reviewed the risks associated with the business of your Company, its root causes and the efficacy of the measures taken to mitigate the same. The Board of Directors also reviewed the key risks associated with the business of your Company, the procedures adopted to assess the risks and their mitigation mechanisms.

BRANDING

We believe that the 'DHFL' brand is one of the most important intangible assets that we own. During this fiscal year, the Company remained resolutely committed to building its brands for the long term and continues to invest in their marketing, sales and distribution in all key markets, such as:

- Brand Campaign: Brand commercial did the aerial carpet bombing during October – November 2011 with 8971 spots across 47 Regional General Entertainment Channels and Business & News Channels and created high brand salience at a blanket level across all markets. This was also supported by high visibility Print Innovations in key select markets.

- Sustenance Campaign: A well designed Print Media plan sustaining for almost 16 weeks starting 17th August carried rational product based communication with creative variations comprising home loan messages of generic, occupational, clear product descriptive, festive based communication and fixed deposits in 27 regional dailies to reach out 129 plus DHFL operating locations through a cumulative of 400 plus insertions.

- Corporate Campaign: The campaign focused at delivering the Brand Essence to the Corporate Audience which involved Key decision makers, Investor Pools etc. The campaign was activated between Nov – Dec 2011 involving high visibility media chosen basis the desired TG. TVC: Over 3000 spots were consumed across key business & news Channels like ET Now, CNBC, BBC World, Bloomberg among others. This was further supported through 39 highly targeted insertions in over 13 Business Magazines like Business World, The Economist, Business Today, Forbes, and Outlook etc. While the Online design covered most prominent online portals catering to the news & business affluent audience like Bloomberg, Money control, Reuters etc delivering 2,54,67,662 impressions.

- Retail Activations: Retail level marketing programs gained a lot of prominence this year. Over 33 trade fairs were participated across the year. 40 Business Associate Meets conducted for alternate referral channel development. DHFL Express a unique activation program conducted across zones in Mumbai, Pune & Rest of Maharashtra, Delhi, Rajasthan, Kerala & Karnataka generating over 6000 enquiries. These events cumulatively supported in delivering disbursements of 603 files worth Rs. 36.5 crore.

- Online: This year saw the DHFL website migrating to the Wordpress platform thereby easing out the content management aspect as well as enhancing the auto optimization for Search Engine Optimization (SEO) which is key in today's digital marketing space. DHFL also went active on the Mobile space through the launch of its Mobile site, which today enjoys a 300% growth in traffic. The platform generated over 18000 enquiries.

- Sports: Your Company is the associate team Sponsor for Mumbai Indians the most followed franchisee of the Indian Premier League (IPL) Twenty20.

DHFL had over a million visits to our website www.dhfl.com on business and property related topics during the year. We continued to have leadership presence at premier housing finance industry and real estate property events.

Awards & Recognition

During this fiscal year, your Company has received the following Awards and Recognition, by the various bodies in recognition of Company's operation and conduct of business, which has made us proud:

- DHFL was awarded the Powerbrand status for the 2nd year consecutively. This is recognition by the Indian Consumer who has chosen DHFL as a Powerbrand, indicating a high degree of brand satisfaction across performance parameters.

- DHFL was ranked 337th amongst the top Fortune India 500 companies for the year 2011-12.

- Ranked as 47th amongst India's' 50 Biggest Financial Companies for the year by Business World Magazine.

- DHFL won Marketer of Year – Realty Plus Excellence Awards of the Year – 2012.

- DHFL won Greentech HR Excellence Award – 2012 for Best Strategy (Gold Award).

- DHFL Wins "Realty Plus Newsmaker of the Year-2011.

- DHFL become Life time corporate member of with The Indian Institution of Valuers (India).

Shri Kapil Wadhawan - Chairman & Managing Director received the Top Honour, as the undisputed, unanimous choice, for the POWERBRANDS HALL OF FAME CORPORATE ICON OF THE YEAR 2011 – 2012. The PowerBrands Hall of Fame seeks to honour leaders in the business fraternity who have carved a niche for themselves with their remarkable strategies that have channelized growth and been instrumental in taking their companies ahead.

All these accolades are a reflection of DHFL's consistency when it comes to delivering shareholder value and speaks volumes about it being customer- centric and service driven.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Considering these, the concept of Corporate Social Responsibility (CSR) is the demand of the current era. CSR has become a concept that frequently overlaps similar approaches, such as corporate sustainability, corporate sustainable development and corporate responsibility.

To meet CSR, your Company along with the International Finance Corporation ("IFC"), a member of the World Bank Group, and DHFL Vysya Housing Finance Ltd., established Aadhar Housing Finance Private Limited (AHFPL) in May 2010 to meet the needs of the under-served lower income segment of society with focus and technical expertise. AHFPL primarily targets states with a relatively larger lower income segment such as Uttar Pradesh, Madhya Pradesh, Jharkhand, Orissa, Chhattisgarh and Bihar. The ticket size of loans to be originated will be limited to a maximum of Rs. 6 lakh.

Your Company is a socially responsible organization and always keen to promote the interest of customers, employees, shareholders and communities as a whole. Your Company has upheld its CSR in the following ways:

Our founder chairman's vision and legacy continues to guide our company and our people. Social responsibility is a way of life at DHFL. It means investing in and enriching our communities. It means encouraging employee volunteerism.

CSR was the main focus this year which received overwhelming participation and was a huge success.

Blood Donation:

To commemorate our heroes on this year's Independence Day, DHFL organized a blood donation drive in association with the Red Cross Society of India on the 12th August, 2011. The event was received with eager participation from the DHFL family.

Joy of Giving:

Employees came forward to celebrate the Joy of Giving by donating newspapers, magazines etc. DHFL supported Umang Foundation's initiative of supporting stationary kits to 300 underprivileged children in the Joy of Giving week.

Children's Day and Toy Donation Drive:

This Children's Day, DHFL conducted a Toy Donation Drive in association with Mumbai Mobile Crèches (MMC). The participation was quite enthusiastic and we managed to collect 5 large cartons of toys. DHFL volunteers also visited the Sion centre of MMC spent some time with the children and handed over the toys. A printer, 2 desktops and stationary for the kids were donated on the occasion.

DHFL Touches Lives Of Children Through Balakalakaar

DHFL was the title sponsor of AIESEC Mumbai's Balakalakaar. Balakalakaar 2011 saw a 1000 children from 10 BMC schools participate in a month long program involving a series of workshops. Based on their performance, 100 children were shortlisted to showcase their talents and receive scholarships at the DHFL Balakalakaar Grand Finale 2011 event held in December 2011.

Eye Donation Campaign:

Employees of DHFL vowed to pass the gift of sight and pledged to donate their eyes facilitated by Umang Donation, a NGO committed to social causes.

WORKPLACE DIVERSITY

1. DHFL, as an equal opportunity employer, celebrated the International Women's Day. All women employees were recognized with chocolates and a card.

2. Regional festivals like Navratri, Onam, Christmas etc are celebrated with great fervor thus promoting a cohesive environment.

Your Company in association with Mumbai Mobile Crèches participated in Standard Chartered Mumbai Marathon - 2012 on 15th January, 2012. Your Company had taken initiatives to help support the cause of children of construction workers at the construction sites in Mumbai.

In line of agreement with Concern India Foundation (CIF), based in Mumbai, your Company continues to support for promoting activities linked to upliftment of members belonging to weaker sections of society. Concern India Foundation is undertaking the activities linked to the following major issues:

- Education

- Community Development

- Health

- Environment

DHFL Employee Welfare Trust

Your Company also provides assistance for education to its employees who aspire to undertake education through its trust "Late Shri Rajesh Kumar Wadhawan DHFL Employees Welfare Trust".

SECRETARIAL AUDIT

Secretarial Audit is being carried out at the specified period, by practicing company secretary. As a measure of good corporate governance the Company had also appointed M/s. Aabid & Co, practicing company secretaries to conduct Secretarial Audit of the Company. The Secretarial Audit Report for the Financial Year ended 31st March, 2012 is provided in this Annual Report.

HUMAN RESOURCES

During the year the Company managed to attract talent from leading banks, financial institutions and multinational organizations.

Your Company is fully operational with its globally renowned HRIS Peoplesoft package for its HR systems and processes.

Your Company believes that the ability to keep learning is a key sustainable advantage and hence strong emphasis is placed on constantly upgrading the skills of its employees. During the year, all new recruits underwent an induction training programme. In addition, employees who were promoted across various grades attended Executive Development and Managerial Skills programmes. During the year, a leadership programme was designed and conducted by the Indian Institute of Management, Ahmedabad, for a select group of employees identified on the basis of their performance and future potential.

Amongst many others, internal training programmes were conducted in the areas of housing finance, corporate risk management; negotiate selling skills, credit risk management KYC and AML measures. Your Company also nominated staff members for a variety of external programmes including real estate and housing, education, treasury and risk management, information technology, taxation and International Financial Reporting Standards.

Measures were taken to reach out to the employees through revised incentive schemes, several reward and recognition programs and employee engagement activities. A complete On-Boarding process including the Buddy program was put in place to ensure that new employees feel at ease in the initial period of joining.

During the year, the Company monitored more closely the individual performances, month on month and the weak performers were put through a structured Performance Improvement Plan (PIP).

The work force of the Company as on 31st March 2012 was 1,400. The total work force cost during the year has gone up by 44.70% from Rs. 59.86 crore to Rs. 87.81 crore. This was mainly due to increase in work force to meet the requirements on account of significant expansion in terms of geographical growth as well as business volumes and the salary revisions effected during the year.

During the year, the Company received an award for "The Best Strategy" Gold Award by Greentech

Foundation as part of their HR Excellence Award, 2012. The HR- Head received the "HR Leader" Gold Award, 2012 given by the same foundation. The change management and transformation process including the scaling up of HR operations to meet the company's dynamic needs, have contributed in no small measure to the robust growth of the company.

Your Company has entered into Deed of Trust with Life Insurance Corporation of India which covers the Company's employees under the group gratuity schemes with the Life Insurance Corporation of India ('LIC'). The schemes are defined benefit schemes and are funded in line with the LIC's actuarial valuation carried out at year end.

PARTICULARS OF EMPLOYEES

In accordance with the provisions of Section 217(2A) of the Companies Act, 1956 and the rules framed thereunder, the names and other particulars of employees are set out in the annexure to the Directors' Report. In terms of the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956 the Director Report is being sent to all the shareholders of the Company excluding the annex. Any shareholder interested in obtaining a copy of the said annex may write to the Company.

EMPLOYEES STOCK OPTION SCHEME (ESOS)

Employees Stock Option Scheme (ESOS) was approved and implemented by the Company and Options were granted from time to time to employees under ESOS 2008 and ESOS 2009 - Plan I & II in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (''the SEBI Guidelines'').

