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Directors Report of Housing Development Finance Corporation Ltd.

Mar 31, 2015

TO THE MEMBERS

The directors are pleased to present the Thirty-eighth annual report of your Corporation with the audited accounts for the year ended March 31, 2015.

FINANCIAL RESULTS For the For the year ended year ended March 31, March 31, 2015 2014 (Rs. in crore) (Rs. in crore)

Profit before Tax 8,624.14 7,440.24

Tax Expense (net of Deferred Tax 2,269.23 2,000.00 Liability (DTL) on Special Reserve)

Profit after Tax but before DTL on 6,354.91 5,440.24 Special Reserve

DTL on Special Reserve 364.77 -

Profit after Tax 5,990.14 5,440.24

Appropriations have been made as under:

Special Reserve No. II 1,054.00 890.00

General Reserve 2,003.33 1,037.98

Statutory Reserve (under Section 29C of the National Housing Bank Act, 1987) 150.00 900.00

Shelter Assistance Reserve - 60.00

Interim and Proposed Dividend (Rs.15 2,362.05 2,184.75 per equity share of Rs. 2 each)

Additional Tax on Interim and Proposed 420.76 367.51

Dividend net of previous year adjustments 5,990.14 5,440.24

Dividend

In March 2015, your directors declared and paid an interim dividend of Rs. 2 per equity share of Rs. 2 each.

Your directors recommend payment of final dividend for the financial year ended March 31, 2015 of Rs. 13 per equity share of Rs. 2 each.

The total dividend for the year is Rs. 15 per equity share as against Rs. 14 per equity share for the previous year.

The dividend payout ratio for year ended March 31, 2015 will be 47%, which was the same as in the previous year.

Lending Operations

The demand for individual home loans remained healthy during the year, with growth predominantly coming from Tier 1, Tier 2 and Tier 3 cities. Improved affordability due to rising incomes and continued fiscal benefits available on home loans have encouraged more people to avail of home loans.

The Corporation remains committed towards offering a bouquet of home loan products so as to ensure that it addresses a wide spectrum of customers. The Corporation has made a concerted effort to grow its rural housing portfolio. It has developed requisite skills to assess agricultural income and has built robust legal and technical appraisal mechanisms to cater to the rural housing finance market.

Addressing housing needs of those from the unorganised sector is another segment that the Corporation has ventured into with the launch of ''HDFC Reach''. Different credit assessment and appraisal techniques are needed to cater to the self- employed and employed customers from the unorganised sector.

Individual loan disbursements grew by 16% during the year. The average size of individual loans stood at Rs. 23.3 lac as against Rs. 22.1 lac in the previous year.

As at March 31, 2015, the loan book stood at Rs. 2,28,181 crore as against Rs. 1,97,100 crore in the previous year. Loans sold during the preceding twelve months amounted to Rs. 8,249 crore. The growth in the individual loan book, after adding back loans sold was 23% (17% net of loans sold). The non-individual loan book grew at 14%. The growth in the total loan book after adding back loans sold was 20% (16% net of loans sold).

Of the total loan book, individual loans comprise 71%. Further, 78% of the incremental growth in the loan book during the year came from individual loans.

Sale of Loans

During the year, the Corporation, under the loan assignment route sold individual loans amounting to Rs. 8,249 crore to HDFC Bank pursuant to the buyback option embedded in the home loan arrangement between the Corporation and HDFC Bank.

As at March 31, 2015, total loans outstanding in respect of loans sold/ assigned stood at Rs. 25,152 crore. HDFC continues to service loans and is entitled to the residual interest on the loans sold. The residual interest on the outstanding individual loans sold/assigned is 1.25% per annum. The residual income on the loans sold/assigned is being recognised over the life of the underlying loans and not on an upfront basis.

Loan pools which were rated by external rating agencies carry a rating indicating the highest degree of safety.

Repayments

During the year under review, Rs. 66,422 crore was received by way of scheduled repayment of principal through monthly instalments as well as redemptions ahead of schedule, as compared to Rs. 58,410 crore received last year.

Resource Mobilisation

Subordinated Debt

During the year, the Corporation raised Rs. 3,000 crore through the issue of long-term unsecured redeemable non-convertible subordinated debentures. The subordinated debt was assigned the highest rating of ''CRISIL AAA/Stable'' and ''ICRA AAA/Stable'' by CRISIL and ICRA respectively.

As at March 31, 2015, the Corporation''s outstanding subordinated debt stood at Rs. 6,475 crore. The debt is subordinated to present and future senior indebtedness of the Corporation and has been assigned the highest rating by CRISIL and ICRA respectively. Based on the balance term to maturity, as at March 31, 2015, Rs. 5,495 crore of the book value of subordinated debt was considered as Tier II under the guidelines issued by the National Housing Bank (NHB) for the purpose of capital adequacy computation.

Non-Convertible Debentures (NCD)

During the year, the Corporation issued NCD amounting to Rs. 26,170 crore on a private placement basis. The Corporation''s NCD issues have been listed on the Wholesale Debt Market segment of the National Stock Exchange of India Limited and the BSE Limited. The NCD issues have been assigned the highest rating of ''CRISIL AAA/Stable'' and ''ICRA AAA/ Stable''. As at March 31, 2015, NCD outstanding stood at Rs. 84,183 crore. The Corporation has been regular in making payments of principal and interest on the NCD.

The Corporation is in compliance with the provisions of the Housing Finance Companies Issuance of Non- Convertible Debentures on Private Placement (NHB) Directions, 2014.

Term Loans from Banks, Institutions and Refinance from the National Housing Bank (NHB)

As at March 31, 2015, the total loans outstanding from banks, institutions and NHB amounted to Rs. 26,194 crore as compared to Rs. 32,952 crore as at March 31, 2014.

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

During the year, the Corporation has drawn NHB refinance amounting to Rs. 529 crore under the Golden Jubilee Rural Housing Refinance Scheme and Urban Housing Fund.

Deposits

Total deposits outstanding increased from Rs. 56,578 crore at the beginning of the financial year to Rs. 66,088 crore as at March 31, 2015. The number of deposit accounts grew from 17.5 lac to 18.1 lac.

