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Notes to Accounts of Housing Development Finance Corporation Ltd.

Mar 31, 2022

9 (b) Loans granted by the Corporation are secured or partly secured by one or combination of the following securities;

• Registered / equitable mortgage of property;

• Hypothecation of assets;

• Bank guarantee, company guarantee or personal guarantee;

• Assignment of receivables;

• Lien on fixed deposit;

• Negative lien;

• Pledge of shares, units, other securities, assignment of life insurance policies;

• Non disposal undertakings in respect of shares;

• Liquidity support collateral [e.g. DSRA (Debt Service Reserve Account)].

9 (c) Loans including installment and interest outstanding due from related parties '' 19.31 Crore (Previous Year '' 23.91 Crore) [Refer Note 42].

9 (d) The Corporation has not granted any loans or advances in the nature of loans to promoters, directors, KMPs and the related parties (as defined under the Companies Act, 2013), either severally or jointly with any other person that are:

(a) repayable on demand; or

(b) without specifying any terms or period of repayment

9 (e) The Corporation have not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Corporation shall;

(a) d irectly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Corporation (Ultimate Beneficiaries) or

(b) d rovide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

9 (f) There were no loans given against the collateral of gold jewellery and hence the percentage of such loans to the total outstanding asset is Nil (Previous Year Nil).

9 (g) Loans including installment and interest outstanding amounts to '' 1,255.39 Crore (Previous Year '' 529.41 Crore) in respect of properties held for disposal under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [SARFAESI].

9 (h) Expected credit loss

For financial reporting, expected credit loss is a calculation of the present value of the amount expected not to be recovered on financial assets. Credit risk is the potential that the obligor and counterparty will fail to meet its financial obligations to the lender. This requires an effective assessment and management of the credit risk at individual and portfolio level.

The key components of Credit Risk assessment are:

• Probability of default (PD): represents the likelihood of default over a defined time horizon.

• Exposure at default (EAD): represents total amount outstanding including accrued interest as at the reporting date.

• Loss given default (LGD): represents the proportion of EAD, that is likely-loss post default.

The definition of default is taken as more than 90 days past due (DPD) for all loans, individual, corporate and others.

Delinquency buckets considered for the staging of loans:

• 0-30 days past due (DPD) and overdue up to one calendar month are classified as stage 1,

• E1-90 DPD and overdue more than one calendar month, but not stage 3; in addition, SICR accounts are classified as stage 2, and

• e 90 DPD Accounts identified by the Corporation as Non-Performing Accounts under regulatory guidelines objective evidence for impairment (Qualitative Overlay) are classified as stage 3.

EAD is the total amount outstanding including accrued interest as at reporting date. The ECL is computed as a product of PD, LGD and EAD.

Macro-economic Variables: The measurement of ECL should be forward looking in nature. In order to incorporate forward looking macro-economic characteristics into ECL, relationships with macroeconomic variables such as Gross Domestic Product, Inflation, Total investments, National Savings, etc. (relevant variables to the underlying loan portfolio) are analysed and modelled into estimates of Probability of Default (PD). Forecasted 12-months and Lifetime PDs are driven by IMF macroeconomic forecasts for India released as part of World Economic Outlook, October 2021.

COVID-19 Impact Analysis: Further, the Corporation has also evaluated its individual and non-individual portfolios to determine any specific category of customers which may reflect higher credit losses (e.g. based on specific sectors) or borrowers who have shown stress due to COVID like salary cut / loss of pay, job loss temporary / permanent, business closed, business related financial difficulty, increase in business expenditure, etc. Basis such determination, the Corporation has recognised provisions as management overlay for specific categories of customers. Cumulative COVID-19 provision as at March 31, 2022 stood at '' 1,242.02 Crore (Previous Year '' 843.57 Crore).

9.1 Individual loans

9.1.1 Credit quality of assets

For the purpose of computing PD, the Corporation classifies all individual loans at amortized cost and has assessed them at the collective pool level.

The individual loan book has been divided into the following segments -

- Housing and Non-Housing

- Salaried and Self Employed

- Geographical location (North, East, West and South)

The 12 months default rates have been forecasted to create the PD term structure which incorporates both 12 months (stage 1 Loans) and lifetime PD (stage 2 Loans). The historical 12 months default rates are modelled against relevant macro-economic variables to arrive at future 12 months point-in-time default rates. The forecasted default rates are then used to create point-in-time PD term structure.

The vintage analysis methodology has been used to create the LGD vintage. The LGD vintage takes into account the recovery experience across accounts of a particular portfolio post default. The recoveries are tracked and discounted to the date of default using the interest rate. The individual loans portfolio has been considered together for the LGD computation.

9.2 Non-individual loans

9.2.1 Credit quality of assets

Measurement of ECL for stage 1 and certain stage 2 non-individual / corporate loans is based on portfolio approach where PD and LGD is calculated based on historic performance of the portfolio further segmented into: i) Corporate Finance ii) Construction Finance iii) Lease Rental Discounting iv) Inter-Corporate Deposits. Certain loans classified as stage 2 and all the loans classified as stage 3 are assessed for ECL provisioning based on case to case approach by calculating probability weighted average cashflows under different recovery scenarios.