INFORMATION TECHNOLOGY AND COMMUNICATIONS

During the year 2011-12, apart from upgrading the existing software applications with enhanced/ added features to meet the current and emerging business needs, certain new application systems were implemented.

Your Company has launched the customer portal in the financial year 2011-12 where the customers can view their loan account details on-line. This facility is primarily created to enable the customer to view the loan details at their convenience. This will also reduce the customer visit to the branches, which in turn will help to gradually reduce the manpower required at the branches to service the customer.

Currently, we have enabled this facility for the post disbursement process, in the second phase we are planning to enable this facility to customers whose application has been logged into the system where they will be able to track the application status. We will initiate various activities with the help of marketing team to educate and make the customers aware of this facility so that we have more number of customer registrations in the customer portal.

AMALGAMATION OF FIRST BLUE HOME FINANCE LTD AND DHFL HOLDINGS PRIVATE LTD. WITH YOUR COMPANY

The Board of Directors of your Company at its meeting held on 28th September, 2011 had, approved amalgamation of First Blue Home Finance Limited and DHFL Holdings Private Limited with your Company in terms of a Scheme of Amalgamation ("the Scheme") under Sections 391 to 394 of the Companies Act, 1956. The Board had approved the share swap ratio of 10:97, meaning thereby 10 (Ten) equity shares of Rs. 10/- each fully paid-up in your Company for every 97 (Ninety Seven) equity shares of Rs. 10/- each fully paid-up in First Blue Home Finance Ltd. Said swap ratio is based upon the report submitted by M/s. Ernst & Young and the fairness opinion of the same had been confirmed by Standard Chartered Bank, an independent merchant banker. The Appointed Date of the amalgamation was April 1, 2011.

The aforesaid Scheme of Amalgamation of First Blue Home Finance Ltd and DHFL Holdings Private Ltd into and with your Company was approved by equity shareholders of your Company with requisite majority at the meeting held on 17th April, 2012. Subsequently, your Company filed the petition before the Hon'ble High Court at Bombay.

SUBSIDIARY COMPANIES

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Profit and Loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. The Company will make available the Annual Accounts of the subsidiary companies and the related detailed information to any members of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open to inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies. The same will also be hosted on our website, www.dhfl.com.

During the year under review your Company disinvested majority of its equity shareholdings in DHFL Vysya Housing Finance Ltd and DHFL Property Services Ltd to the existing promoters / promoter group of your Company. Disinvestment of equity shares in DHFL Vysya Housing Finance Ltd. was to compliance with NHB requirement.

In view of the aforesaid disinvestment, the shareholding of your Company, in DHFL Vysya Housing Finance Ltd is below 10% of the total paid up equity capital of the DHFL Vysya Housing Finance Ltd and has ceased to be subsidiary of your Company and your Company does not hold any equity stake in DHFL Property Services Ltd.

Accordingly, Aadhar Housing Finance Private Ltd, which was promoted by your Company also ceases to be subsidiary of your Company due to disinvestment of Company's equity in DHFL Vysya Housing Finance Ltd.

Due to aforesaid disinvestment, DHFL Vysya Housing Finance Ltd, DHFL Property Services Ltd and Aadhar Housing Finance Private Ltd. have ceased to be subsidiaries. However, the said companies shall continue to be Associate/Group Companies of your Company.

Your Company has 3 subsidiaries, namely, First Blue Home Finance Ltd, First Blue Financial Consultants Ltd. and DHFL Holdings Private Ltd.

CONSOLIDATION OF ACCOUNTS

The audited Consolidated Accounts and Cash Flow Statement, comprising of DHFL and its subsidiary, First Blue Homes Finance Ltd. First Blue Financial Consultants Ltd and DHFL Holdings Private Ltd. are annexed to this Annual Report. The Auditors' Report on the Consolidated Accounts is also attached. The Consolidated Accounts have been prepared in accordance with the Accounting Standards prescribed by the Institute of Chartered Accountants of India in this regard.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO

The particulars regarding foreign exchange earnings and expenditure appear as Note No. 31.1 in the Notes forming part of the financial statement for the year ended 31st March, 2012.

Since the Company is not engaged in any manufacturing activity, the other particulars relating to conservation of energy and technology absorption as stipulated in the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are not applicable.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956 read with the Clause 158 of the Articles of Association of the Company, Shri Dheeraj Wadhawan and Dr. P. S. Pasricha, directors of your Company retire by rotation and being eligible; offer themselves for re- appointment at the ensuing Annual General Meeting. Necessary resolutions for the re- appointment of the aforesaid directors have been included in the notice convening the ensuing AGM.

Brief resume of the Directors proposed to be appointed / re-appointed, nature of their expertise in specific functional areas and names of companies in which they hold directorship and membership / chairmanship of Board committees, as stipulated under Clause 49 of Listing Agreement with the Stock Exchanges, are provided in the Report on Corporate Governance forming part of the Annual Report. All the directors of the Company have confirmed that they are not disqualified for being appointed/ reappointed as directors in term of Section 274(1)(g) of the Companies Act, 1956.

INTERNAL AUDIT

Your Company has a well equipped internal audit department carrying out a regular independent evaluation of various activities undertaken by your Company through its branches, Zonal Offices and Corporate Office. The Internal Audit Department is headed by senior management personnel. The audit function maintains its independence and objectivity while carrying out assignments. It evaluates on a continuous basis, the adequacy and effectiveness of internal control mechanism, adherence to policies, procedures as well as regulatory and legal requirements. The function also proactively recommends improvement in operational processes and suggests streamlining of controls against various risks. The Audit Committee of the Board reviews the performance of the internal audit on continuous basis, gives direction to its functionaries and reviews effectiveness of internal control systems.

In addition to internal audit, concurrent audit is conducted on monthly basis by engaging 22 independence practicing Chartered Accountant Firms in most of our branches covering major volume of our business. Focus of concurrent audit is mainly on transaction level adherence to policies, procedures and guidelines issued by management and compliance to regulatory and statutory guidelines.

Systems and procedures are being upgraded to provide checks and alerts for avoiding/detecting fraud arising out of misrepresentation by borrower/s while availing the housing loans.

AUDITORS

M/s. B.M. Chaturvedi & Co., Mumbai, Chartered Accountant [Firm Registration No.114317W], retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. M/s. B.M. Chaturvedi & Co., have confirmed that if reappointed, it shall be within the limits of Section 224 (1B) of the Companies Act, 1956. The necessary eligibility certificate under Section 224(1B) of the Companies Act, 1956, was received from them. The Audit Committee and Board of Directors recommend the appointment of M/s. B.M. Chaturvedi & Co., Chartered Accountants, as the auditors of your Company.

AUDITORS REPORT

The notes to the accounts referred to in Auditors Report are self-explanatory and therefore do not call for any further comments.

DIRECTORS' RESPONSIBILITY STATEMENT

Your Directors would like to inform that the audited accounts containing the Financial Statement for the year ended 31st March 2012 are in conformity with the requirements of the Companies Act, 1956 and they believe that the financial statements reflect fairly the form and substance of transactions carried out during the year and reasonably present the Company's financial condition and results of operations. These Financial Statements are audited by the Statutory Auditors, M/s. B. M. Chaturvedi & Co., Chartered Accountants, Mumbai.

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

(i) in the preparation of accounts, the applicable accounting standards have been followed;

(ii) they 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 as at 31st March, 2012 and of the profit of the Company for year ended on date;

(iii) they have taken proper and sufficient care 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

(iv) they have prepared the annual accounts on a going concern basis.

CORPORATE GOVERNANCE

Your Company has complied with the provisions of Corporate Governance as under the amended Listing Agreements of the Stock Exchanges, with which the Company's shares are listed. Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, the followings form part of this Annual Report :

(i) Chairman & Managing Director's declaration regarding compliance of Code of Conduct by Board Members and Senior Management personnel;

(ii) Management Discussion & Analysis

(iii) Report on the Corporate Governance;

(iv) Auditors' Certificate regarding compliance of conditions of Corporate Governance.

FUTURE OUTLOOK

Housing / real estate sector which is slowly coming out of the mid 2008 slump has received good support from Union Budget 2012- 2013. How the budget has encouraged housing sector finance is given below:

- Existing scheme of interest subvention of 1 per cent on housing loan further liberalized.

- Existing housing loan limit enhanced to Rs. 25 lakh under priority sector lending.

- Limit of indirect finance under priority sector to housing loan enhance to Rs. 10 lakh from Rs. 5 lakh

- Allowing External Commercial Borrowings (ECB) for low cost affordable housing projects across major cities and towns and

- Setting up of a Credit Guarantee Trust Fund to ensure improved flow of institutional credit for housing loans.

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 quarters. This will lead to a rise in credit demand for housing. The liquidity conditions of your Company have remained comfortable during the year. Your Company has successfully raised funds from bank as well as non bank sources. Your Company does not expect any pressure on the liquidity front. This is because liquidity conditions in the banking system will continue to remain comfortable. A healthy demand for credit for home loan coupled with comfortable liquidity conditions will lead to a rise in disbursement.

ACKNOWLEDGEMENTS

Your Directors wish to place on record their gratitude to the National Housing Bank, the Company's Customers, Bankers, Shareholders, Debenture holders, Depositors and others for their assistance and co-operation and who have helped the Company in its endeavour. The Board also places on record its deep appreciation for the excellent support received from the employees at all levels during the year. The Directors also like to thank the Bombay Stock Exchange, the National Stock Exchange, NSDL, CDSL and the Credit Rating Agencies for their co-operation.

for and on behalf of the Board

Kapil Wadhawan

Chairman & Managing Director

Dated : 10th May, 2012 Place : Mumbai


Mar 31, 2011

Dear Shareholders,

The Directors are pleased to present the 27th Annual Report on the business and operations of your Company together with the Audited Statement of Accounts for the year ended 31st March, 2011.

FINANCIAL RESULTS

The Financial performance of the Company for year ended March 31, 2011 is summarized below:- (Rs. in Crore)

2010-2011 2009-2010

Gross Income 1,451.24 992.55

Less : Interest 964.55 669.84

Overheads 176.91 117.69

Depreciation 3.73 2.83

Profit before Tax & Exceptional Items 306.05 202.19

Add:Exceptional Items 35.43 -

Profit before Tax 341.48 202.19

Less:Provision for taxation 76.35 51.50

Profit after tax 265.13 150.69

Add : Balance b/d from the previous year 30.35 24.74

Surplus available for appropriations 295.48 175.43

Appropriations

Transferred to Special Reserve under

Section 36(1)(viii) of the Income Tax Act, 1961 40.00 35.00

Transferred to General Reserve 100.00 75.00

Transfer to Contingency Reserve 35.00 -

Dividend on Preference Shares 00.02 .03

Dividend for Earlier Year 6.59 5.34

Proposed Equity Dividend 36.57 24.61

Tax on proposed Dividends 7.34 5.09

Balance carried over to Balance Sheet 69.96 30.36

Total 295.48 175.43

PERFORMANCE

Your Company registered a remarkable growth in its operations. The operating profit before charging depreciation and tax amounted to Rs. 309.78 crore as against Rs. 205.02 crore in the preceding year; representing a rise of 51.10%. Profit After Ta x (PAT) went up by 75.94% to Rs. 265.13 crore from Rs. 150.69 crore in the previous year. The EPS improved to Rs. 26.43 as against Rs. 19.78 of the previous year.