CRISIL, a subsidiary of Standard & Poor''s Rating Services and ICRA, an associate of Moody''s Investors Service have for the twentieth consecutive year, reaffirmed a rating of ''CRISIL FAAA/Stable'' and ''ICRA MAAA/Stable'' respectively for HDFC''s deposits. These ratings represent the highest degree of safety regarding timely servicing of financial obligations and carries the lowest credit risk.

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

There has been no default in repayment of deposits or payment of interest during the year. All the deposits accepted by the Corporation are in compliance with the requirements of Chapter V of the Companies Act, 2013.

Unclaimed Deposits

As of March 31, 2015, public deposits amounting to Rs. 609 crore had not been claimed by 50,352 depositors. Since then, 12,868 depositors have claimed or renewed deposits of Rs. 219 crore. Depositors were intimated regarding the maturity of deposits with a request to either renew or claim their deposits. Where the deposit remains unclaimed, reminder letters are sent to depositors periodically and follow up action is initiated through the concerned agent or branch.

Deposits remaining unclaimed for a period of seven years from the date they became due for payment have to be transferred to the Investor Education and Protection Fund (IEPF) established by the central government. Accordingly, during the year, an amount of Rs. 1.43 crore has been transferred to the IEPF.

Non-Performing Loans

Gross non-performing loans as at March 31, 2015 amounted to Rs. 1,542 crore. This is equivalent to 0.67% of the loan portfolio (as against 0.69% in the previous year). The non- performing loans of the individual portfolio stood at 0.51% while that of the non-individual portfolio stood at 1.01%.

As per NHB norms, the Corporation is required to carry a total provision of Rs. 1,703 crore.

The balance in the provision for contingencies account as at March 31, 2015 stood at Rs. 2,034 crore of which Rs. 481 crore is on account of non-performing loans and the balance Rs. 1,553 crore is in respect of general provisioning and other provisions. This balance in the provision for contingencies is equivalent to 0.89% of the loan portfolio. The Corporation carries an additional provision of Rs. 331 crore over the regulatory requirements.

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) has proved to be a useful recovery tool and the Corporation has been able to successfully initiate recovery action under this Act.

Regulatory Guidelines /Amendments

The Corporation has complied with the Housing Finance Companies (NHB) Directions, 2010 prescribed by NHB regarding accounting standards, prudential norms for asset classification, income recognition, provisioning, capital adequacy, credit rating, concentration of investments and capital market exposure norms.

The Corporation creates Special Reserve through appropriation of profits in order to avail tax deduction under Section 36 (1)(viii) of the Income Tax Act, 1961. NHB vide its circular dated May 27, 2014, directed HFCs to create Deferred Tax Liability (DTL) on Special Reserve as a matter of prudence. Further, vide circular dated August 22, 2014, NHB permitted HFCs to create DTL in respect of Special Reserve outstanding as at March 31, 2014 by adjusting the same directly from the reserves over a period of three years, starting from the financial year under review, in a phased manner, in the ratio of 25:25:50. DTL for amounts transferred to Special Reserve from the year ended March 31, 2015 onwards is to be charged to the Statement of Profit and Loss of that year.

The Corporation''s capital adequacy ratio (CAR) after reducing the investment in HDFC Bank from Tier I capital stood at 16.1%. Of this, Tier I capital was 12.5% and Tier II capital was 3.6%.

The CAR without reducing the investment in HDFC Bank from Tier I capital, while treating it as a 100% risk weight stood at 18.5%, of which Tier I capital was 15% and Tier II capital was 3.5%. As per the regulatory norms, the minimum requirement for the capital adequacy ratio and Tier I capital is 12% and 6% respectively.

Codes and Standards

The Corporation has adopted various codes and standards set out by NHB including inter alia Know Your Customer (KYC) Guidelines, Anti Money Laundering Standards, Fair Practices Code, Model Code of Conduct for Direct Selling Agents, Guidelines for Recovery Agents engaged by HFCs and Most Important Terms and Conditions of housing loans.

The Corporation has mechanisms in place to review and monitor adherence to these codes and standards and ensure reporting and compliances as required.

Marketing and Distribution

During the year, efforts were concentrated on further strengthening the distribution network. The Corporation''s distribution network now spans 378 outlets, which includes 103 offices of HDFC''s wholly owned distribution company, HDFC Sales Private Limited (HSPL).

To further augment the network, HDFC covers additional locations through its outreach programmes. HDFC has overseas offices in London, Singapore and Dubai. The Dubai office reaches out to its customers across Middle East through its service associates based in Kuwait, Qatar, Oman, Abu Dhabi and Saudi Arabia.

The Corporation''s distribution channels which include HSPL, HDFC Bank and third party direct selling associates (DSAs) play an important role in sourcing home loans. In value terms, HSPL, HDFC Bank and third party DSAs sourced 49%, 24% and 18% of home loans disbursed respectively during the year.

The Corporation has distribution tie-ups with banks such as IndusInd Bank, RBL Bank and Lakshmi Vilas Bank as well as with Sundaram Finance Limited, IIFL Limited and Cholamandalam Distribution Services Limited. All distribution channels only source loans, while the control over the credit, legal and technical appraisal continues to rest with HDFC, thereby ensuring that the quality of loans disbursed is not compromised in any way and is consistent across all distribution channels.

In order to reach out and connect more effectively with customers, the Corporation embarked on a number of digital initiatives including a revamped website, development of a mobile application, introduction of a ''live chat'' with non-resident Indian customers as well as building a stronger presence on various social media platforms. The Corporation organised an online property fair to enable customers to identify and select homes.

Property fairs across major cities in India were organised. To cater to the Indian diaspora, ''India Homes'' fairs were held in London, Singapore and Muscat where developers were invited by HDFC to show case their properties.

Value Added Services and Cross Selling

HDFC''s subsidiary companies have strong synergies with HDFC. This enables the Corporation to provide property related value added services and cross sell products and services under the ''HDFC'' brand.

HDFC Realty Limited, a property advisory company, has a presence in 23 locations across India and helps individuals and corporate institutions to buy, sell or lease real estate. HDFCRED.com, an on-line real estate search engine assists potential home buyers in identifying properties and provides leads for potential home loan customers.

HDFC and HSPL are Composite Corporate Agents for HDFC Standard Life Insurance Company Limited

(HDFC Life) and HDFC ERGO General Insurance Company Limited (HDFC ERGO).