The vintage analysis methodology has been used to create the LGD vintage for measurement of ECL, based on a portfolio approach. The LGD vintage takes into account the recovery experience across accounts of a particular portfolio post default. The recoveries are tracked and discounted to the date of default using the effective interest rate.

The Corporation has identified certain non-individual accounts as Watch List under Stage 2 based on the following criteria:

• Builders'' Cash flows are insufficient to service the loan due to slow sales or the project is stalled.

• Borrowers'' operational cashflows are insufficient indicating possibility of further delayed payments.

• Security cover is insufficient for repayment of loans.

• Where the borrowing company has been proceeded upon under Insolvency and Bankruptcy Code (IBC) by creditors and such reference has been admitted by the National Company Law Tribunal (NCLT).

Such accounts identified as watchlist are upgraded by the Corporation, where the management is satisfied that the risks associated with the account has abated.

9.3 ECL Provision

In addition to the management overlays described above in relation to the impact of COVID 19, the management has recognised additional provisions towards overlay in relation to specific categories of individual customers e.g. loans associated with incomplete / delayed projects, reduction in collateral value, loans associated with specific stage 3 customers, loans associated with projects covered by subvention schemes.

Further, the Corporation has also applied point in time method for determining the probability of default in relation to computation of provision under the expected credit loss model for non-individual customers.

Note 10.1 HDFC Life Insurance Company Limited

During the year, the Board of Directors of HDFC Life Insurance Company Limited (HDFC Life), a subsidiary of the Corporation under Ind AS 110, had approved a share purchase and share swap agreement among HDFC Life, Exide Industries Limited and Exide Life Insurance Company Limited (Exide Life), in connection with the acquisition of 100% of the equity share capital and subsequent merger of Exide Life into HDFC Life for a total consideration of '' 6,687 Crore. Pursuant to the agreement and subsequent to receipt of regulatory approvals, on January 1, 2022, HDFC Life has paid '' 726 Crore and issued 8,70,22,222 equity shares at an issue price of '' 685 per share as consideration. Accordingly, Exide Life has become a wholly owned subsidiary of HDFC Life with effect from January 1, 2022. Further, the Board of Directors of HDFC Life has filed a scheme for amalgamation of Exide Life with and into HDFC Life and their respective shareholders and creditors under Sections 230 to 232 of the Companies Act, 2013 and Sections 35 to 37 of the Insurance Act, 1938 and other applicable laws and regulations to give effect to the said amalgamation, subject to receipt of requisite approvals from various regulatory and statutory authorities, their respective shareholders and creditors.

Note 10.2 HDFC ERGO General Insurance Company Limited

During the year, the Corporation has sold 44,12,000 equity shares of HDFC ERGO General Insurance Company Limited (HDFC ERGO) resulting in a pre tax gain of '' 208.85 crore. As at March 31, 2022, the Corporation''s equity shareholding in HDFC ERGO stood at 49.98% which is in compliance with the RBI requirement to reduce its shareholding to 50 percent or below. Further, the

Board of Directors of the Corporation in Q1- FY22 had approved the sale of 3,55,67,724 equity shares of '' 10 each, representing 4.99% stake in HDFC ERGO to HDFC Bank Ltd., which is pending due to regulatory approvals.

Note 10.3 Good Host Spaces Private Limited

During the year, the Corporation has sold its entire holding i.e. 47,75,241 equity shares representing 24.48% of the equity capital of Good Host Spaces Private Limited (Good Host) an associate (refer note 29.5.2).

Note 10.4 HDFC ERGO Health Insurance Limited

During the previous year, the National Company Law Tribunal has sanctioned the scheme of amalgamation for merger of HDFC ERGO Health Insurance Limited (formerly Apollo Munich Health Insurance Company Limited) (HDFC ERGO Health) with and into HDFC ERGO General Insurance Company Limited (HDFC ERGO), subsidiaries of the Corporation and Insurance Regulatory and Development Authority of India (IRDAI) had issued final approval for the merger. Consequently, HDFC ERGO Health had merged with HDFC ERGO from appointed date i.e. March 1, 2020.

Note 10.5 Debt Asset Swap

During the year, the Corporation has disposed off certain investment costing of ? 173.86 Crore which were acquired through debt asset swap in earlier years. The gross carrying value (fair value) of Investments under debt asset swap as at March 31, 2022 stood at ? 305.85 Crore (Previous Year ? 347.71 Crore).

11.1 During the previous year, the Government of India, Ministry of Finance, vide its notification dated October 23, 2020, had announced COVID-19 Relief Scheme for grant of ex-gratia payment of difference between compound interest and simple interest for six months to borrowers in specified loan accounts (‘the Scheme''), as per the eligibility criteria and other aspects specified therein and irrespective of whether the moratorium was availed or not. The Corporation had implemented the Scheme and credited an amount to the eligible borrowers loan account as per the Scheme and during the current year received reimbursement from SBI - Nodal office in accordance with the relief scheme.

12.3.1 The evaluation of uncertain tax positions involves an interpretation of relevant tax laws which could be subject to challenge by the tax authorities and an assessment of whether the tax authorities will accept the position taken. The Corporation does not currently consider that assumptions or judgements made in assessing tax liabilities have a significant risk resulting in a material adjustment within the next financial year. (Refer note 40.2).