The Company's core business is providing housing finance, and also carries on vertical businesses such as insurance and property services. These vertical businesses are operated through Company's subsidiary/associate companies which have strong synergies with the Company and offers customers a wide range of financial products and services under DHFL brand. Detailed review of the operations of each subsidiary companies are presented in the respective company's Directors' Report, a brief overview of the major developments thereof is also presented in the Management Discussion and Analysis, forming part of this Report.

Lending Operations

The cumulative loans disbursement of the Company as at the end of financial year 2010-11 was Rs. 19739.79 crore as compared to Rs. 13234.22 crore in the previous year. The housing loans/other loan sanctioned during the year ended 31st March, 2011 were to the extent of Rs. 8,949.48 crore as against Rs. 5,273.96 crore sanctioned during the previous year.

Disbursement

The loan disbursed during the year ended 31st March, 2011 was to the extent of Rs. 6,505.57 crore as against Rs. 3865.56 crore disbursed during the previous year.

DIVIDEND

In view of the overall performance of the Company and the objective of rewarding shareholders, while retaining capital to maintain a healthy capital adequacy ratio to support future growth, the Board of Directors has recommended a higher dividend of Rs. 3.50 per share (35%) on 10,44,26,402 equity shares of Rs. 10 each for the financial year ended 31st March, 2011, subject to approval of the shareholders at the ensuing Annual General Meeting, as compared to dividend of Rs. 3.00 per share (30%) for the financial year ended 31st March, 2010. This dividend shall be subject to tax on dividend to be paid by the Company. The total outgo on account of dividend (including dividend distribution tax) will be Rs. 43.91 crore as against Rs. 29.70 crore in the previous year.

As required under the Listing Agreement of the Stock Exchange(s), your Company has paid dividend of Rs. 6.59 crore and Rs. 1.12 crore as tax on the distribution of dividend for the financial year 2009-10 to new shareholders as on 31st March, 2010 on account of allotment of equity shares under QIP, Preferential issue and exercise of options under Employee Stock Option Scheme before the date of the book closure but prior to record date for the dividend payment.

Equity shares that may be allotted on allotment of equity shares under Employee Stock Option Scheme before the date of the book closure for payment of dividend which ranks pari passu with the existing shares will be entitled to receive the dividend for the financial year 2010-11.

SHARE CAPITAL

During the year, the Company had focused on measure to improve its net worth.

Pursuant to the approval of the shareholders at the Extra-Ordinary General Meeting held on 18th May, 2010, for placement of equity shares to Qualified Institutional Buyers (QIBs) and preferential issue of equity shares to the Promoter Group Entities and M/s. Caledonia Investment Plc. Accordingly the Committee of the Board of Directors has issued and allotted aforesaid equity shares along with the equity shares under DHFL ESOS Scheme's as under :

Qualified Institutional Placement :

During the year under review, your Company successfully completed issue of 1,68,69,095 equity shares of Rs. 10/- each, at a price of Rs. 222.30 per equity share, including premium of Rs. 212.30 per equity share, aggregating to Rs. 375 crore to Qualified Institutional Buyers (QIBs) in terms of Chapter VIII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 ("SEBI ICDR Regulations"), as amended. The QIP was opened for subscription to QIBs on Thursday, 27th May, 2010 and closed Friday, 28th May, 2010. The said QIP issue was overwhelmed by strong investor response and has been successfully subscribed. The said QIP was allotted on 2nd June, 2010. The BSE and the NSE had given trading permission for the equity shares issued to QIBs on 9th June, 2010.

Equity Shares on Preferential Allotment Basis :

To further strengthen the Company's financial position and to generate resources, inter alia, for investing in the businesses of the Company, on 12th June, 2010, your Company issued and allotted 40,00,000 and 10,00,000 equity shares respectively of Rs. 10/- each, at a price of Rs. 222.30 per equity share (including a premium of Rs. 212.30 per equity share), aggregating to Rs. 111.15 crore to Promoter Group Entities and M/s. Caledonia Investment Plc. respectively on a preferential basis in terms of the relevant Guidelines for Preferential Issues issued by the Securities and Exchange Board of India. The equity shares allotted to the Promoters Group Entities are locked-in for a period of three years and M/s. Caledonia Investment Plc for a period of one year from the date of allotment as per the SEBI guidelines.

Employee Stock Option Scheme's:

During the year under review, the Company allotted in tranches 5,30,763 equity shares of Rs. 10/- each upon exercise of stock options to the eligible employees of the Company under the Employee Stock Option Scheme – 2008 and 2009.

In view of above, the issued, subscribed and paid- up equity share capital of the Company increased from 8,20,26,544 equity shares of Rs. 10 each as on 31st March, 2010 to 10,44,26,402 equity shares of Rs. 10/- each as on 31st March, 2011.

Details of the shares issued and allotted under DHFL ESOS scheme's, as well as the disclosures in compliance with Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in Annexure to this Report.

The Company has paid the listing fees payable to the BSE and the NSE for the financial year 2010-11.

Redemption of Preference Shares:

During the year 30,00,000, 1% Redeemable Non-Convertible Preference Shares of Rs. 10/- each at a premium of Rs. 90/- per share aggregating to Rs. 30 crore allotted to ICICI Bank Ltd, carrying divided at @ 1% per annum were redeemed by your Company on 9th December, 2010 @ Rs. 136 per preference share. The aforesaid preference shares were redeemed by utilizing share premium.

RESOURCE MOBILISATION

The Indian economy however started showing revival during the latter half of the year. Due to Inflationary pressures, Reserve Bank of India had to tighten the monetary policy by increasing the key interest rates. The Company's average cost of borrowings for the year was 10.70% as against 10.97% in the previous year.

Subordinated Debt:

During the year, your Company raised Rs. 500 crore through the issue of long-term Unsecured Redeemable Non-Convertible Subordinated Debentures. The subordinated debt was assigned an 'AA' rating from both CARE and Brickworks.

As at 31st March, 2011, your Company's outstanding subordinated debt stood at Rs. 580 crore. The debt is subordinated to present and future senior indebtedness of your Company and has been assigned the highest rating by CARE and Brickworks. Based on the balance term to maturity, as at 31st March, 2011, Rs. 580 crore of the book value of subordinated debt is considered as Tier II under the guidelines issued by the National Housing Bank (NHB) for the purpose of capital adequacy computation.

Non-Convertible Debentures (NCD) :

During the year, your Company issued NCDs amounting to Rs. 585.00 crore on a private placement basis. The Company's NCD issues have been listed on the Wholesale Debt Market segment of the NSE. The Company's NCDs have been assigned the highest rating of 'AA' by both CARE and Brickworks. As at 31st March, 2011, NCDs outstanding stood at Rs. 1190.67 crore.

Commercial Paper:

The Commercial Paper (CP) programme of your Company has been rated by Credit Rating and Information Services of India Limited (CRISIL) and is assigned the highest rating of P1 (P One Plus) having validity period of twelve months. During the year your Company issued CPs to the extent of Rs. 580 crore in two tranches and placed them with investors at the most competitive rates of interest. As at 31st March, 2011, commercial papers outstanding stood at Rs. 97.49 crore.

Loans from Banks:

As part of its liability management, your Company endeavors to diversify its resource base in order to achieve an appropriate maturity structure and minimize the weighted average cost of borrowed funds. During the year under review, fresh term loans of Rs. 4,559.12 crore were availed from the commercial banks and financial institutions, taking the total term loan outstanding to Rs. 11,099.01 crore

Refinance from National Housing Bank (NHB) :

NHB has an internal rating mechanism for Housing Finance Companies (HFCs) and your Company has been assigned the highest rating for its refinance schemes by NHB. During the year, your Company has drawn refinance amounting to Rs. 100 crore under NHB's Refinance Scheme to Housing Finance Companies, 2003.

Deposits:

Deposits continued to grow during the financial year under review despite strong competition from banks. DHFL deposit portfolio has reached Rs. 557 crore as on 31st March 2011 with the customer base of 44,000. The year on year the net inflow of Company's Fixed Deposit was Rs. 377 crore through 22,000 new accounts of which new Trust Deposit was Rs. 200 crore through 1144 accounts. Your Company effected revision in interest rates on deposits during the year in line with market conditions.

Despite the 2nd half of the last financial turning quite unfavourable leading to repayment of Rs. 50 crore of deposits, thanks to focused efforts made by the Company with its agents, Company's deposit products continue to be a preferred investment for households and trusts., DHFL's deposit portfolio has grown from Rs. 182.15 Crore in 31st March, 2010 to Rs. 557 Crore as on the 31st March, 2011, expanding the deposit base from 21,000 in 31st March, 2010 to 44,000 in 31st March, 2011.

During the year Company initiated the growth strategy for mobilization of fixed deposit by introduction of ECS for periodical interest w.e.f 1st of April, 2010, which cover 95% of non cumulative depositor.

During the year under review your Company launched Aashray Deposit Plus, 20 Months and 30 Months Schemes, 365 Trust Deposit and 400 days Deposit Schemes.

CARE and Brickworks have, reaffirmed their CARE 'AA ' and BWR FAAA rating respectively for DHFL's deposits. This rating represents 'highest safety, attractive returns and impeccable service standards' as regards timely repayment of principal and interest.

Unclaimed Deposits:

As of March 31, 2011, public deposits amounting to Rs. 3.67 crore had not been claimed by 697 depositors. Since then, 240 depositors have claimed or renewed deposits of Rs. 1.82 crore. Depositors were intimated regarding the maturity of deposits with a request to either renew or claim their deposits.

CREDIT RATING

Your Company has received a P1 (pronounced as 'P one plus')credit rating from CRISIL for our short term debt (up to Rs. 1,500 crore) which indicates strong capacity for timely payment of our financial commitments. Your Company has also received ratings from CARE as CARE AA (FD) credit rating indicating 'high safety' and BWR FAAA credit rating indicating 'outlook stable' for our fixed deposits (up to Rs. 1,000 crore). With respect to our non-convertible debentures, we have received a CARE AA (FD) credit rating indicating 'high safety' (non- convertible debentures up to Rs. 1,190.67 crore, of which Rs. 585 crore was issued as at 31st March, 2011) and a BWR AAA indicating 'outlook stable' (non-convertible debentures up to Rs. 1,000 crore). Our Company has also received a CARE AA rating for our redeemable preference shares and for our subordinate debts.