International Housing Finance Initiatives

HDFC''s expertise in housing finance is well regarded and therefore a number of existing and new housing finance companies are keen to tap the Corporation for training and technical assistance in housing finance.

The Frankfurt School of Finance & Management and HDFC jointly organised the seventh ''Housing Finance Summer Academy'' in Germany, which is a course that aims to provide housing finance solutions for emerging markets through a combination of academic knowledge and practical experience.

The Corporation remains committed to sharing its expertise in countries which have nascent mortgage markets. The Corporation continues to lend its support to housing finance players in Bangladesh, Sri Lanka, Maldives and Indonesia. Currently, the Corporation is in the process of setting up a greenfield housing finance company in Tanzania, along with International Finance Corporation (IFC) and three local based investors.

With a perspective of developing the capital markets to facilitate access to long-term funding for housing finance, the Corporation participated in the first international conference on capital markets in East Africa. The conference was held in Rwanda and was co-hosted by the Rwanda government and IFC.

Corporate Social Responsibility

In accordance with the provisions of Section 135 of the Companies Act, 2013 and rules framed there under, the Corporation has a Corporate Social Responsibility (CSR) Committee of Directors comprising Mr. Deepak S. Parekh (Chairman), Mr. D. N. Ghosh (independent director) and the whole- time directors.

The role of the committee is to review the CSR policy, indicate activities to be undertaken by the Corporation towards CSR and formulate a transparent monitoring mechanism to ensure implementation of projects and activities undertaken by the Corporation towards CSR.

The Corporation contributed directly and through H T Parekh Foundation to identified social sectors such as education, health and sanitation, community development, child welfare and livelihood and supporting differently abled persons.

During the year, the Corporation supported educational initiatives such as primary and secondary school education (rural and urban), girl child education, scholarships, alternate educational programmes, special education and teacher training and vocational skills training for underprivileged children. In the healthcare sector, the Corporation has been a strong supporter of institutions that work towards the prevention, treatment, rehabilitation and palliation for cancer patients and also for community based hospitals serving the rural population. Recognising health related risks attached to poor sanitation, the Corporation associated with organisations focusing on urban slum sanitation.

The Corporation supports initiatives towards the health, safety, nutrition and development of orphaned and underprivileged children. Additionally, assistance was provided to institutions educating children with physical and mental disabilities to improve their livelihood. The Corporation also supported organisations promoting environmental preservation and Indian athletes competing at an international level.

Further details on the prescribed CSR spend under Section 135 of the Companies Act, 2013 and the amount committed and disbursed during the year under review are provided in the Annual Report on CSR activities annexed to this report.

Human Resource Development

The Corporation recognises that training and continuous upgradation of skill sets are essential to ensure a high calibre workforce. During the year, new recruits participated in an induction programme at the Centre for Housing Finance, which is the Corporation''s training centre in Lonavla. Other in-house training programmes were conducted on subjects like Know Your Customer, Credit Fraud Risk and Mitigation, Disbursement Processes, Rural Housing and Appraisal Techniques for Customers from the Unorganised Sector. Training was also imparted in specialised fields of legal and credit risk management. Staff members were nominated for a variety of external training programmes in India and overseas.

Awards and Recognitions

During the year, some of the awards received by the Corporation included:

- The Dun & Bradstreet- Corporate Awards, 2014 in the FIs / NBFCs / Financial Services sector;

- Best Home Loan Provider by CNBC Awaaz Real Estate Awards, 2014;

- Best Loan Finance Bank and Best Overall Bank for Real Estate in India at the Euromoney Real Estate Awards, 2014.

The Board of Directors of the Corporation was selected as one of the ''Five Best Boards'' for the second consecutive year in a study conducted by The Economic Times and Hay Group on India''s Best Boards 2014.

Subsidiary/Associate Companies

In accordance with the provisions of Section 136 of the Companies Act, 2013, the annual report of the Corporation, the annual financial statements and the related documents of the Corporation''s subsidiary companies are placed on the website of the Corporation, www. hdfc.com.

Shareholders may download the annual financial statements and detailed information on subsidiary companies from the Corporation''s website or may write to the Corporation for the same. Further, the documents shall be available for inspection by the shareholders at the registered office of the Corporation.

During the year under review, Magnum Foundations Private Limited was acquired as an associate by a subsidiary of the Corporation. There were no new subsidiary or joint venture companies incorporated during the year. H T Parekh Foundation ceased to be a subsidiary of the Corporation during the year.

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

Review of Key Subsidiary and Associate Companies

HDFC Bank Limited (HDFC Bank)

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

As at March 31, 2015, advances of HDFC Bank stood at Rs.365,495 crore - an increase of 21% over the previous year. Total deposits stood at Rs. 450,796 crore - an increase of 23%. As at March 31, 2015, HDFC Bank''s distribution network includes 4,014 branches and 11,766 ATMs in 2,464 locations.

For the year ended March 31, 2015, HDFC Bank reported a profit after tax of Rs. 10,216 crore as against Rs. 8,478 crore in the previous year, representing an increase of 21%. HDFC Bank has recommended a dividend of Rs. 8 per share of Rs. 2 each as against Rs. 6.85 per share for the previous year.

HDFC together with its wholly owned subsidiaries, HDFC Investments Limited and HDFC Holdings Limited holds 21.7% of the equity share capital of HDFC Bank.

HDFC Standard Life Insurance Company Limited (HDFC Life)

Gross premium income of HDFC Life for the year ended March 31, 2015 stood at Rs. 14,830 crore as compared to Rs. 12,063 crore in the previous year. The sum assured in force at the end of FY 2015 was Rs. 3,66,755 crore as compared to Rs. 2,72,697 crore in the previous year, representing a growth of 34%.

The Company has a portfolio of 24 retail products and 7 group products covering saving, investment, protection and retirement needs of its customers, along with 9 optional rider benefits.

HDFC Life''s distribution network includes 414 branches, covering 1,000 locations and a liaison office in Dubai. In addition, the company has 86,000 financial consultants, 4 bancassurance partners and 9 pan-India brokers and corporate agency tie-ups. In FY 2015, HDFC Life ranked third among private sector life insurers in terms of market share based on the weighted received premium of individual business.

During the year, the Corporation sold 0.95% of the total issued and paid-up share capital of HDFC Life to Azim Premji Trust.