13.1 The Corporation has entered into debt assets swap, wherein the net carrying amount of the investment properties including properties held for sale taken over stood at '' 2,631.31 Crore as at March 31, 2022 (Previous Year '' 910.50 Crore), the properties taken over by the Corporation are mix of residential and commercial properties located in key metro cities. The properties are being held for capital appreciation, which the Corporation will dispose off at an appropriate time in accordance with the applicable regulations.

The fair value of the Corporation''s investment properties as at March 31, 2022 and March 31, 2021 has been arrived at on the basis of valuation by registered valuer as defined under rule 2 of Companies (Registered Valuers and Valuation) Rules, 2017 or internal valuation basis (Level 3) using valuation technique such as market approach (Direct sales comparison method), income approach (rent capitalization method) and net present value (NPV) of discounted cash flows (DCF) method.

The Corporation has leased out certain investment properties. The Corporation has classified these leases as operating leases, because they do not transfer substantially all risk and rewards incidental to the ownership of the assets. (refer Note 29.2)

13.3 The Corporation has entered in to agreement to sell / memorandum of understanding to sell certain Investment properties against which part consideration has been received as at the year end, accordingly the same has been classified as Non-Current Assets held for sale in compliance with the Ind AS 105 on ''Non Current assets held for sale and Discontinuing Operation''.

13.4 Investment property under construction represent rights acquired by the Corporation in properties under construction. These properties are part of the projects being developed by respective real estate developers and not by the Corporation. Accordingly, disclosures relating to investment property under development in terms of paragraph WB of general instructions for preparation of Balance Sheet prescribed in Division III of Schedule III to the Companies Act, 2013 are not applicable.

13.5 Title deed of all investment properties are held in name of the Corporation, however in respect of;

a) Farm House Located at Village Mehrauli, Tehsil Hauz Khas, New Delhi, gross carrying value amounting to '' 42.00 Crore, the Corporation has a duly executed agreement for sell in its favour. A suit for specific performance was successfully decreed in favour of the Corporation by the High Court in the month of January 2020 and in terms thereof the possession of the property was handed over to the Corporation. The Corporation has approached the High Court for execution of the sale deed and the same is expected to be undertaken at the soonest by the High Court through the Court Commissioner.

b) F lot No 4, Echelon Institutional Sector 32, Gurgaon, gross carrying value amounting to '' 72.10 Crore, the Corporation has acquired this property under a debt asset swap arrangement in the month of December 2015. The Corporation holds a duly executed agreement to sell (along with power of attorney) in its favour and is in possession of the property. The existing tenancy was duly attorned in favour of the Corporation as well. Necessary representation to the authority was made to enable execution of sale deed in favour of the Corporation. Since the relevant matter is at the Supreme Court presently, the Corporation has accordingly, made appropriate representation to enable the sale deed executed in its favour.

Further, the acquisition of these properties was in the normal course of business and none of the directors, or their relatives are associated with these transactions in any manner.

18.1 All secured debts are secured by negative lien on the assets of the Corporation and/or mortgage of property as the case may be, subject to the charge created in favour of its depositors pursuant to the regulatory requirements under Section 29B of the National Housing Bank Act, 1987.

18.2 Non-convertible debentures includes '' 4,274.10 Crore (Previous Year '' 4,076.00 Crore) held by related parties [refer note 42].

18.3 The Corporation had issued Synthetic Rupee Denominated Bonds of '' 11,100.00 Crore to overseas investors of which '' 1,800.00 Crore remains outstanding as at March 31, 2022 (Previous Year '' 2,800.00 Crore). The Corporation had also established a Medium Term Note Programme (MTN Programme) for USD 2,800 million so as to enable the Corporation to issue debt instruments in the international capital markets. The Corporation had raised '' 6,100.00 Crore under the MTN Programme in accordance with the RBI guidelines. The Corporation was the first Indian corporate issuer of such bonds. These bonds are listed on the London Stock Exchange. These bonds are unsecured and the currency risk is borne by the investor.

18.4 The Corporation has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Corporation shall;

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Corporation (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

18.5 The Corporation does not have any charges or satisfaction which are yet to be registered with Registrar of Companies beyond the statutory period. However, in the earlier years, the Corporation had redeemed in full, certain secured Non-convertible debentures (Series 2, 4, 5 and 6) aggregating to '' 365 Crore (Previous Year '' 365 Crore), which were issued in the financial year 1998-1999 and 1999-2000 and were secured by way of immovable property or any interest therein. Necessary forms for satisfaction of charges were filed for the said series within the prescribed time limits with the Registrar of Companies, Mumbai (ROC). However, the ROC has not taken such filings on records and the Corporation has not received any communication for the same.

19.1 All secured borrowings are secured by negative lien on the assets of the Corporation, subject to the charge created in favour of its depositors pursuant to the regulatory requirement under Section 29B of the National Housing Bank Act, 1987. The Corporation has no borrowings from banks or financial institutions only on the basis of security of current assets. The Corporation has not been declared as wilful defaulter by any bank or financial Institution or other lender.

19.2 The Corporation do not have any charges or satisfaction which is yet to be registered with Registrar of Companies beyond the statutory period for borrowings.