CAPITAL ADEQUACY

Your Company is presently required by the NHB to maintain a minimum capital adequacy of 12% on a stand-alone basis. In addition, the NHB also requires that our Company transfers 20% of its annual profits to a reserve fund. In line with international norms, the RBI has also reduced the risk weight on individual housing loans to 50% for banks. The following table sets out our stand-alone capital adequacy ratios as at March 31 2009, 2010 and 2011.

Particulars As on 31st March

2011 2010 2009

Capital Adequacy 19.39% 17.26% 16.21% Ratio (Stand-alone)

Your Company's capital adequacy ratio has followed a general increasing trend during the three fiscal years ended 31st March, 2011. Your Company's stand-alone capital adequacy ratio was at 19.39% as on 31st March, 2011, which we believe provides an adequate cushion to withstand business risks and is above the minimum requirement of 12% stipulated by the NHB.

NON-PERFORMING ASSETS AND PROVISIONS FOR CONTINGENCY

Your Company scrupulously adhered to the prudential guidelines for Non-Performing Assets (NPAs), issued by the National Housing Bank (NHB) under its Directions of 2010, as amended from time to time As per the prudential norms prescribed by NHB, an asset is a non-performing asset (NPA) if the interest or principal installment is overdue for 90 days. HFCs have to set aside 2 per cent of the outstanding amount of teaser loans as provisions. For other housing loans, the NHB has mandated provisioning of 0.2 per cent by 31st March and 0.4 % by 30th September depending on the ageing of such overdues. As per the prudential norms, the income on such NPAs is not to be recognised.

The Non Performing Assets (NPA) consisting of the principal loans outstanding where payments of EMI/PEMI were in arrears for 90 days or more amounted to Rs. 94.29 crore. As per the prudential norms prescribed by NHB, the Company is required to carry a contingency provision of Rs. 36.42 crore in respect of Non Performing Housing Loan, Non Housing Standard Assets and other loans. However, as a matter of prudence, over the years, your Company has been transferring additional amounts to provision for contingencies. Provision for contingencies has been further strengthened during the year by a transfer of Rs. 9.00 crore, taking the total provision to Rs. 45.35 crore. With these provisions, your Company has not only provided for the standard non-housing loan assets at the prescribed rate of 0.40% but also provided fully for NPAs of Rs. 94.29 crore. As a result, your Company's net NPAs stood at 0.10% (0.73%) of the outstanding loans of Rs. 14,111.21 crore as at 31st March, 2011.

The Securitizations and Reconstructions of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI) has proved to be a useful recovery tool and the Company has been able to successfully initiate recovery action under this Act in the case of willful individual and corporate defaulters.

BRANCH EXPANSION & BUSINESS TIE-UP

Your Company has a strong marketing and distribution network, with a presence at 193 locations throughout India as on 31st March, 2011 including 100 branches and 67 service centers and 26 camp locations spread across the length and breadth of India. Additionally, your Company has international representative offices located in London and Dubai to cater to the needs of non-resident Indians. Your Company has entered into tie-ups with public sector banks ("PSBs") including Punjab & Sind Bank to penetrate the northern Indian region, United Bank of India to penetrate the eastern Indian region and Central Bank of India across pan India. DHFL's tie-ups with PSBs provide us with access to their customer database and extensive branch network. Our strong network coverage is designed to provide increased penetration to cater to the evolving needs of our existing customer base and tapping a growing potential customer base throughout India.

INVESTMENTS

The Investment Committee constituted by the Board of Directors is responsible for approving investments in line with limits as set out by the board.

The decisions to buy and sell upto the approved limit delegated by the board are taken by the Chairman & Managing Director, who is assisted by three Senior Executives. The investment function is carried out primarily to support the core business of housing finance to ensure adequate levels of liquidity and to maintain investment in approved securities in respect of public deposits raised as per the norms of NHB.

Considering the time lag between raising of resources and its deployment, the surplus funds are generally being parked with liquid fund schemes of mutual funds and short term deposits with banks. During the year, your Company earned Rs. 6.85 lacs by way of Income from Mutual funds and Rs. 7.81 crore by way of interest on deposits placed with banks. At the end of the year, your Company maintained Rs. 86.03 crore by way of short term deposits with banks.

As per NHB guidelines, HFCs are required to maintain Statutory Liquid Ratio (SLR) in respect of public deposits raised. Currently the SLR requirement is 12.50% of the public deposits. As at 31st March, 2011, your Company has invested Rs. 30.20 crore in approved securities comprising of government securities, government guaranteed bonds and NHB bonds. It is maintained within the limits prescribed by NHB.

Acquisition of Deutsche Postbank Home Finance Limited ("DPHFL"):

During the year, your Company along with Wadhawan Housing Private Limited, M/s. Caledonia Investment Plc, U.K and Amber 2010 Ltd., has acquired from BHW Holding AG, Germany 100% equity stake in Deutsche Postbank Home Finance Limited ("DPHFL"), a Housing Finance Company registered with the National Housing Bank. The business acquisition was made by entering into Share Sale Agreement for a consideration of Rs. 1079 crore.

Your Company acquired 67.56% equity stake in DPHFL which is eventually held through its a special purpose vehicle company i.e. DHFL Holdings Private Limited (a 100% subsidiary company) and the balance 32.44% has been acquired by other purchasers i.e. Wadhawan Housing Private Limited, Caledonia Investment Plc, U.K and Amber 2010 Ltd.

INSURANCE OF PROPERTY

Your Company has insured its various properties and facilities against the risk of fire, theft, etc., so that financials are not impacted in the unfortunate even of such incidents.

The employees of the Company are covered under the mediclaim facility against hospitalization.

DIRECTORS' AND OFFICER LIABILITIES

This policy covers the Director's and officer of the company against the risk of third party actions arising out of their actions /directions which may have resulted in financial loss to any third party. The Company has appropriately insured itself to mitigate such risk coming from any third party

INSURANCE COVERAGE TO BORROWERS

All the borrowers of the company were insured against accidental death, Property Insurance & Loss of Employment up to 3 EMI's by ICICI Lombard GIC.

Your Company has tied up with market leader, ICICI Prudential LIC for 'Home Assure' product for Mortgage Reducing Term Assurance, whereby the borrower gets insurance cover on his / her life to the extent of outstanding home loan amount as on the day of death. The primary objective is to ensure protection of the loan portfolio from default due to sudden demise of the borrowers.

Your Company insured close to 87% of the new home loan portfolio acquired in the year 2010-11. With consistent growth in retail Insurance business your company has taken a big leap in Retail Cross sell business this year with a growth of 305% over the last fiscal year. Over all insurance Fee income growth in FY 2010-11 was 147% over 2009-10.

NHB GUIDELINES

The Company has been following the various Circulars, Notifications and Guidelines issued by National Housing Bank (NHB) from time to time.

The Circulars and the Notifications issued by NHB are also placed before the Board at regular intervals along with the compliance of the same.

During the year under review, NHB has conducted an inspection of the Company under Section 34 of the NHB Act, 1987 and Company has furnished the replies to the same.

CODES AND STANDARDS

During the year under review, the National Housing Bank has issued revised comprehensive Know Your Customer (KYC) Guidelines and Anti Money Laundering Standards in the context of recommendations made by the Financial Action Task Force on Anti Money Laundering Standards and on Combating Financing of Terrorism Standards. During the year, the Board reviewed and noted the amendments to the Company's KYC and Prevention of Money Laundering Policy as stipulated by NHB. Your Company has adhered to the compliance requirements in terms of the said policy for monitoring and reporting cash/suspicious transactions.

The Fair Practices Code framed by NHB seeks to promote good and fair practices by setting minimum standards in dealing with customers, increase transparency so customers have a better understanding of what they can reasonably expect of the services being offered, encourage market forces through competition to achieve higher operating standards, promote fair and cordial relationships between customers and the housing finance company and foster confidence in the housing finance system. During the year, your Company has adhered to the Fair Practices Code as approved by the Board of Directors.

Code of Conduct:

Your Company has adopted a revised Code of Conduct for its Board Members and Senior Management personnel. The code of conduct has also been posted on the official website of the Company. A copy of the code of conduct has been circulated to the directors and senior Management. The Declaration by the Chairman & Managing Director of the Company regarding compliance with the Code of Conduct for Board Members and

Senior Management is annexed with the Corporate Governance report

Risk Management Framework:

Your Company has a Risk Management Framework, which provides the mechanism for risk assessment and mitigation. The ALCO Management Committee (AMC) comprises the Chairman & Managing Director, the Chief Executive Officer, Chief Operating Officer and members of senior management.

During the year, the AMC reviewed the risks associated with the business of your Company, its root causes and the efficacy of the measures taken to mitigate the same. Thereafter, the Board of Directors also reviewed the key risks associated with the business of your Company, the procedures adopted to assess the risks and their mitigation mechanisms.

BRANDING

We believe that the 'DHFL' brand is one of the most important intangible assets that we own. During this fiscal year, the Company was, by the following bodies in recognition of Company's operation and conduct of business:

- Ranked as "POWER BRAND" amongst the top 200 brands in India by M/s Planman Marcom,

- Ranked at the best company to work for in India by Times of India 's survey of "Best Companies to Work For"

- Greentech Foundation, India has chosen the Company for the prestigious Greentech HR Excellence Award.

- has been chosen as "The Newsmaker of the Year" by a leading real estate publication – Realty Plus.

We had over a million visits to our website on business and property related topics on our website www.dhfl.com during the year. We continued to have leadership presence at premier housing finance industry and real estate property events.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Corporate Social Responsibility is a sustained activity wherein an organization and its employees take up social causes with a view to serve the society. The real work in CSR extends beyond the statutory obligations and sees organizations and its people voluntarily taking up programmes and initiatives to improve the quality of life of the local community and also the society at large.

Your Company in association with Mumbai Mobile Crèches participated in Standard Chartered Mumbai Marathon - 2010 on 16th January, 2011.

Your Company had taken initiatives to help support the cause of children of construction workers at the construction sites in Mumbai.

In line of agreement with Concern India Foundation (CIF), based in Mumbai, your Company continues to support for promoting activities linked to upliftment of members belonging to weaker sections of society. Concern India Foundation is undertaking the activities linked to the following major issues:

- Education

- Community Development

- Health

- Environment

The financial support to Concern India Foundation will directly benefit the following important constituents of the society:

- Women

- Children

- Senior citizens

Education Trust

Your Company also provides learning assistance to its employees who aspire to undertake higher education through its trust "Late Shri Rajesh Kumar Wadhawan DHFL Employees Welfare Trust". Besides education, the said Trust also support exigency family medical support, marriage support for deserving employees of DHFL across locations especially the staff in lower grades who runs out of cash in case of any exigencies and with such other objects of charitable nature.