HDFC Life has reported a profit after tax of Rs. 786 crore for the year ended March 31, 2015 as against Rs. 725 crore in the previous year. The back book is generating sufficient profits to offset the new business strain incurred in writing of new policies.

The new business margin for individual business stood at 22.5% (based on loaded acquisition expenses). The post overrun margins (after considering the impact of the acquisition overrun) was 17.5% (PY 16.1%). At the company level, the post overrun margin was 18.5% for the year ended March 31, 2015.

As at March 31, 2015, the Market Consistent Embedded Value stood at Rs. 8,805 crore (previous year Rs. 6,992 crore).

During the year, HDFC Life paid an interim dividend of Rs. 0.70 per equity share of Rs. 10 each. The solvency ratio of the company was 196% as at March 31, 2015 as against the minimum regulatory requirement of 150%.

HDFC holds 70.7% of the equity share capital in HDFC Life.

HDFC Asset Management Company Limited (HDFC-AMC)

As at March 31, 2015, HDFC-AMC managed 55 debt, equity, gold exchange traded fund and fund of fund schemes of HDFC Mutual Fund. The average assets under management for the month of March 2015 stood at Rs. 1,67,161 crore (which is inclusive of average assets under discretionary portfolio management/ advisory services). HDFC Mutual Fund has been ranked first in the industry on the basis of quarterly average assets under management for the year ended March 31, 2015. The number of investor accounts was in excess of 52 lac as at March 31, 2015. HDFC-AMC has 141 investor service centres across the country.

For the year ended March 31, 2015, HDFC-AMC reported a profit after tax of Rs. 416 crore as against Rs. 358 crore in the previous year.

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

HDFC ERGO General Insurance Company Limited (HDFC ERGO)

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

The Company offers a complete range of insurance products like motor, health, travel, home and personal accident in the retail segment and customised products like property, marine, aviation and liability insurance in the corporate segment. The Company continues to leverage on the HDFC group''s distribution capability to drive its growth and on the technical capability of ERGO in the field of general insurance. The Company has a balanced portfolio mix with the retail segment accounting for 59% of the business.

The gross written premium (excluding motor and declined risk pool) of the Company increased by 9% to Rs. 3,256 crore as against Rs. 2,978 crore in the previous year.

The profit before tax of the Company for the year stood at Rs. 141 crore as against Rs. 224 crore in the previous year. Lower profits during the year under review was mainly on account of the impact of natural catastrophes such as the Jammu & Kashmir floods, Cyclone Hudhud and Cyclone Phailin and due to a change in the depreciation policy, aligning it with the Companies Act, 2013. For the year ended March 31, 2015, the profit after tax stood at Rs. 104 crore.

During the year, HDFC ERGO paid an interim dividend of Rs. 0.75 per equity share of Rs. 10 each as against Rs. 0.50 per equity share in the previous year.

The combined ratio as at March 31, 2015 stood at 108.6% (after motor and declined risk pool losses). The solvency ratio of the company was 165% as at March 31, 2015 as against the minimum regulatory requirement of 150%.

HDFC holds 73.6% of the equity share capital of HDFC ERGO.

HDFC Property Funds

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

HDFC Property Fund has two schemes -- the first scheme is HDFC India Real Estate Fund (HI-REF), which had an initial corpus of Rs. 1,000 crore. HI-REF has, as on date distributed the entire investment corpus and also profits to its investors. HI-REF is in the midst of concluding final exits from the balance portfolio. The second scheme was HDFC IT Corridor Fund, a Rs. 464 crore rent yielding portfolio. This scheme has been fully exited.

HDFC Property Ventures Limited (HPVL) provides investment advisory services to Indian and overseas asset management companies (AMCs). Such AMCs in turn manage and advise Indian and offshore private equity funds.

HDFC holds 80.5% of the equity share capital of HVCL and 100% of the equity share capital of HPVL.

The Corporation has sponsored two off shore funds -- HIREF International LLC and HIREF International Fund II Pte Ltd. HIREF International LLC was launched in 2007 and has a corpus of USD 800 million. Exits have commenced and the fund is in the process of exiting the balance investments. HIREF International Fund II Pte Ltd. had its second and final closing in April 2015 with a total corpus of USD 321 million.

GRUH Finance Limited (GRUH)

GRUH is a housing finance company with a retail network of 154 offices spread across 8 states. During the year, GRUH disbursed loans amounting to Rs. 3,121 crore as compared to Rs. 2,577 crore in the previous year - an increase of 21%. As at March 31, 2015, the loan portfolio stood at Rs. 8,915 crore, recording a growth of 27% over the previous year. The gross non-performing loans stood at 0.28% of the total loans outstanding and the net non performing loans are nil. The average size of loans disbursed during the year was Rs. 8.4 lac.

As at March 31, 2015, the capital adequacy ratio stood at 15.4%, of which Tier I capital was 13.9% and Tier II capital was 1.5%.

For the year ended March 31, 2015, GRUH reported a profit after tax before DTL on Special Reserve of Rs. 223 crore as compared to Rs. 177 crore - representing a growth of 26%. The profit after tax after the factoring DTL on Special Reserve for the year ended March 31, 2015 stood at Rs. 204 crore.

The board recommended payment of a dividend for the year ended March 31, 2015 of Rs. 2 per equity share of Rs. 2 each as against Rs. 3 per equity share in the previous year. Considering the company declared a 1:1 bonus during the year, the effective dividend for the year is Rs. 4 per equity share (pre bonus) as compared to Rs. 3 per share in the previous year (pre bonus).

HDFC''s holding in GRUH currently stands at 58.6%.

HDFC Sales Private Limited (HSPL)

HDFC Sales Private Limited (HSPL) continues to strengthen the Corporation''s marketing and sales efforts by providing a dedicated sales force to sell home loans and other financial products.

HSPL has a presence in 103 locations. During the year under review, HSPL

sourced loans accounting for 49% of individual loans disbursed by HDFC.

HSPL is a wholly owned subsidiary of HDFC.

Credila Financial Services Private Limited (Credila)

Credila is India''s first dedicated education loan company, providing loans to students pursuing higher education in India and abroad. As on March 31, 2015, Credila had cumulatively disbursed Rs. 2,221 crore to 21,031 customers. The outstanding loan book stood at Rs. 1,690 crore, registering a growth of 43% over the previous year. The average loan amount disbursed was Rs. 10.5 lac. For the year ended March 31, 2015, Credila reported a profit after tax of Rs. 28 crore as against Rs. 19 crore in the previous year - representing a growth of 45%.