19.3 The Corporation has total external commercial borrowing (ECBs) of USD 1,400.00 million and JPY 53,200 million for financing prospective owners of low cost affordable housing units for on-lending towards green housing in accordance with the guidelines issued by the RBI. The borrowing has maturity of upto five years. In accordance with RBI guidelines, most of the borrowings have been swapped into rupees for the entire maturity by way of principal only swaps and forward contracts. The foreign currency exposure on interest has been partially hedged by way of forward contracts.

19.4 As at March 31, 2022, the Corporation has foreign currency borrowings of USD 1,404.28 million and JPY 53,200 million (Previous Year USD 1,377.45 million and JPY 53,200 million). The Corporation has undertaken currency swaps and forward contracts of a notional amount of USD 1,400.00 million and JPY 53,200 million (Previous Year USD 1,365.00 million and JPY 53,200 million) and foreign currency arrangements of USD 4.28 million (Previous Year USD 12.45 million) to hedge the foreign currency risk.

As a part of asset liability management, the Corporation has entered into INR interest rate swaps of a notional amount of '' 1,44,845.00 Crore (Previous Year '' 93,160.00 Crore) and USD Interest rate swaps of '' 9,563.00 Crore as on March 31, 2022 (Previous Year '' 8,722.00 Crore) for varying maturities, linked to various benchmarks.

20.2 Public deposits as defined in paragraph 4.1.30 of Master Direction - Non-Banking Financial Company -Housing Finance Company (Reserve Bank) Directions, 2021 read with Paragraph 3 (xiii) of Master Direction - Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016, are secured by floating charge and lien in favour of the Trustee''s for Depositors on the Statutory Liquid Assets maintained in terms of paragraph 42.2 of the Master Direction - Non-Banking Financial Company - Housing Finance Company (Reserve Bank) Directions, 2021 read with sub-sections (1) & (2) of Section 29B of the National Housing Bank Act, 1987.

21.2 These debentures are subordinated to present and future senior indebtedness of the Corporation and qualify as Tier II capital under National Housing Bank (NHB) guidelines for assessing capital adequacy. Based on the balance term to maturity as at March 31, 2022, 40% (Previous Year 45%) of the book value of the subordinated debt is considered as Tier II capital for the purpose of capital adequacy computation.

22.1 As required under Section 124 of the Companies Act, 2013 read together with Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, the Corporation has transferred '' 2.67 Crore (Previous Year '' 2.30 Crore) being unpaid dividend, underlying 86,465 equity shares of '' 2 each (Previous Year: 65,928 equity shares of '' 2 each) and '' 5.04 Crore (Previous Year '' 4.00 Crore) being unclaimed deposits to the Investor Education and Protection Fund (IEPF). As at March 31, 2022, no amount was due for transfer to the IEPF. However, 2,371 equity shares (Previous Year 2,148 equity shares) relating to such unclaimed dividend could not be transferred as the depositories informed that the aforesaid shares were not available in the demat accounts of the respective shareholders.

25.1 The Corporation had invested in 100 Crore equity shares of Yes Bank Limited at '' 10 each on March 14, 2020. Of these, 75% of the equity shares i.e. 75 Crore shares are locked in and not permitted to be sold within 3 years from the date of acquisition. Accordingly, the gain on initial recognition of '' 1,065.75 Crore, based on fair valuation of such locked in shares was deferred and amortised over the locked in period. For the purposes of subsequent measurement, these shares have been designated as FVOCI. During the current year, '' 355.25 Crore (Previous Year '' 355.25 Crore) has been recognised in accordance with Ind AS 109 on Financial Instruments.

26.2 There were no shareholder holding more than 5 percent shares in the Corporation as at March 31, 2022 and March 31, 2021.

26.3 Terms and rights attached to equity shares:

The Corporation has only one class of shares referred to as equity shares having face value of '' 2 each. Each holder of equity share is entitled to one vote per share.

The holders of equity shares are entitled to dividends, if any, proposed by the Board of Directors and approved by Shareholders at the Annual General Meeting.

26.5 The Corporation has not allotted any share pursuant to contracts without payment being received in cash or as bonus shares nor has it bought back any share during the preceding period of five financial years.

26.6 During the previous year, the Corporation had issued 5,68,18,181 equity shares at a price of '' 1,760.00 per share and 36,930 secured redeemable non-convertible debentures of face value of '' 10,00,000 at par, each due on August 11, 2023, carrying a coupon rate of 5.40% payable annually, aggregating '' 3,693 Crore simultaneously with 1,70,57,400 warrants at an issue price of '' 180.00 per warrant with a right to exchange one warrant with one equity share of '' 2 each of the Corporation, any time before the expiry of 36 months from the date of allotment, at an exercise price of '' 2,165.00 per equity share, to eligible qualified institutional buyers through Qualified Institutions Placement under Chapter VI of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 and other applicable regulations. Expenses incurred for issuance of equity share amounting to '' 22.34 Crore has been debited to securities premium account in accordance with the provisions of Companies Act, 2013 in financial year ended March 31, 2021.

The net proceeds of the funds raised through the issue has been utilised to augment the long term resources of the Corporation, to maintain sufficient liquidity in the uncertain economic environment driven by the outbreak of the COVID-19 pandemic, for general corporate purposes and to finance organic and / or inorganic business opportunities that may arise in financial services including housing finance and/or in areas where the subsidiaries of the Corporation operate.