SECRETARIAL AUDIT

As directed by the Securities and Exchange Board of India (SEBI) Secretarial Audit is being carried out at the specified period, by practicing company secretary. As a measure of good corporate governance the Company had appointed M/s. Aabid & Co, practicing company secretaries to conduct Secretarial Audit of the Company. The Secretarial Audit Report for the Financial Year ended 31st March, 2011 is provided in this Annual Report.

HUMAN RESOURCES

Improved performance and renewed commitment of the employees apart from improvement in various systems like Performance Management have triggered the consolidation, diversification and growth of your Company.

Your Company has covered considerable ground in establishing itself as a preferred employer in the Indian Housing Sector. During the year, your Company managed to attract talent from leading banks, multinational organizations and leading business schools.

A study conducted jointly by The Economic Times & 'Great Place to Work Institute' recognizing India's best companies to work for in 2010 rated your Company among the 100 Best Companies.

As a part of this re-positioning, your Company engaged the services of globally renowned firm - Price Watehouse Cooper and IBM in reorienting and restructuring the HR systems and processes including Organization Diagnostics & Structuring, Performance Management System Design & Implementation. Thereby, your Company is realigning the compensation in line with the market, in phases and has also revamped the Performance Management System in accordance with the business imperatives.

Your Company has made an endeavour to constantly upgrade the knowledge and enhance the skill-set of the employees.

As part of the development initiatives, in-house functional and behavioral interventions were organized at regular intervals. Employees were nominated to leading institutes for Executive Development Programs and Seminars/Workshops conducted by various Chambers of Commerce to keep them abreast with the latest developments in the financial as well as other sectors.

The work force strength of your Company as on 31st March 2011 was 1,137. The total work force cost during the year has gone up by 57.31% from Rs. 39.05 crore to Rs. 61.43 crore. This is mainly due to the increase in work force to meet the requirements on account of significant expansion in terms of geography as well as in business volumes and the salary revisions effected during the year. Few additional positions are added for meeting business requirements and to give greater focus to functions like Credit Appraisal and Operations.

Your Company has entered into Deed of Trust with Life Insurance Corporation of India which covers the Company's employees under the group gratuity schemes with the Life Insurance Corporation of India ('LIC'). The schemes are defined benefit schemes and are funded in line with the LIC's actuarial valuation carried out at year end.

PARTICULARS OF EMPLOYEES

In accordance with the provisions of Section 217(2A) of the Companies Act, 1956 and the rules framed thereunder, the names and other particulars of employees are set out in the annexure to the Directors' Report.

DHFL EMPLOYEES STOCK OPTION SCHEME (ESOS)

Besides the existing DHFL Employees Stock Option Scheme 2008 and 2009, the Remuneration & Compensation Committee, during the year under review, considered and approved grant of 12,34,670 (out of 12,75,000) Stock Options available for grant, to the employees of the Company, at the pre-determined price under the DHFL ESOS Scheme's – 2009 Plan II.

The Remuneration & Compensation Committee of the Board of Directors has also considered re-issue of 1,45,800 stock options out of 1,70,000 stock options, which were cancelled/lapsed without being exercised and available under ESOS–2008 Plan–I, to the employees, at the pre-determined price under the DHFL ESOS Scheme's –2008 Plan-I.

The particulars of options issued under the said Plan as required by SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are appended as Annexure and forms part of this report.

INFORMATION TECHNOLOGY AND COMMUNICATIONS

Information Technology department has set up 'Central Integrated Information System (CIIS)' which is an umbrella providing solutions to almost all areas of activities of your Company.

During the year 2010-11, apart from upgrading the existing software applications with enhanced/added features to meet the current and emerging business needs, certain new application systems were implemented. The new systems developed and implemented include a system of on-line monitoring of loan assets. The Asset-liability system was upgraded to facilitate auto-generation of gap report on daily basis for major assets and liabilities. System for projecting and analyzing future cash inflows and outflows under various financial, market and business scenarios has been developed which also facilitates gap analysis. IT infrastructure platform like VPN (Virtual Private Network), routers, switches and firewalls were upgraded to enhance the performance and security of the network. The e- mailing facility was upgraded with an efficient and improved solution. With an objective to strengthen and facilitate technological support in the organization, IT hardware and software infrastructure is being upgraded.

IT security mechanism was also strengthened to prevent virus attacks and unauthorized access. The initiative to create a paperless environment in the Company was further taken forward by using Document Management System, scanning and e- storing large volume of documents.

SUBSIDIARY COMPANIES

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet Profit and Loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. The Company will make available the Annual Accounts of the subsidiary companies and the related detailed information to any members of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open to inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies. The same will also be hosted on our website, www.dhfl.com.

Your Company has 5 subsidiaries, namely, DHFL Vysya Housing Finance Limited, Deutsche Postbank Home Finance Limited, Aadhar Housing Finance Private Limited, DHFL Property Services Limited and DHFL Holdings Private Limited.

During the year under review your Company subscribed equity shares in the subsidiary companies. The details are as given below :

- 21,60,10,000 equity shares of Rs. 10/- each at par in DHFL Holdings Private Ltd.

- 5,00,00,000 equity shares of Rs. 10/- each at par in Aadhar Housing Private Ltd.

Details of aforesaid subsidiaries companies are covered in Management Discussion and Analysis Report forming part of the Annual Report.

Review of Subsidiary Companies:

DHFL Vysya Housing Finance Ltd. (DVHFL) is a housing finance company registered with NHB and has operations primarily in the States of Karnataka, Andhra Pradesh, Tamil Nadu and Maharashtra.

For the year ended March, 31, 2011, DVHFL has reported a profit after tax of Rs. 12.11 crore as compared to Rs. 8.55 crore in the previous year. The Board of Directors of the subsidiary company has declared an interim dividend of 15% and has recommended a final dividend of 10% making the total dividend to 25%.

DHFL Property Services Limited [DPSL] a wholly- owned subsidiary of the Company offers real estate/property services under one roof, as a value added services along with housing. It also provides Real Estate & Property Advisory Services to leverage wide database of customers and relationship with developers and builders.

The operations of the said company began during the financial year 2009-10. For the year ended March, 31, 2011, DPSL has reported a profit after tax of Rs. 32 crore as compared to Rs. 18 crore in the previous year.

DHFL Holdings Private Limited [DHPL] was incorporated on 3rd January, 2011 and is a wholly- owned subsidiary of the Company. The subsidiary manages investments in equity, acquire and hold shares, stocks, debentures, debenture stock, bonds mutual funds, real estate, fixed income and structured products.

Aadhar Housing Finance Private Limited - Your Company, along with its subsidiary DHFL Vysya Housing Finance Ltd., promoted and incorporated a new company "Aadhar Housing Finance Private Limited" [Aadhar Housing] as a Housing Finance Company registered with a National Housing Bank (NHB) with equity participation agreement between your Company, DHFL Vysya Housing Finance and International Finance Corporation – Washington in ratio of 50:30:20 respectively. Aadhar Housing commenced its operations on 8th February, 2011 in the State of Uttar Pradesh, in Lucknow and it further proposes to market retail housing loans for the low income segment of the Indian population in the states of Uttar Pradesh, Madhya Pradesh, Bihar, Chhatisgarh, Jharkhand and Orissa.

Deutsche Postbank Home Finance Ltd.

Deutsche Postbank Home Finance Ltd. (DPHFL), was incorporated in India on 2nd March 1995, a National Housing Bank (NHB) registered housing finance company having its registered office in New Delhi & Corporate Office in Gurgaon. Deutsche Postbank Home Finance Limited has a network of 40 Branches and sales offices across India offices across India.

In terms of Share Sale Agreement DHFL acquired 67.56% equity stake in Deutsche Postbank Home Finance Limited (DPHFL) which is held through its 100% owned SPV and the balance 32.44% has been acquired by other purchasers i.e. Wadhawan Housing Private Limited, Caledonia Investment Plc, U.K and Amber 2010 Ltd.

CONSOLIDATION OF ACCOUNTS

The audited Consolidated Accounts and Cash Flow Statement, comprising of DHFL and its subsidiary Companies namely DHFL Vysya Housing Finance Ltd., DHFL Property Services Ltd, DHFL Holdings Pvt. Ltd., Aadhar Housing Finance Pvt. Ltd. and Deutsche Postbank Home Finance Ltd., are annexed to this Annual Report. The Auditors' Report on the Consolidated Accounts is also attached. The Consolidated Accounts have been prepared in accordance with the Accounting Standards prescribed by the Institute of Chartered Accountants of India in this regard.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO

The particulars regarding foreign exchange earnings and expenditure appear as Item No. B–41 in the 'Other Notes to Accounts'. (Schedule Q) Since the Company is not engaged in any manufacturing facility, the other particulars relating to conservation of energy and technology absorption as stipulated in the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are not applicable.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956 read with the Clause 158 of the Articles of Association of the Company, Shri Ajay Vazirani and Shri V. K. Chopra, directors of your Company retire by rotation and being eligible; offer themselves for re-appointment at the ensuing Annual General Meeting. Necessary resolutions for the re-appointment of the aforesaid directors have been included in the notice convening the ensuing AGM.

Brief resume of the Directors proposed to be appointed / re-appointed, nature of their expertise in specific functional areas and names of companies in which they hold directorship and membership / chairmanship of Board committees, as stipulated under Clause 49 of Listing Agreement with the Stock Exchanges in India, are provided in the Report on Corporate Governance forming part of the Annual Report. All the directors of the Company have confirmed that they are not disqualified for being appointed/ reappointed as directors in term of Section 274(1)(g) of the Companies Act, 1956.

AUDITORS

M/s. B.M. Chaturvedi & Co., Mumbai, Chartered Accountant [Firm Registration No.114317W], retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. M/s. B.M. Chaturvedi & Co., have sought reappointment and confirmed that their reappointment shall be within the limits of Section 224 (1B) of the Companies Act, 1956. The necessary eligibility certificate under Section 224(1B) of the Companies Act, 1956, was received from them. M/s. B. M. Chaturvedi & Co. was earlier a proprietary concern and has been converted into partnership concern by including new partners. The Audit Committee and Board of Directors recommend the appointment of M/s. B.M. Chaturvedi & Co., Chartered Accountants, as the auditors of your Company.

AUDITORS REPORT

The notes to the accounts referred to in Auditors Report are self-explanatory and therefore do not call for any further comments.

The Company has also internal audit system implemented by in-house department and supported by various independent Chartered Accountants firms appointed by Concurrent Auditors to carry out concurrent Audit of the branches.

Systems and procedures are being upgraded to provide checks and alerts for avoiding/detecting fraud arising out of misrepresentation given by borrower/s while availing the housing loans.