In addition to having its own offices and sourcing applications through the web, Credila capitalises on HDFC''s distribution network to source and market education loans. Credila''s borrowers are entitled to income tax exemption under Section 80E of the Income Tax Act, 1961.

HDFC holds 89.5% of the share holding in Credila on a fully diluted basis.

HDFC Education and Development Services Private Limited (HDFC Edu)

HDFC Edu is the Corporation''s wholly owned subsidiary which focuses on the education sector.

The objective of the Corporation entering the education space is to imbibe best practices in education and facilitate innovation, thereby creating a visible impact on the schooling system in the country.

In March 2015, the Corporation''s first school called ''The HDFC School'' was inaugurated in Gurgaon. The motto of the school is ''Educate, Excel and Empower.'' The school has started the primary wing and is in the process of setting up a 5-acre school campus for its secondary wing. The HDFC School is intended to be a full-fledged K-12 school, which will follow the National Curriculum Framework, 2005 and will be a Central Board of Secondary Education (CBSE) affiliated school.

Particulars of Employees

HDFC had 2,081 employees as of March 31, 2015. During the year, 16 employees employed throughout the year were in receipt of remuneration of Rs. 60 lac or more per annum.

In accordance with the provisions of Rule 5.2 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of such employees are set out in the annex to the Directors'' Report. In terms of the provisions 136(1) of the Companies Act, 2013 read with the said rule, the Directors'' Report is being sent to all the shareholders of the Corporation excluding the annex. Any shareholder interested in obtaining a copy of the said annex may write to the Corporation.

Further disclosures on managerial remuneration are provided in Annex 1 appended to the Directors'' Report.

Particulars of Loans, Guarantees or Investments

Since the Corporation is a housing finance company, the disclosures regarding particulars of the loans given, guarantee given and security provided is exempt under the provisions of Section 186(11) of the Companies Act, 2013.

As regards investments made by the Corporation, the details of the same are provided under Notes 13 and 17 forming part of the standalone financial statements of the Corporation for the year ended March 31, 2015.

Particulars of Contracts or Arrangements with Related Parties

The particulars of contracts or arrangements with related parties referred to Section 188(1), as prescribed in Form AOC - 2 under Rule 8(2) of the Companies (Accounts) Rules, 2014, is annexed to this report.

Particulars Regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

The particulars regarding foreign exchange earnings and expenditure appear as Item Nos. 25.1 and 26.3 in the Notes to the Accounts. Since HDFC does not own any manufacturing facility, the other particulars relating to conservation of energy and technology absorption as stipulated in the Companies (Accounts) Rules, 2014, are not applicable.

Employees Stock Option Scheme (ESOS)

Presently, stock options granted to the employees operate under the following schemes: ESOS-07, ESOS- 08, ESOS-11 and ESOS-14. There has been no variation in the terms of the options granted under any of these schemes. One stock option is equivalent to 5 equity shares of the Corporation.

ESOS-07, ESOS-08 and ESOS-11 (Schemes)

No fresh options were either granted or vested under ESOS-07 and ESOS-08. No fresh options were granted under ESOS-11, however, 1,80,438 options vested during the year, under ESOS-11.

During the year, an aggregate of 28,33,013 options were exercised. Pursuant to the exercise, the Corporation received Rs.684.28 crore as exercise consideration (excluding tax), of which Rs. 2.83 crore was towards share capital and Rs. 681.45 crore towards securities premium. During the year, pursuant to exercise of options, 1,41,65,065 equity shares of Rs. 2 each were allotted to the concerned option grantees.

During the year, 63,287 options lapsed, while options in force (including unvested) as on March 31, 2015 stood at 99,80,684.

ESOS-14

At the 37th Annual General Meeting (AGM) held on July 21, 2014, you had approved the issue of 62,42,130 stock options representing 3,12,10,650 equity shares of Rs. 2 each to the eligible employees and directors of the Corporation. The Nomination & Remuneration Committee of Directors of the Corporation at its meeting held on October 8, 2014, reserved 10,876 options for grant in future, out of total available 62,83,940 options (including 41,810 options lapsed under previous schemes). Accordingly, 62,73,064 stock options were granted representing 3,13,65,320 equity shares of Rs. 2 each at an exercise price of Rs. 5,073.25 per option i.e., Rs. 1,014.65 per equity share of Rs. 2 each under ESOS-14.

The price was determined in accordance with the pricing formula approved by you i.e. at the latest available closing price of the equity share at the NSE, prior to the meeting of the Nomination & Remuneration Committee at which the options are granted. The options granted will vest over a period of 1 to 3 years from the date of grant. The options are exercisable over a period of five years from the date of respective vesting. None of the options granted have vested during the year (and consequently, no options have been exercised). As at March 31, 2015, 49,045 options have lapsed and 62,24,019 options are in force. Under ESOS-14, 19,79,633 options have been granted to 86 employees, in the grades of Deputy General Manager and above up to and including the Vice Chairman & Chief Executive Officer. The minimum number of options granted to any of these employees was 6,000.

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

Fair value

Since options were granted at the market price, the intrinsic value of the option is nil. Consequently, the compensation cost was nil. However, if the fair value of the options using the Black-Scholes model was used, considering the assumptions as of the date of grant, the compensation cost (net) would have been Rs. 198.64 crore and the profit after tax would have been lesser by Rs. 198.64 crore and the basic and diluted Earnings Per Share (EPS) would have been Rs. 36.86 and Rs. 36.52 respectively.

The key assumptions used in Black- Scholes model for calculating the fair value under ESOS-14, as on the date of grant, are (a) risk-free interest rate: 8.28% (b) expected life: up to 3 years (c) expected volatility of share price: 15% and (d) expected growth in dividend: 20%. The market price of the equity share on the date of grant ranged from Rs. 1,006.85 to Rs. 1,025.65.

All the options were granted at an exercise price of Rs. 1,014.65 per share and hence the weighted average exercise price is Rs. 1,014.65 per share. The weighted average fair value of the option granted under ESOS-14 (using the Black-Scholes model) works out to Rs. 1,035.91 per option i.e. Rs. 207.18 per share of the face value of Rs. 2 each.