26.9 Dividend

The Board of Directors have proposed dividend on equity shares at '' 30 per share at their meeting held on May 2, 2022 (Previous Year '' 23 per share), subject to the approval of shareholder at the ensuing Annual General Meeting.

27.1 Capital reserve: The Corporation had forfeited equity shares on non payment of call money, profit on reissue of those shares were credited as Capital Reserve.

27.2 Securities premium: Share premium is credited when shares are issued at premium and with the fair value of the stock options which are treated as expense, if any, in respect of shares allotted pursuant to Employee Stock Options Scheme. Share premium can be utilised only for limited purposes such as issuance of bonus shares or adjustment of share issue expenses, net of tax, as permissible under the Companies Act, 2013.

27.3 General reserve: It is a free reserve which is created by appropriation from profits of the current year and/ or undistributed profits of previous years, before declaration of dividend duly complying with any regulations in this regard.

27.4 Special reserve (I & II) has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961 out of the distributable profits of the Corporation.

Special reserve no. I relates to the amounts transferred upto the Financial Year 1996-97 in terms of Section 36(1)(viii) of the Income-tax Act.

Special reserve no. II relates to the amounts transferred after Financial Year 1996-97 in terms of Section 36(1)(viii) of the Income-tax Act.

27.5 Statutory reserve: As per Section 29C of the National Housing Bank Act, 1987 (the “NHB Act"), the Corporation is required to transfer at least 20% of its net profits every year to a reserve before any dividend is declared and no appropriation from the statutory reserves except for the purpose as may be specified by the National Housing Bank (NHB) from time to time and every such appropriation shall be reported to the NHB. For this purpose any Special Reserve created by the Corporation under Section 36(1)(viii) of the Income-tax Act, 1961 is considered to be an eligible transfer. The Corporation has transferred an amount of '' 2,100 Crore (Previous Year '' 2,000 Crore) to Special Reserve No. II in terms of Section 36(1)(viii) of the Income-tax Act, 1961 and an amount of '' 700 Crore (Previous Year '' 500 Crore) to “Statutory Reserve (as per Section 29C of the NHB Act)".

27.6 Shelter assistance reserve: It represents funding various development and grassroot level organisations for the purposes as mentioned in Schedule VI to the Companies Act, 2013 and in accordance with the Corporation''s policy.

277 Other comprehensive income:

Effective portion of cash flow hedge: It represents the cumulative gains/(losses) arising on revaluation of the derivative instruments designated as cash flow hedges through OCI.

Cost of hedge: It represent the cumulative charge for the derivative instrument, in the form of premium amortisation on option contracts and forward contracts taken, designated as cash flow hedges through OCI.

278 Share-based payment reserve:

The Corporation has Employee stock option schemes under which the eligible employees and key management personnel are granted stock options. Stock options granted are measured at fair value on the grant date using Black-Scholes model and amortised over the vesting period as share based payment with corresponding credit in share-based payment reserve. On exercise of the stock options, balance in share-based payment reserve is transferred to securities premium account.

28.1 The surplus on deployment in liquid instruments represents return on investments where underlying securities yield fixed income such as Government Securities / Treasury Bills, Commercial Paper and Certificate of Deposit.

28.2 In accordance with the RBI Circular No. RBI/2021-22/17 DOR.STR.REC.4/21.04.048/2021-22 dated April 7, 2021 and the methodology for calculation of interest on interest based on guidance issued by Indian Banks'' Association, the Corporation had put in place a Board approved policy to refund / adjust interest on interest charged to borrowers during the moratorium period, i.e. March 1, 2020 to August 31, 2020. During the current year, the Corporation has credited the required amount to the customers account.

29.1 Dividend income

Dividend income includes '' 918.48 Crore (Previous Year '' 716.84 Crore) received from subsidiary companies and '' 562.00 Crore (Previous Year : Nil) received from an associate company.

29.2 Rental income

Rental income includes '' 56.53 Crore (Previous Year '' 52.13 Crore) from certain investment properties that were rented to external parties.

29.3 Fees and commission income

Fees and commission income includes '' 226.72 Crore (Previous Year '' 193.98 Crore) received from related parties.

29.5 Profit on sale of investments and investment property (net)

29.5.1 During the year, the Corporation has sold 44,12,000 equity shares of HDFC ERGO General Insurance Company Limited (HDFC ERGO) resulting in a pre tax gain of '' 208.85 Crore. As at March 31, 2022, the Corporation''s equity shareholding in HDFC ERGO stood at 49.98% which is in compliance with the RBI requirement to reduce its shareholding to 50 percent or below.

29.5.2 During the year, the Corporation has sold its entire Investment in equity shares of Good Host Spaces Private Limited an associate, as a result pre tax profit on sale of investment of '' 54.17 Crore has been recognised.

29.5.3 During the previous year, the Corporation has sold 2,85,48,750 equity shares of HDFC Life Insurance Company Limited (HDFC Life), in two tranches in May 2020 and November 2020, to comply with the RBI direction to reduce the shareholding in HDFC Life to 50 percent or below. As a result, a pre tax profit on sale of investments of '' 1,397.69 Crore has been recognised.

29.5.4 During the year, the Corporation has sold certain Investment Property resulting in loss of '' 3.72 Crore (Previous Year '' 2.20 Crore).