DIRECTORS' RESPONSIBILITY STATEMENT

Your Directors would like to inform that the audited accounts containing the Financial Statement for the year ended 31st March 2011 are in conformity with the requirements of the Companies Act, 1956 and they believe that the financial statements reflect fairly the form and substance of transactions carried out during the year and reasonably present the Company's financial condition and results of operations. These Financial Statements are audited by the Statutory Auditors, M/s. B. M. Chaturvedi & Co., Chartered Accountants, Mumbai.

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

(i) in the preparation of accounts, the applicable accounting standards have been followed;

(ii) they 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 as at 31st March, 2011 and of the profit of the Company for year ended on date;

(iii) they have taken proper and sufficient care 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

(iv) they have prepared the annual accounts on a going concern basis.

CORPORATE GOVERNANCE

Your Company has complied with all the provisions of Corporate Governance as prescribed under the amended Listing Agreements of the Stock Exchanges, with which the Company's shares are listed. Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, the followings form part of this Annual Report :

(i) Chairman & Managing Director's declaration regarding compliance of Code of Conduct by Board Members and Senior Management personnel;

(ii) Management Discussion & Analysis

(iii) Report on the Corporate Governance;

(iv) Auditors' Certificate regarding compliance of conditions of Corporate Governance.

Future Outlook

Housing / real estate sector which is slowly coming out of the mid 2008 slump, has received good support from Union Budget 2011- 2012. While the budget has encouraged housing sector finance as given below:

- Existing scheme of interest subvention of 1 per cent on housing loan further liberalized.

- Existing housing loan limit enhanced to Rs. 25 lakh of dwelling units under priority sector lending.

- Provision under Rural Housing Fund enhanced to Rs. 5,000 crore.

With the recent recovery 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 quarters. This will lead to a rise in credit demand for housing. The liquidity conditions of your Company have remained comfortable during the year, so far. Your Company has successfully raised funds from bank as well as non bank sources. Your Company does not expect any pressure on the liquidity front in the months to come either. This is because liquidity conditions in the banking system will continue to remain comfortable. A healthy demand for credit for home loan seeks coupled with comfortable liquidity conditions will lead to a rise in disbursement

ACKNOWLEDGMENTS

Your Directors wish to place on record their gratitude to the NHB, the Company's Customers, Bankers, Shareholders, Debenture holders, Depositors and others for their assistance and co- operation and who have helped the Company in its endeavour. The Board also places on record its deep appreciation for the excellent support received from the employees at all levels during the year. The Directors also like to thank The Stock Exchange, Mumbai, the National Stock Exchange, NSDL, CDSL and the Credit Rating Agencies for their co-operation.

for and on behalf of the Board

Kapil Wadhawan

Chairman & Managing Director

Dated: 13th May, 2011

Place : Mumbai


Mar 31, 2010

The Directors are pleased to present the 26th Annual Report on the business and operations of your Company together with the Audited Statement of Accounts for the year ended 31st March,2010.

FINANCIAL RESULTS

The Financial performance of your Company for year ended March 31, 2010 is summarized below:-

(Rupees in Crore)

2009-2010 2008-2009

GROSS INCOME 992.55 692.46

Less : Interest 669.84 492.91

Overheads 109.19 67.02

Provision for Contingencies 8.50 6.00

Depreciation 2.83 2.42

Profit Before Tax 202.19 124.11

Less : Provision for taxation 51.50 32.35

Profit After Tax 150.69 91.76

Less Prior Period Adjustment Nil 5.44

Add : Balance b/f from the previous year 24.74 21.20

Surplus available for appropriations 175.43 107.52

APPROPRIATIONS

Transferred to Special Reserve under

Section 36(1 )(viii) of the Income Tax Act, 1961 35.00 20.00

Transferred to General Reserve 75.00 45.00

Dividend on Preference Shares 0.03 0.07

Dividend for Earlier Year 5.34 Nil

Proposed Equity Dividend 24.61 15.13

Tax on proposed Dividends 5.09 2.58

Balance carried over to Balance Sheet 30.36 24.74

Total 175.43 107.52

PERFORMANCE

The financial year 2009-10 which is silver jubilee year of your Companys Operation, has indeed proved to be a momentous year and your Company has further consolidated its position in the housing finance industry. The year under review has been a challenging one. Indian economy growth slowed to slightly less than 7% in the fiscal year 2009-10 due to impact of the global downturn. The core real estate / housing sector has experienced series of setbacks in 2008. While the demand for housing has been stagnant, high costs of construction, major liquidity crunch in the banking system and high interest rates on loans have caused the turbulence in the sector. But towards the latter part of 2008, the sector witnessed correction in prices between 10% to 30% in far metros depending on the location. With stimulus package and fiscal concession given to the Housing Sector, the Housing Finance Industry witnessed a hectic activity with the Banks, Financial Institutions and other corporate bodies joining the fray in a big way, Developers too have shifted in developing and offering affordable homes, which will be realistic owing to interest rates and inflation coming down. However, with stiff competition and falling rates of interest, the trend of stagnant demand for housing as end-buyers do not have enough money to even buy affordable homes due to uncertainty in the markets and economic turmoil.

Your Company registered a remarkable growth in its operations. The operating profit before charging depreciation and tax amounted to Rs. 205.02 crore as against Rs. 126.53 crore in the preceding year; representing a rise of 62.03% Profit After Tax (PAT) went up by 64.22% to Rs 150.69 crore from Rs. 91.76 crore in the previous year. The EPS improved to Rs 1 9.78 as against Rs. 1 5.1 5 of the previous year.

Your Companys core business is providing housing finance and also carries on business vertical such as Insurance, Technical Consultancy and Project Management Services and Property Services. These vertical of the business are operated through Companys subsidiary /associate companies which have strong synergies with the Company and offer customer wide range of financial products and services under DHFL brand. Detailed review of the operations of each subsidiary companies are presented in the respective Companys Directors Report, a brief overview of the major developments thereof is also presented in the Management Discussion and Analysis, forming part of this Report.

Lending Operations

The cumulative loans disbursement of your Company as at the end of financial year 2009-10 was Rs. 13234.22 crore as compared to Rs. 9368.66 crore in the previous year. The housing loans/other loan sanctioned during the year ended 31st March, 2010 were to the extent to Rs. 5273,96 crore as against Rs. 2698.18 crore sanctioned during the previous year.

Disbursement

The loan disbursed during the year ended 31 st March, 2010 was to the extent of Rs. 3805.50 crore as against Rs. 2266.02 crore disbursed during the previous year.

DIVIDEND

Keeping in view excellent financial results and fund requirements in the near future, the Board has recommended a dividend of Rs. 3/- pershare [30%] on 8,20,26,544 equity shares of Rs.10/- each for the financial year ended 31 st March, 2010, subject to approval of the shareholders at the ensuing Annual General Meeting. The total outgo on account of dividend (including dividend distribution tax) will be Rs. 29.70 crore as against Rs. 17.71 crore in the previous year.

Your Company paid dividend of Rs. 5.34 crore and Rs. 0.91 crore as tax on the distribution of above dividend to new shareholders on account of Final Dividend for the year 2008-09 as required under the Listing Agreement as those shares were allotted after 31 st March, 2009, but prior to record date for the dividend payment.

Equity shares that may be allotted on allotment of shares under QIP, Preferential issue and exercise of options under Employee Stock Option Scheme before the date of the book closure for payment of dividend will rank pari passu with the existing shares and be entitled to receive the dividend.

SHARE CAPITAL

During the year, your Company had focused on measure to improve its net worth.

Pursuant to the special resolution passed at the Extra - Ordinary General Meeting of the Company held on Saturday, 27th, June, 2009, your Company issued and allotted following securities.

Qualified Institutional Placement:

During the year under review, your Company successfully completed issue of 1,60,12,231 equity shares of Rs. 1 0/- each at a price of Rs. 141/- per equity share, including a premium of Rs. 131/- per equity share, aggregating Rs. 225.77 crore to Qualified Institutional Buyers (QIBs) as per Chapter Xlll-A of erstwhile SEBI (DIP) Guidelines, 2000, through the QIR The QIP was opened for subscription to QIBs on 29 June 2009 and closed on 30th June, 2009 and the same was allotted on 7th July, 2009. The BSE and the NSE had given trading permission for the equity shares issued to QIBs on 9th July, 2009.

Equity Shares on Preferential Allotment Basis:

To further strengthen the Companys financial position and to generate resources, inter alia, for investing in the businesses of the Company, the Company issued and allotted in 16th July, 2009, 53,50,000 equity shares of Rs.10 each at a premium of Rs. 131/- each aggregating Rs. 75.44 crore to promoters and a promoter group entity on a preferential basis in terms of the relevant Guidelines for Preferential Issues, issued by the Securities and Exchange Board of India. The equity shares allotted as aforesaid Promoters are locked-in for a period of three years.

Employee Stock Option Scheme - 2008

During the year under review, the Company allotted in four [4] tranches 1,41,338 equity shares of Rs.10/- each upon exercise of stock options by the eligible employees under the Employee Stock Option Scheme-2008.

In view of above, the issued, subscribed and paid-up equity share capital increased from 6,05,22,975 equity shares of Rs.10 each as on March 31, 20009 to 8,20,26,544 equity shares of Rs. 10/- each as on March 31,2010..

Details of the shares issued and allotted under ESOS, as well as the disclosures in compliance with Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1 999 are set out in Annexure to this Report.

The Company has paid the listing fees,payable to the BSE and the NSE for the financial year 2009-10

Further Issue of Shares

The Board of Directors of your Company by its resolution dated 21st April, 2010 has resolved to augment resources of your Company by way of issue of equity shares to (1) Qualified Institutional Buyers (2) Caledonia Investments Pic (3) Promoter Group Entities up to an amount of Rs. 500 crore, subject to the approval from the members of the Company in the Extra Ordinary General meeting scheduled to be held on 1 8th May, 201 0.

Rights Issue

The proposal of raising of funds during the year through a Rights Issue for part funding the Companys various ongoing/proposed projects was dropped in view of the then prevailing market conditions. The Company has neither filed offer document nor announced any Record date for the same.

Commercial Paper

The Commercial Paper (CP) programme of your Company has been rated by Credit Rating and Information Services of India Limited (CRISIL) and is assigned the highest rating of PI + (P One Plus) having validity period of twelve months. As at 31st March 201 0 your Company had issued CPs to the extent of Rs. 300 crore and placed them with investors at the most competitive rates of interest. The subscription amount of the Commercial Papers is utilized for working capital.

FUNDS RAISING

Term Loans

As part of its liability management, your Company endeavors to diversify its resource base in order to achieve an appropriate maturity structure and minimize the weighted average cost of borrowed funds. During the year under review, fresh term loans of Rs 3243.84 crore were availed from the Banks and Financial Institutions, taking the total term loan outstanding to Rs. 6539.89 crore. These loans were drawn at varying spreads below the prime lending rates of the respective banks.