The diluted EPS is Rs. 37.78 as against a basic EPS of Rs. 38.13.

Unclaimed Dividend

As at March 31, 2015, dividend amounting to Rs. 16.94 crore had not been claimed by shareholders of the Corporation. The Corporation has been periodically intimating the concerned shareholders, requesting them to encash their dividend before it becomes due for transfer to the IEPF. The Corporation continues to take various initiatives to reduce the quantum of unclaimed dividend.

Unclaimed dividend amounting to Rs. 0.75 crore for FY 2006-07 was transferred to the IEPF on August 22, 2014. Further, the unclaimed dividend in respect of FY 2007-08 must be claimed by shareholders by August 22, 2015, failing which it will be transferred to the IEPF within a period of 30 days from the said date.

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

Unclaimed Shares

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

Directors and Key Managerial Personnel

In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Corporation, Mr. Deepak S. Parekh is liable to retire by rotation at the ensuing AGM. He is eligible for re-appointment.

The necessary resolution for the re- appointment of Mr. Deepak S. Parekh has been included in the notice convening the ensuing AGM.

All the directors of the Corporation have confirmed that they are not disqualified from being appointed as directors in terms of Section 164(2) of the Companies Act, 2013.

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

The details on number of board/ committee meetings held are provided in the Report of the Directors on Corporate Governance, which forms part of this report.

During the year under review, Mr. Girish V. Koliyote resigned as the company secretary - a key managerial person of the Corporation, with effect from the close of business hours on March 19, 2015.

The Board of Directors, at its meeting held on March 19, 2015 appointed Mr. Ajay Agarwal as the company secretary -- a key managerial person in accordance with the provisions of Section 203 of the Companies Act, 2013, with effect from March 20, 2015.

Auditors

At the 37th AGM held on July 21, 2014, the members had appointed Messrs Deloitte Haskins & Sells LLP, Chartered Accountants, having registration number 117366W/W- 100018 as the statutory auditors of the Corporation and branch auditors to audit the accounts at the Corporation''s branches in India and offices in London and Singapore, for a period of 3 years, to hold office as such until the conclusion of the 40th AGM, subject to them ratifying the said appointment at every AGM.

The Corporation has received a confirmation from Messrs Deloitte Haskins & Sells LLP to the effect that their appointment, if ratified at the ensuing AGM would be in terms of Sections 139 and 141 of the Companies Act, 2013 and rules made thereunder. The board proposes to the members to ratify the said appointment of Messrs Deloitte Haskins & Sells LLP.

Messrs PKF, Chartered Accountants, having registration number 10 issued by the Ministry of Economy, United Arab Emirates (UAE) was also appointed for a period of 3 years to hold office as such until the conclusion of the 40th AGM, subject to the members ratifying the said appointment at every AGM. The board proposes to ratify the appointment of Messrs PKF.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Corporation appointed Messrs N. L. Bhatia & Associates, practising company secretaries to undertake the secretarial audit of the Corporation. The Secretarial Audit Report is annexed to this report.

Litigations

During the year under review, no significant or material orders were passed by any regulatory/statutory authorities or courts/tribunals against the Corporation impacting its going concern status and operations in future.

Directors'' Responsibility Statement

In accordance with the provisions of Section 134 (3) (c) of the Companies Act, 2013 and based on the information provided by the management, your directors state that:

a) In the preparation of annual accounts, the applicable accounting standards have been followed;

b) Accounting policies selected have been applied consistently. Reasonable and prudent judgements and estimates have been made so as to give a true and fair view of the state of affairs of the Corporation as at the end of March 31, 2015 and of the profit of the Corporation for the year ended on that date;

c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Corporation and for preventing and detecting frauds and other irregularities;

d) The annual accounts of the Corporation have been prepared on a going concern basis;

e) Internal controls have been laid down to be followed by the Corporation and such internal controls are adequate and were operating effectively; and

f) Systems to ensure compliance with the provisions of all applicable laws are in place and were adequate and operating effectively.

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

In accordance with Clause 49 of the listing agreements, the Management Discussion and Analysis Report and the Report of the Directors on Corporate Governance form part of this report.

In accordance with the provisions of Clause 55 of the listing agreements, the Business Responsibility Report (BRR) has been prepared and placed on the Corporation''s website. Members who wish to receive a physical copy of the BRR are requested to write to the Corporation.

Extract of Annual Return - Form MGT 9

The details forming part of the extract of the Annual Return in Form MGT 9 is annexed to this report.

Acknowledgements

The Corporation would like to acknowledge the role of all its stakeholders - shareholders, borrowers, channel partners, depositors, key partners and lenders for their continued support to the Corporation.

The directors appreciate the guidance received from various regulatory authorities including NHB, RBI, SEBI, MCA, Registrar of Companies, Financial Intelligence Unit (India), Foreign Investment Promotion Board, the stock exchanges and the depositories.

Your directors place on record their appreciation of the hard work and dedication of all the employees of the Corporation.

On behalf of the Board of Directors

MUMBAI DEEPAK S. PAREKH April 29, 2015 Chairman


Mar 31, 2013

TO THE MEMBERS

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

FINANCIAL RESULTS

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

Profit before Tax 6,572.84 5,665.62

Tax Expense 1,724.50 1,543.00

Profit after Tax 4,848.34 4,122.62

Appropriations have been made as under:

Special Reserve No. II 775.00 730.00

General Reserve 956.62 870.87

Additional Reserve (under Section 29C of the National Housing Bank Act, 1987) 825.00 620.00

Shelter Assistance Reserve 40.00 15.00

Proposed Dividend (at Rs. 12.50 per equity share of face value of Rs. 2 each) 1,932.93 1,624.67

Additional Tax on Proposed Dividend 328.50 263.56

Additional Tax on Dividend (24.62) (4.66)

Dividend pertaining to Previous Year paid during the year 14.91 3.18

4,848.34 4,122.62

Dividend

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

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

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

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

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

Conversion of Warrants

In August 2009, the Corporation had issued 1,09,53,706 Warrants with a right exercisable by the Warrant holders to exchange each Warrant with one equity share of face value of Rs. 10 per share, on or before August 24, 2012, at a Warrant Exercise Price of Rs. 3,000 per equity share.