29.6 Income on derecognised (assigned) loans

The Corporation has derecognised Individual loans of '' 28,455.26 Crore and Non-Individual loan of '' 1,500.00 Crore (Previous Year Individual loan of '' 18,979.78 Crore) (measured at amortised cost) on account of assignment transactions resulting in total income of '' 1,056.00 Crore (Previous Year '' 1,190.25 Crore) including upfront gains of '' 606.50 Crore (Previous Year '' 706.72 Crore).

As at March 31, 2022, the outstanding amount in respect of individual loans sold was '' 83,880.24 Crore (Previous Year '' 71,420.87 Crore). The Corporation continues to service these loans.

36. Segment reporting

The Corporation''s main business is financing by way of loans for the purchase or construction of residential houses, commercial real estate and certain other purposes, in India. All other activities of the Corporation revolve around the main business. As such, there are no separate reportable segments, as per the Indian Accounting Standard (Ind AS) 108 on ''Segment Reporting''.

37. Employee benefit plan37.1 Defined contribution plan

The Corporation has recognised '' 15.07 Crore (Previous Year '' 14.36 Crore) for superannuation contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Corporation are at rates specified in the rules of the schemes.

A separate trust fund is created to manage the superannuation plan and the contribution to the trust fund is done in accordance with Rule 87 of the Income Tax Rules, 1962.

37.2 Defined benefit plans Provident fund

The fair value of the assets of the provident fund and the accumulated members'' corpus is '' 679.45 Crore and '' 666.06 Crore respectively (Previous Year '' 597.96 Crore and '' 583.60 Crore respectively). In accordance with an actuarial valuation, there is no deficit in the interest cost as the present value of the expected future earnings on the fund is more than the expected amount to be credited to the individual members based on the expected guaranteed rate of interest of 8.10%. The actuarial assumptions include discount rate of 7.25% (Previous Year 6.82%) and an average expected future period of 14 years (Previous Year 14 years). Expected guaranteed interest rate (weighted average yield) is 8.07% (Previous Year 8.83%).

The Corporation has recognised '' 30.01 Crore (Previous Year '' 25.79 Crore) for provident fund contributions in the statement of profit and loss. The contributions payable to these plans by the Corporation are at rates specified in the rules of the schemes.

Gratuity

The Corporation has a defined benefit gratuity plan in India for its employees (funded). The Corporation''s gratuity plan requires contributions to be made to a separately administered fund. The fund is managed by a trust which is governed by the Board of Trustees. The Board of Trustees are responsible for the administration of the plan assets and for the definition of the investment strategy.

During the year, there were no plan amendments and curtailments.

A separate trust fund is created to manage the Gratuity plan and the contribution to the trust fund is done in accordance with Rule 103 of the Income Tax Rules, 1962.

Risks associated with defined benefit plan

Provident Fund and Gratuity is a defined benefit plan and Corporation is exposed to the following risks:

Interest rate risk: A fall in the discount rate, which is linked to the Government Securities rate, will increases the present value of the liability requiring higher provision. A fall in the discount rate generally increases the mark to market value of the assets depending on the duration of asset.

Salary risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of members. As such, an increase in the salary of the members more than assumed level may increase the plan''s liability.

Investment risk: The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan asset is below this rate, it will create a plan deficit. Currently, for the plan in India, it has a relatively balanced mix of investments in government securities, and other debt instruments.

Asset liability matching (ALM) risk: The plan faces the ALM risk as to matching cash flow. Since the plan is invested in lines of Rule 101 of Income Tax Rules, 1962, it generally reduces ALM risk.

Mortality risk: Since the benefits under the plan is not payable for life time and payable till retirement age only, plan does not have any longevity risk.

Other post retirement benefit plan

The details of the Corporation''s post-retirement benefits plans for its employees including whole-time directors are given below which is as certified by the actuary and relied upon by the auditors:

The sensitivity analysis have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

The sensitivity analysis presented above may not be representative of the actual change in the projected benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the projected benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same method as applied in calculating the projected benefit obligation as recognised in the balance sheet. There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.

The weighted average duration of the Defined Benefit Obligation as at March 31, 2022 is 8 years (Previous Year : 8 years).

Funding arrangement and policy

The contribution by the Corporation to fund the liabilities of the plan has to be invested. The trustees of the plan are required to invest the funds as per the prescribed pattern of investments laid out in the income tax rules for such approved schemes. Due to the restrictions in the type of investments that can be held by the fund, it is not possible to explicitly follow an asset-liability matching strategy to actively manage liquidity risk.

Estimated amount of contribution expected to be paid to the fund during the annual period being after the Balance Sheet date is '' 23.87 Crore (Previous Year '' 12.95 Crore).

38.2 Method used for accounting for share based payment plan

The stock options granted to employees pursuant to the Corporation''s Stock options Schemes, are measured at the fair value of the options at the grant date using Black-Scholes model for grants given and vested after the Ind AS transition date of April 1, 2017. The fair value of the options determined at grant date is recognised as employee compensation cost over the vesting period on straight line basis over the period of option, based on the number of grants expected to vest, with corresponding increase in equity.