Refinance from National Housing Bank

During the year, your Company availed itself refinance facility of Rs.780 crore. As on 31st March, 2010 refinance outstanding from NHB is Rs. 1487.57 crore.

Non-Convertible Debentures

During the year, your Company issued secured, redeemable and non-convertible debentures (NCDs) amounting to Rs. 225 crore through private placement with institutional investors and mutual funds.

All the term loans and secured borrowings, are secured by way of the first charge on all the movable and immovable properties of your Company, both present and future and ranking pari-passu inter-se basis in favour of all the secured lenders.

FIXED DEPOSITS

During the year under review, your Company has achieved phenomenal growth in its Fixed Deposits Portfolio. The Outstanding Deposit as of March 31, 2010 stood at Rs 182.16. crore compared to Rs.46.88 crore as at 31st March, 2009, showing the growth level of 289% in FY 2009-1 0. During the year under review around 13,000 New Depositors have shown their confidence by investing in the Companys Fixed Deposit Scheme taking the total number of Depositors to 21,910 Accounts. Your Company now has on its panel most of the Top Line Corporate Brokers as Intermediaries promoting its Deposit Schemes.

Being the year of Silver Jubilee Celebration and to reward the confidence shown by the depositors, your Company has launched "Rajat Jayanti Depositor Scheme" in July 2009, wherein all the existing Deposits were given 25 basis point extra interest rates over and above the existing rates. In the month of December 2009, "DHFL Swayamsiddha Deposit Scheme" was launched targeting the Women Depositors. The Scheme received an overwhelming response, mobilizing as on 31 st March, 201 0, deposits of Rs. 1 2.28 crore in as many as 2209 Depositors.

Your Company has renewed the Permission of the Charity Commissioner, Govt, of Maharashtra, for Accepting Deposits from Public Trusts. During the Year, your Company has received BWR FAAA Rating from Brickwork Ratings Agency, indicating Excellent Credit Quality & Highest Safety.

As on 31st March. 2010, 37 depositors had not claimed the deposits amounting to Rs. 1 5.65 lakh. Depositors have been intimated regarding the maturity of their deposits, with a request to either renew or claim their matured deposits. Since then, 1 (one) depositor have either renewed or claimed their deposits aggregating to Rs 1.50 lakh. The fixed deposits accepted by your Company are secured appropriately to the extent of floating charge created by way of Deed of Trust, as per the guidelines issued by NHB.

CREDIT RATING

Your Company had received rating from CRISIL as PI + (pronounced as P one plus) for the short- term debt issue, indicating the strongest capacity for timely payment of the financial commitment.

Your Company continued to enjoy CARE AA+ (FD) rating from CARE for Fixed Deposits and Secured Non-Convertible Debentures, indicating high safety1.

Your Company also enjoys CARE AA+ rating from CARE for its redeemable preference shares raised / to be raised to meet capital adequacy ratio. Your Company has received a rating of CARE AA from CARE for its subordinate debts.

CAPITAL ADEQUACY

During the year the capital adequacy ratio of the Company was at a comfortable level of 1 7.26% as on 31 st March, 201 0 as against the minimum requirement of 12% stipulated by the National Housing Bank (NHB).

NON-PERFORMING ASSETS AND PROVISIONS FOR CONTINGENCY

Your Company scrupulously adhered to the prudential guidelines for Non-Performing Assets (NPAs), issued by the National Housing Bank (NHB) under its Directions of 2001, as amended from time to time. During the year under review your Company has made required provision for contingencies in accordance with the guidelines on prudential norms issued by the National Housing Bank

The amount of loans where the installments are outstanding for over 90 days as on 31st March, 2010, aggregate to Rs. 100.48 crore. The non- performing loans amount to 1.1 6% of the total loan portfolio as compared to 1.47% in the previous year. Your Company has initiated various measures for speedy recovery and has also taken action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) and is thus able to take recovery action against the defaulters.

INVESTMENT

The Investment Committee constituted by the Company is responsible for approving investment in line with limit as set out by the Board. The decisions to buy and sell upto approved limit of Rs. 500 crore as delegated by the Board are taken by the Chairman & Managing Director, who is assisted by two senior executives. The investment functions are carried out primarily to support the core business of housing finance to ensure adequate levels of liquidity and to maintain statutory liquidity.

Housing Finance Companies (HFCs) are required to maintain liquid assets of 12.50% of the outstanding public deposits. Your Company continued to maintain its statutory liquidity ratio (SLR) as stipulated by NHB. Accordingly, your Company has made adequate investments in approved securities and bank deposits as on March 31,2010 to meet the requirement of SLR.

INSURANCE OF PROPERTY

Your Company has insured its various properties and facilities against the risk of fire, theft, etc., so that financials are not impacted in the unfortunate even of such incidents.

The employees of your Company are covered under the medliclaim facility against hospitalization.

INSURANCE COVERAGE TO BORROWERS

Your Company has tied up with Future Generali India Insurance Co. Ltd for insurance of its housing loan products called Sampoorna Suraksha Plan which covers the borrowers of the company as under:

(a) Accidental Insurance: Personal accident risk cover, free of cost upto an amount of outstanding loan at any particular point of time during the term/tenure of the term loan.

(b) Mortgaged Property Insurance: The property acquired out of loan, for and upto an extent of the outstanding loan amount, under risk, against fire, earthquake and allied perils affecting the concerned property.

(c) Loss of Employment: Loss of job cover is upto three EMIs of loan or a maximum of Rs 25,000/-, whichever is lower.

With the consistent growth in insurance business, your Company has explored to cross sell as another revenue channel and has tied up as a Corporate Agents with SBI Life Insurance Company for life products and for non-life products with ICICI Lombard GIC. For safety of loan portfolio, your Company has also entered into an arrangement with ICICI Prudential LIC for mortgage linked term assurance product "Home Assure". Insurance products are linked with home loans of customers, both new and existing ones. Under this scheme, the borrower gets an insurance cover on his life to the extent of the outstanding home loan. This scheme has been introduced to ensure protection from loan default to the families of deceased borrower. We have insured more than 70% of our new portfolio acquired in 2009-10.

TECHNOLOGY

During the financial year 2009-1 0, your Company further strengthened its IT infrastructure and systems to support its operations. It upgraded its main data centre infrastructure. Connectivity to branches was upgraded though the WAN system. New application software was implemented to provide improved information flow to branches and to further support the collection system.

In view of rapid expansion of business operations and its volume in all its loan products, the present system was not able to cope with the current business volume and as a part of implementation of software programme, your Company has engaged IBM (I) Ltd for business process re-engineering and to develop software applications as per the Companys current need of business volume.

BRANCH EXPANSION & BUSINESS TIEUP

In order to increase its share of the housing finance business by tapping underserved segments of the Indian economy, your Company is expanding its pan-India presence by setting up new offices across regions where the Company has been hitherto not present including Northern and North Eastern India to meet target customers of LMI segments. Your Companys presence includes those places where little or no presence for other HFCs and private banks in India. The geographical spread of the Company is based on both macro and micro economic factors and since business spread is at outskirts of the cities, around 66% of the business is generated from the total presence within 50 km radius. To support the growth, Company has an integrated branch network at 93 branch office (including its representative office in London and Dubai) 71 Services Centres and 30 Camp Locations, 5 Zonal Offices, 7 Regional Processing Units, and 2 alliance operations with nationalized banks i.e. Punjab & Sind Bank and United Bank of

India which spread across the length and breadth of the country, has resulted in optimization of its operational costs and has improved delivery mechanism. Your Company has linked all branch offices to a central database which helps in periodic assessment of loan portfolio and provides specific advantages in terms of efficiency and cost savings.

DEPOSITORY SYSTEM

As the members are aware the Companys share are compulsory tradable in electronic form. As on 31st March, 2010 almost 98.98% of the Companys total paid up capital -representing 8,1 1,93,408 equity shares are in dematerialised form. In view of the numerous advantage offered by the depository system members holding shares in physical mode are advised to avail of the facility of dematerialization on either of depositories.

HUMAN RESOURCES AND TRAINING

The nature of your Companys business requires trained and skilled professionals. Your Company has been successful in attracting and retaining highly qualified professionals, with impeccable professional track record, by offering them a challenging work environment, coupled with competitive compensation including Stock Ownership. Owner mindset is the basic tenet which drives your Companys human resource policy and this enables them to unleash their inner entrepreneurial energy without compromising on team work and ethics.

Housing / Financial services is a knowledge intensive sector where employee skills form a critical aspect in service delivery. Your Company has developed comprehensive in-house training modules to make sure that all employees understand your Companys vision, purpose and imbibe the ethos of the organization. Emphasis is laid on On the Job trainings where an experienced and senior person mentors the junior executives In order to keep the employees abreast of the changing expectation of a growth oriented organization, wide training sessions were conducted across grades to prepare employees to bring about their best.

Your Company has also put in place Human Resource Information Management software People Konnect which automated the Human Resources operations thereby reducing lead time. Employee skill development and learning has always been the focus of your Company. In order to ensure that the employees are well informed and have the requisite knowledge about the operational norms and guidelines, industry benchmarks etc, a knowledge management portal was implemented, which also helps to track employee progress towards learning.

Apart from the above, various employee engagement activities were undertaken to keep the employees involved in the day to day operations of the Company. Employee reward and recognition programs were run throughout the year.

The work force strength of your Company as on 31st March 2010 was 980. The total work force cost during the year has gone up by 46.16% from Rs. 28.40 crore to Rs. 39.05 crore. This is mainly due to the increase in work force to meet the requirements on account of significant expansion in terms of geography as well as in business volumes and the salary revisions effected during the year. Few additional positions are added for meeting business requirements and to give greater focus to functions like Credit Appraisal and Operations.

During the year your company entered into Deed of Trust with Life Insurance Corporation of India which covers the Companys employees under the group gratuity schemes with the Life Insurance Corporation of India (LIC). The schemes are defined benefit schemes and are funded in line with the LICs actuarial valuation carried out at year end.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Corporate Social Responsibility is a sustained activity wherein an organization and its employees take up social causes with a view to serve the society. The real work in CSR extends beyond the statutory obligations and sees organizations and its people voluntarily taking up programmes and initiatives to improve the quality of life of the community and also the society at large.

Your Company in association with Mumbai Mobile Creches participated in Standard Chartered Mumbai Marathon - 201 0 on 1 7th January 201 0. Your Company had taken initiatives to help support the cause of children of construction workers at the construction sites in Mumbai.

In line of agreement with Concern India Foundation (CIF), based in Mumbai, your Company continues to support for promoting activities linked to upliftment of members belonging to weaker sections of society. Concern India Foundation is undertaking the activities linked to the following major issues:

- Education

- Community Development

- Health

- Environment

In many ways the organizational purpose of your Company is closely linked to the above mentioned issues. The financial support to Concern India Foundation will directly benefit the following important constituents of the society:

- Women

- Children

- Senior citizens

Education Trust

Your Company also provides learning assistance to its employees who aspire to undertake higher education through its trust "Late Shri Rajesh Kumar Wadhawan DHFL Employees Welfare Trust". Besides education, the said Trust also support exigency family medical support, marriage support for deserving employees of DHFL across locations especially the staff in lower grades who runs out of cash in case of any exigencies and with such other objects of charitable nature.