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

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

The proceeds from the exchange of Warrants were utilised to replace the Zero Coupon Debentures and consequently, the Corporation will not earn any additional interest income on the amounts raised. 25,380 Warrants which were not submitted for exchange with equity shares of the Corporation by 15 Warrant holders have lapsed and cease to be valid. Accordingly, the amounts paid towards them stands forfeited.

Lending Operations

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

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

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

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

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

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

As at March 31, 2013, the loan book stood at Rs. 1,70,046 crores as against Rs. 1,40,875 crores in the previous year. Loans sold during the preceding twelve months amounted to Rs. 5,175 crores. The growth in the individual loan book, after adding back loans sold was 31% (25% net of loans sold). Non-individual loans grew by 13%. The growth in the total loan book after adding back loans sold was 24% (21% net of loans sold).

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

Sale of Loans

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

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

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

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

Repayments

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

Resource Mobilisation

Subordinated Debt

As at March 31,2013, the Corporation''s outstanding subordinated debt stood at Rs. 3,475 crores. The debt is subordinated to present and future senior indebtedness of the Corporation and has been assigned the highest rating by CRISIL and ICRA. Based on the balance term to maturity, as at March 31, 2013, Rs. 2,985 crores 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. The Corporation did not issue any subordinated debt during the year.

Non-Convertible Debentures (NCD)

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

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

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

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

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

Deposits

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

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

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

Unclaimed Deposits

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

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

Non-Performing Loans

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

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

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

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

All DRHL had converted into floating rate loans linked to HDFC''s Retail Prime Lending Rate with effect from April 1, 2012. As per NHB guidelines, the Corporation was mandated to carry a higher provisioning of 2% on standard DRHL up to one year after the interest rates were re-set. Accordingly, with effect from April 1, 2013, the Corporation will no longer need to maintain a higher provisioning on these loans.

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

Regulatory Guidelines/Amendments

HDFC has complied with the Housing Finance Companies (NHB) Directions, 2010 prescribed by NHB regarding accounting standards, prudential norms for asset classification, income recognition, provisioning, capital adequacy, credit rating, concentration of investments and capital market exposure norms.

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

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

Codes and Standards

NHB has issued 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 approved the amendments to the Corporation''s KYC and Prevention of Money Laundering Policy as stipulated by NHB. The Corporation has adhered to the compliance requirements in terms of the said policy relating to monitoring and reporting of cash/ suspicious transactions.

The Fair Practices Code framed by NHB seeks to promote good and fair practices by setting minimum standards in dealingwith customers, increase transparency so customers have a better understanding of what they can reasonably expect of the services being offered, encourage marketforces through competition to achieve higher operating standards, promotefairand cordial relationships between customers and the HFC and foster confidence in the housing finance sector. The Corporation has put in place a mechanism to monitor and review adherence to the Fair Practices Code as approved by the Board of Directors.

The Corporation has adopted the Model Code of Conduct for Direct Selling Agents and Guidelines for Recovery Agents engaged by HFCs as stipulated by NHBand dulyapproved by the Board of Directors.

The Corporation has formulated and adopted a Share Dealing Code 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, employees and their dependents. The said persons are restricted from dealing in the securities of the Corporation during the ''restricted trading periods'' notified by the Corporation, from time to time. During the year, the code was amended to enforce higher standards of compliance relating to insider trading norms.

Marketing and Distribution

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

HDFC''s reach and presence is also enhanced by its distribution channels, which include HSPL, HDFC Bank and a few third party direct selling associates (DSAs). Besides local and regional DSAs, tie-ups with some banks and distribution houses have enhanced incremental business. Prominent banks with whom the Corporation has distribution tie-ups include IndusInd Bank and Ratnakar Bank. These channels only source loans, while the control over the credit, legal and technical appraisal continues to rest with HDFC, thereby ensuring that the quality of loans disbursed is not compromised in any way and is consistent across all distribution channels.

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

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

Cross Selling and Distribution of Financial Products and Services

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

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

International Housing Finance Initiatives

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

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

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

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

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

Shelter Assistance Reserve (SAR)

HDFC partners and supports worthwhile projects undertaken by development associations and non-government organisations through the SAR. During the year, the Corporation disbursed Rs. 9.13 crores from the SAR, covering over 180 partner organisations spread across the country.

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

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

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

H T Parekh Foundation

2011 marked the birth centenary year of late Shri H. T. Parekh, founder chairman ofthe Corporation. To commemorate his enormous contribution to the development of housing finance and other financial services in India, the board approved the proposal to set up the H T Parekh Foundation. Shri H. T. Parekh was associated with several philanthropic causes and welfare organisations during his lifetime.

During the year, the Corporation incorporated the H T Parekh Foundation as a not for profit company licensed under Section 25 ofthe Companies Act, 1956. Some of the key objectives of the foundation include undertaking welfare activities for the socially and economically disadvantaged, provision of education and medical services and assisting in the preservation and conservation of India''s rich heritage. Subject to the receipt of requisite approvals, the Corporation has committed to contribute an amount of upto Rs. 200 crores to fund the charitable activities of the foundation over a period of 3 financial years. During the year, the Corporation infused an amount of Rs. 10 crores as equity capital to enable the foundation to commence its activities.

Training and Human Resource Management

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

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

Building Service and Productivity Excellence

In order to raise the bar on customer service, it is important to constantly assess and evaluate the service delivery mechanism. In this context, during the year, the Corporation embarked on a project called ''Customer Relationship Enhancement through System Transformation'' (CREST).

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

CREST entails a significant upgrade in the loan appraisal and processing system. It involves process standardisation, centralisation and adoption of new technology. The aim is to increase business growth through improved productivity levels, better customer service and cost efficiencies. The new process is being rolled out in a phased manner across all branches.