40. Contingent liabilities and commitments

40.1 The Corporation is involved in certain appellate, judicial and arbitration proceedings (including those described below) concerning matters arising in the normal course of business including claims from revenue authorities, customers, contingencies arising from having issued guarantees to lenders or to other entities. The proceedings in respect of these matters are in various stages. Management has assessed the possible obligations arising from such claims against the Corporation, in accordance with the requirements of Indian Accounting Standard (Ind AS) 37 and based on judicial precedents, consultation with lawyers or based on its historical experiences. Accordingly, Management is of the view that based on currently available information, no provision in addition to that already recognised in its financial statements is considered necessary in respect of the above.

40.2 Given below are amounts in respect of claims asserted by revenue authorities and others:

(a) Contingent liability in respect of income-tax demands, net of amounts provided for and disputed by the Corporation, amounts to '' 2,581.56 Crore (Previous Year '' 2,064.18 Crore). The said amount has been paid/adjusted and will be received as refund if the matters are decided in favour of the Corporation.

(b) Contingent liability in respect of disputed dues towards wealth tax amounts to '' 0.11 Crore (Previous Year '' 0.13 Crore).

(c) Contingent liability in respect of disputed dues towards Service tax not provided for by the Corporation amounts to '' 17.26 Crore (Previous Year '' 0.80 Crore).

The Management is generally unable to reasonably estimate a range of possible loss for proceedings or disputes other than those included in the estimate above as plaintiffs / parties have not claimed an amount of money damages, the proceedings are in early stages and/or there are significant factual issues to be resolved.

The Management believes that the above claims made are untenable and is contesting them.

40.3 Contingent liability in respect of guarantees and undertakings comprise of the following:

a) Guarantees outstanding '' 367.83 Crore (Previous Year '' 299.50 Crore).

b) Corporate undertakings for securitisation and assignment of loans aggregated to '' 1,152.72 Crore (Previous Year '' 1,152.68 Crore). The outflows would arise in the event of a shortfall, if any, in the cash flows of the pool of the securitised and assigned loans.

In respect of these guarantees and undertaking, the Management does not believe, based on currently available information, that the maximum outflow that could arise, will have a material adverse effect on the Corporation''s financial condition.

40.4 Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is '' 345.55 Crore (Previous Year '' 297.33 Crore).

40.5 Estimated amount of investment commitment on venture fund and alternative investment fund is '' 978.72 Crore (Previous Year '' 564.59 Crore).

The Corporation has made provision towards loans and advances, trade receivable, investments, inter corporate deposits and other financial assets.

Impairment on loans arising during the years includes impairment of '' 335.00 Crore (Previous Year '' 468.00 Crore) relating to interest on stage 3 accounts (credit impaired assets), which is netted off from interest income in the Statement of Profit and Loss.

Key management personnel are those individuals who have the authority and responsibility for planning and exercising power to directly or indirectly control the activities of the Corporation and its employees. The Corporation includes the members of the Board of Directors which include independent directors (and its sub-committees) and Executive Committee to be key management personnel for the purposes of Ind AS 24 Related Party Disclosures.

Transactions with key management personnel of the Corporation

The Corporation enters into transactions, arrangements and agreements involving directors, senior management and their business associates, or close family members, in the ordinary course of business under the same commercial and market terms, interest and commission rates that apply to non-related parties.

The Corporation manages various risks associated with its business. These risks include liquidity risk, foreign exchange risk, interest rate risk and counterparty risk.

The Corporation manages the aforesaid risk, on an ongoing basis, in accordance with the framework under the Board approved policies such as Financial Risk Management policy, Asset Liability Management policy.

Liquidity risks are managed through a combination of strategies like managing tenors in line with the Asset Liability Management policy and adequate liquidity cover is maintained in line with the RBI''s Liquidity Risk Management Framework. Interest rate risks are managed by entering into interest rate swaps. The currency risk on borrowings is actively managed mainly through a combination of currency swaps, forward contracts and option contracts. Counterparty risk is reviewed periodically to ensure that exposure to various counterparties is well diversified and within the limits fixed by the Derivative Committee. It is also managed by entering into collateralization arrangements with banking counterparties to the extent possible.

43.3.2 Valuation technique used to determine fair value

The fair value of a financial instrument on initial recognition is normally the transaction price (fair value of the consideration given or received). Subsequent to initial recognition, the Corporation determines the fair value of financial instruments that are quoted in active markets using the quoted bid prices (financial assets held) or quoted ask prices (financial liabilities held) and using valuation techniques for other instruments. Valuation techniques include discounted cash flow method, market comparable method, recent transactions and other valuation models.

The Corporation measures financial instruments, such as investments (other than equity investments in Subsidiaries, Joint Ventures and Associates) at fair value.

The Corporation uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Level 1 to Level 3, as described below:

Quoted prices in an active market (Level 1): Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, units of mutual funds (open ended) and traded bonds that have quoted price. The fair value of all equity instruments (including bonds) which are traded in the stock exchanges is valued using the closing price as at the reporting period.

Valuation techniques with observable inputs (Level 2): The fair value of financial instruments that are not traded in an active market for example, Securities receipts, Mutual Funds (close ended) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2, this level of hierarchy includes financial assets, measured using inputs other than quoted prices included within Level 1 that are observable for the asset, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Valuation techniques with significant unobservable inputs (Level 3): This level of hierarchy includes financial assets measured using inputs that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part, using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data, this level of hierarchy includes unlisted equity instruments, venture fund units and security receipts.