DIRECTORS

Shri Rakesh Kumar Wadhawan Chairman, Shri Sarang Wadhawan and Shri Ashok Kumar Gupta Directors of the Company have resigned from the Board with effect from 28th July, 2009. Your Directors place on record their deep appreciation for the valuable contribution made by Shri Rakesh Kumar Wadhawan, Shri Sarang Wadhawan and Shri Ashok Kumar Gupta during their tenure as Directors of the Company. Shri Rakesh Kumar Wadhawan has been associated with the Company since incorporation of the Company i.e. 1984 and has played a key role in building DHFL to its present pre-eminent position in the corporate world.

Dr. P S. Pasricha was appointed as Additional Non- Executive Independent Director w.e.f on 3rd March, 2010. He shall hold office upto the date of the ensuing Annual General Meeting of the Company and, being eligible, offer himself for appointment.

In terms of Article 1 58 of the Articles of Association of the Company, Shri R. R Khosla and Shri R. S. Hugar, retire by rotation and being eligible, offer themselves for re- appointment at the ensuing Annual General Meeting.

Consequent upon the resignation of Shri Rakesh Kumar Wadhawan as the Chairman, Shri. Kapil Wadhawan has been elevated to the post of Chairman & Managing Director w.e.f. from 28th July, 2009, by the Board, as recommended by Remuneration & Compensation Committee of the Board.

Term of appointment of Shri Kapil Wadhawan Chairman & Managing Director will expire on 4th October, 2010. As recommended by the Remuneration & Compensation Committee the Board of Directors in their meeting held on 12th May, 2010, he will be re-appointed for another term of five years subject to the approval of the shareholders in the forthcoming Annual General Meeting scheduled on 27th July 2010.

Brief resume of the Directors proposed to be appointed / re-appointed, nature of their expertise in specific functional areas and names of companies in which they hold directorship and membership / chairmanship of Board committees, as stipulated under Clause 49 of Listing Agreement with the Stock Exchanges in India, are provided in the Report on Corporate Governance forming part of the Annual Report. None of the Directors of the Company are disqualified for being appointed/ reappointed as Directors pursuant to Section 274(1) (g) of the Companies Act, 1956.

Inter-se Transfer of Shares

As a part of business realignment and to have focused attention in the respective business, the Promoters of the Company have inter-se transferred shares between the promoters. Critically, it will empower the promoters to take independent decisions on fund-raising, joint ventures and diversification. It will also allow them to better focus on their respective businesses, bring clarity to shareholders and create fewer succession issues.

Shri Rakesh Kumar Wadhawan and Shri Sarang Wadhawan have transferred their entire shareholding of equity shares to the existing Promoter/ Promoter Group of the Company. This transfer has not resulted in any change in the aggregate promoter holding in the Company.

AUDITORS

M/s. B.M. Chaturvedi & Co., Chartered Accountants, Mumbai, bearing Registration Number 114317W, with the Institute of the Chartered Accountants of India, retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. M/s. B. M. Chaturvedi & Co., have sought reappointment and confirmed that their reappointment shall be within the limits of Section 224 (IB) of the Companies Act, 1956. The necessary eligibility certificate under Section 224(1 B) of the Companies Act, 1956, was received from them. The Audit Committee and Board of Directors recommend the appointment of M/s. B. M. Chaturvedi & Co., Chartered Accountants, as the auditors of your Company.

AUDITORS REPORT

The Notes to Accounts referred to in Auditors Report are self-explanatory and do not call for any further comments.

Your Company has internal audit system which is being conducted in-house. Efforts are being continued to further strengthen the internal audit system.

Systems and procedures are being upgraded to provide checks and alerts for avoiding fraud arising out of misrepresentation given by borrower/s while availing the housing loans.

SECRETARIALAUDIT

As directed by the Securities and Exchange Board of India (SEBI), Secretarial Audit is being carried out at the specified period, by the Practicing Company Secretary. The findings of the secretarial audit were entirely satisfactory.

PARTICULARS OF EMPLOYEES

The Board of Directors expresses their appreciation to all the employees for their outstanding contribution to the operations of the Company during the year. Information under Section 21 7(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employee Rules, 1 975, is appended herewith.

EMPLOYEES STOCK OPTION SCHEME (ESOS)

Besides the existing Employees Stock Option Scheme 2008 (ESOS-2008), providing for 14,22,590 stock options, your Company also announced an Employees Stock Option Scheme 2009 (ESOS-2009), under the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) guidelines, 1999. As approved by the Remuneration & Compensation Committee on 25th November, 2009, the ESOS-2009 provides for 25,50,000 stock options.

During the year, your Company granted 1 2,75,000 stock options to the employees under its ESOS-2009.

The particulars of options issued under the said Plan as required by SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1 999 are appended as Annexure and forms part of this report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND

OUTGO

The particulars regarding foreign exchange earnings and expenditure appear as Item No. B-35 in the Other Notes to Accounts. (Schedule Q)

Since your Company is not engaged in any manufacturing facility, the other particulars relating to conservation of energy and technology absorption as stipulated in the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1 988 are not applicable.

SUBSIDIARY COMPANIES

During the year under review, your Company subscribed/purchased equity shares in the subsidiary companies. The details are as given below:

- 23,28,000 equity shares of Rs. 10/- each at par in DHFL Vysya Housing Finance Ltd.

- 1 0,00,000 equity shares of Rs. 1 0/- each at par in DHFL Property Services Ltd.

DHFL Vysya Housing Finance Ltd. (DVHFL) is a housing finance company registered with NHB and has operations primarily in the States of Andhra Pradesh, Karnataka, Maharashtra and Tamil Nadu.

For the year ended March, 31, 2010, DVHFL has reported a profit after tax of Rs 8.56 crore as compared to Rs 6.32 crore in the previous year. The Board of Directors of the subsidiary company has declared an interim dividend of 15% and has recommended a final dividend of 1 0% making the total dividend to 25%.

DHFL Property Services Limited

During the year under review the Board at its meeting held on 1 1th May, 2009, has approved the investment in DHFL Property Services Limited (DPSL), a promoter group entity, upto an amount not exceeding Rs. 1 crore and making it a 100% Subsidiary of your Company. The main objects of the company is to provide quality real estate/ property services under one roof for customers, as value added services. It is expected that as a separate organization it will bring a sharper focus and improvement in the quality of these services, thus permitting your Company to focus on its core business.

The major operations of the said company began during the financial year 2009-10 and hence no comparative data is available. For the year ended 31 st March, 201 0, DPSL has reported a profit after tax of Rs. 17.95 lacs.

The audited accounts of DHFL Vysya Housing Finance Ltd. and DHFL Property Services Limited together with the Reports of the Director and the Auditor thereon, are attached to this Annual Report, as required under Section 212 of the Companies Act, 1956.

CONSOLIDATION OF ACCOUNTS

The audited Consolidated Accounts and Cash Flow Statement, comprising of DHFL and its subsidiary Companies, DHFL Vysya Housing Finance Ltd. and DHFL Property Services Limited are annexed to this Annual Report. The Auditors Report on the Consolidated Accounts is also attached. The Consolidated Accounts have been prepared in accordance with the Accounting Standards prescribed by the Institute of Chartered Accountants of India in this regard.

NHB GUIDELINES

Your Company has been rigorously following the various Guidelines issued by National Housing Bank (NHB) from time to time. The Circulars and the Notifications issued by NHB are also placed before the Board at regular intervals along with the compliance of the same.

During the year under review, NHB has conducted an inspection of the Company under Section 34 of the NHB Act, 1 987 and Company has furnished the replies to the same.

DIRECTORS RESPONSIBILITY STATEMENT

Your Directors would like to inform that the audited accounts containing the Financial Statements for the year ended 31st March, 201 0, are in conformity with the requirements of the Companies Act, 1 956 and they believe that the financial statements reflect fairly the form and substance of transactions carried out during the year and reasonably present the Companys financial condition and results of operations. These Financial Statements are audited by the Statutory Auditor, M/s. B. M. Chaturvedi & Co., Chartered Accountants, Mumbai.

In accordance with the provisions of Section 21 7 (2AA) of the Companies Act, 1 956 and based on the information provided by the management, your directors state that:

(i) in the preparation of accounts, the applicable accounting standards have been followed;

(ii) accounting policies selected were applied consistently. Reasonable and prudent judgements and estimates were made so as to give a true and fare view of the state of affairs of the Company as at the end of 31 st March, 201 0 and of the profit of the Company for the year ended on that date;

(iii) 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 frauds and other irregularities;

(iv) the annual accounts of the Company have been prepared on a going concern basis.

CORPORATE GOVERNANCE

Your Company has complied with all the provisions of Corporate Governance as prescribed under the amended Listing Agreements of the Stock Exchanges, with which the Companys shares are listed. Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, the followings form part of this Annual Report:

(i) Managing Directors declaration regarding compliance of Code of Conduct by Board Members and Senior Management personnel;

(ii) Management Discussion and Analysis

(iii) Report on the Corporate Governance;

(iv) Auditors Certificate regarding compliance of conditions of Corporate Governance.

Future Outlook

Housing / real estate sector which is slowly coming out of the Mid 2008 slump, has received good support from Union Budget 2010-11. While the budget has encouraged affordable housing below Rs 20 lakhs with 1 % interest subvention for housing loan upto 10 lakhs and extension of benefits available under section 80IB by one more year, inclusion of some services are extended so as to bring under service tax impacting the industry in difficult times.

With the recent recovery 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 quarters. This will lead to a rise in credit demand for housing.

The liquidity conditions of your Company has remained comfortable during the year. Your Company has successfully raised funds from banks as well as non bank sources. Your Company do not expect any pressure on the liquidity front in the months to come either. This is because liquidity conditions in the banking system will continue to remain comfortable. A healthy demand of credit for home loan coupled with comfortable liquidity conditions will lead to a rise in disbursement

ACKNOWLEDGMENTS

Your Directors wish to place on record their gratitude to the NHB, the Companys Customers, Bankers, Shareholders, Debenture holders, Depositors and others for their assistance and co-operation and who have helped the Company in its endeavour. The Board also places on record its deep appreciation for the excellent support received from the employees at all levels during the year. The Directors also like to thank The Bombay Stock Exchange Ltd., The National Stock Exchange of India Ltd., NSDL, CDSL and the Credit Rating Agencies for their co-operation.

for and on behalf of the Board

Kapil Wadhawan

Chairman & Managing Director

Dated: 12th May, 2010

Place : Mumbai

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