Rural Housing

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

Property Related Services

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

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

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

Education Initiatives

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

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

Awards and Recognitions

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

Subsidiary Companies

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

The Board of Directors has passed the necessary resolutions granting the requisite approvals for not attaching to the annual report of the Corporation, a copy of the balance sheet, statement of profit and loss, reports of the directors and auditors of the following 16 subsidiary companies of the Corporation: HDFC Developers Limited, HDFC Investments Limited, HDFC Holdings Limited, HDFC Asset Management Company Limited, HDFC Trustee Company Limited, HDFC Realty Limited, HDFC Standard Life Insurance Company Limited, HDFC ERGO General Insurance Company Limited, GRUH Finance Limited, HDFC Sales Private Limited, HDFC Ventures Trustee Company Limited, HDFC Venture Capital Limited, HDFC Property Ventures Limited, Credila Financial Services Private Limited, HDFC Education and Development Services Private Limited and H T Parekh Foundation and the following step-down subsidiary companies: HDFC Asset Management Company (Singapore) Pte. Limited, HDFC Pension Management Company Limited, Griha Investments, Mauritius and Griha Pte. Limited, Singapore - have not been attached to the balance sheet of the Corporation for the financial year ended March 31, 2013.

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

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

Review of Key Subsidiary and Associate Companies

HDFC Bank Limited (HDFC Bank)

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

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

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

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

HDFC Standard Life Insurance Company Limited (HDFC Life)

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

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

HDFC Life''s distribution network includes 450 branches, covering 961 cities. In addition, the company has 95,000 financial consultants, 3 large bancassurance partners and 10 pan- India brokers and corporate agency tie-ups. In FY 2013, HDFC Life ranked number 2, for the second consecutive year, among private sector life insurers in terms of market share based on the weighted received premium of individual business.

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

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

HDFC Asset Management Company Limited (HDFC-AMC)

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

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

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

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

HDFC ERGO General Insurance Company Limited (HDFC ERGO)

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

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

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

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

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

HDFC Property Funds

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

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

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

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

HDFC Property Ventures Limited (HPVL) provides investment advisory services to Indian and overseas asset management companies (AMCs). Such AMCs in turn manage and advise Indian and offshore private equity funds. During the year, HPVL made a profit after tax of Rs. 3.05 crores.

HDFC holds 100% ofthe equityshare capital of HPVL.

GRUH Finance Limited (GRUH)

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

For the year ended March 31, 2013,

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

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

HDFC Sales Private Limited (HSPL)

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

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

HSPL is a wholly owned subsidiary of HDFC.

Credila Financial Services Private Limited (Credila)

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

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

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

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

Particulars of Employees

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

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

Employees Stock Option Scheme (ESOS)

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

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

No fresh options were either granted or vested under these Schemes. During the year, an aggregate of 29,38,799 options of Rs. 10 each were exercised. Pursuant thereto the Corporation received Rs. 551.97 crores as exercise consideration (excluding tax), of which Rs. 2.94 crores was towards share capital and Rs. 549.03 crorestowards securities premium. In all 1,46,93,995 equity shares of Rs. 2 each were allotted to the concerned employees. In accordance with the provisions of ES0S-05, the last date for exercise of the options was October 24, 2012.

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

ESOS-11

At the 34th annual general meeting held on July 8, 2011, you had approved the issue of 58,67,546 stock options representing 2,93,37,730 equity shares of Rs. 2 each to the employees and directors of the Corporation. The Nomination & Compensation Committee of the Corporation at its meeting held on May 23, 2012, granted the said options together with options lapsed under previous schemes (aggregating 2,34,929 options). In the aggregate, 61,02,475 stock options of Rs. 10 each were granted representing 3,05,12,375 equity shares of Rs. 2 each at an exercise price of Rs. 635.50 per equity share under ESOS-11.

The said price was determined in accordance with the pricing formula approved by you i.e. at the latest available closing price of the equity share of the Corporation on the NSE, prior to the meeting of the Nomination & Compensation Committee at which the options were granted. The options granted will vest over a period of 1 to 3 years from the date of grant, depending upon the option grantee completing a continuous service of three years with the Corporation. The options are exercisable over a period of five years from the date of respective vesting. None of the options granted have vested during the year (and consequently, no options have been exercised). As at March 31, 2013, 31,200 options have lapsed and 60,71,275 options are in force. Under ESOS-11, 20,86,000 options have been granted to 83 senior management employees, in the grades of deputy general manager and above up to and including the Managing Director and the Vice Chairman & Chief Executive Officer. The minimum number of options granted to any of these employees was 6,000.

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

Fair value

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

The key assumptions used in Black- Scholes model for calculating the fair value under ESOS-11, as on the date of grant, are (a) risk-free interest rate: 8.06% (b) expected life: up to 2 years (c) expected volatility of share price: 15% and (d) expected growth in dividend: 20%. The market price of the equity share on the date of grant ranged from Rs. 629.10 to Rs. 643.45.

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

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

Unclaimed Dividend

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

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

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

Unclaimed Shares

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

Particulars Regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

The particulars regarding foreign exchange earnings and expenditure appear as Item Nos. 25.1 and 26.3 in the Notes to the Accounts. Since HDFC does not own 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 and the Articles of Association of the Corporation, Mr. Deepak S. Parekh, Mr. Keshub Mahindra, Mr. D. M. Sukthankar and Mr. Nasser Munjee are liable to retire by rotation at the ensuing AGM. They are eligible for re-appointment.

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

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

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

Auditors

Messrs Deloitte Haskins & Sells, Chartered Accountants, having registration number 117366W, statutory auditors of the Corporation and branch auditors to audit the accounts at the Corporation''s branches in India and offices in London and Singapore hold office until the conclusion of the ensuing AGM and are eligible for appointment.

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

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

Directors'' Responsibility Statement

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

i. In the preparation of annual 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 fair view of the state of affairs of the Corporation as at the end of March 31, 2013 and of the profit of the Corporation 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 Corporation and for preventing and detecting frauds and other irregularities;

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

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

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

SEBI vide Circular No. CIR/CFD/ DIL/8/2012 dated August 13, 2012, has mandated the inclusion of a Business Responsibility Report(BRR) as part of the Annual Report for the top 100 listed companies based on their market capitalisation on the BSE Limited and National Stock Exchange of India Limited as at March 31, 2012. Accordingly, your Corporation has prepared a BRR and the same has been uploaded on its website. Members who wish to receive a physical copy of the BRR are requested to write to the Corporation.

Acknowledgements

The Corporation would like to acknowledge the role of all its stakeholders-shareholders, borrowers, channel partners, depositors, key partners and lenders for their continued support to the Corporation.

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

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

On behalf of the Board of Directors

MUMBAI DEEPAK S. PAREKH

May 8, 2013 Chairman

 
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