43.3.3 Valuation Process - Equity Instrument Level 3

When the fair value of equity investments cannot be measured based on quoted prices in active markets, their fair values are measured using valuation techniques including the Discounted Cash Flow (DCF) model, market comparable method and based on recent transactions happened in respective companies. The inputs to these models are taken from observable market where possible, but where this is not feasible, a degree of judgement is exercised in establishing fair values. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

For certain unquoted equity instruments, recent information is insufficient to measure fair value and cost, represents the best estimate of fair value. These investments in equity instruments are not held for trading.

43.3.6.1 The fair value of the financial assets and financial liabilities are considered at the amount, at which the instrument could be exchanged in current transaction between willing parties, other than in, forced or liquidation sale.

43.3.6.2 Loans

Substantially most of the loans are repriced frequently, with interest rates broadly in line with current interest rates, the carrying value of such loans amounting to '' 5,54,862.51 Crore (Previous Year '' 4,85,294.26 Crore) approximates their fair value.

43.3.6.3 Other Financial Assets and Liabilities

With respect to Bank balances and Cash and cash equivalents (Refer Notes 5 and 6), Trade receivables (Refer Note 8), Other financial assets (Refer Note 11), Trade payables (Refer Note 17) and Other financial liabilities (Refer Note 22), the carrying value approximates the fair value.

43.3.6.4 Fair value of Non Convertible Debentures has been computed using annualized Government bond yield provided by FBIL and corresponding fortnightly corporate bond spreads provided by FIMMDA.

43.4 Credit Risk

Credit risk is the risk of loss that may occur from the failure of any party to abide by the terms and conditions of any contract, principally the failure to make required payments of amounts due to the Corporation. In its lending operations, the Corporation is principally exposed to credit risk.

The credit risk is governed by various Product Policies. The Product Policy outlines the type of products that can be offered, customer categories, the targeted customer profile and the credit approval process and limits.

Credit Approval Authorities

The Board of Directors have delegated loan approving authority to branch sanctioning committees/ management committee/ committee of directors, depending upon the nature of loan (i.e. retail/non-individual) and also depending upon the value of the loan.

Credit Risk Assessment Methodology43.4.1 Corporate Portfolio

The Corporation has an established credit appraisal procedure which has been detailed in Corporate Loans Policy and Developer Loans Policy respectively. The policies outline appraisal norms including assessment of quantitative and qualitative parameters along with guidelines for various products. The policy also includes process for approval of Loans which are subject to review and approval by Sanctioning Committees.

The Corporation carries out a detailed analysis of funding requirements, including normal capital expenses, long-term working capital requirements and temporary imbalances in liquidity. A significant portion of Corporate Finance loans are secured by a lien over appropriate assets of the borrower.

Borrower risk is evaluated by considering:

• the risks and prospects associated with the industry in which the borrower is operating (industry risk);

• the financial position of the borrower by analysing the quality of its financial statements, its past financial performance, its financial flexibility in terms of ability to raise capital and its cash flow adequacy (financial risk);

• the borrower''s relative market position and operating efficiency (business risk);

• the quality of management by analysing their track record, payment record and financial conservatism (management risk); and

• the risks with respect to specific projects, both pre-implementation, such as construction risk and funding risk, as well as post-implementation risks such as industry, business, financial and management risks related to the project (project risk).


Mar 31, 2021

3.2.10 Servicing of Assets / Liabilities

The Corporation transfers loans through securitisation and direct assignment transactions. The transferred loans are de-recognised and gains/losses are accounted for, only if the Corporation transfers substantially all risks and rewards specified in the underlying assigned loan contract. In accordance with the Ind AS 109, on de-recognition of a financial asset under assigned transactions for a fee, the Corporation recognises the fair value of future service fee income over service obligations cost on net basis as service fee income in the statement of profit and loss and, correspondingly creates a service asset in balance sheet.

The Corporation recognises either a servicing asset or a servicing liability for servicing contract. If the fee to be received is not expected to compensate the Corporation adequately for performing the servicing activities, a servicing liability for the servicing obligation is recognised at its fair value. If the fee to be received is expected to be more than adequate compensation for the servicing activities, a servicing asset is recognised. Corresponding amount is recognised in Statement of Profit and Loss.

3.2.11 Derivative Financial Instruments

The Corporation enters into a variety of derivative financial instruments to manage its exposure to interest rate risk and foreign exchange rate risk. Derivatives held include foreign exchange forward contracts, interest rate swaps, cross currency interest rate swaps and foreign exchange option contracts.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The resulting gain/loss is recognised in the statement of profit and loss immediately unless the derivative is designated and is effective as a hedging instrument, in which event the timing of the recognition in the statement of profit and loss depends on the nature of the hedge relationship. The Corporation designates certain derivatives as either hedges of the fair value of recognised assets or liabilities (fair value hedges) or hedges of highly probable forecast transactions (cash flow hedges).

A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability.

3.2.11,1 Hedge Accounting

The Corporation makes use of derivative instruments to manage exposures to interest rate and foreign currency. In order to manage particular risks, the Corporation applies hedge accounting for transactions that meet specified criteria.

At the inception of a hedge relationship, the Corporation formally designates and documents the hedge relationship to which the Corporation wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Corporation''s risk management objective and strategy for undertaking hedge, the hedging / economic relationship, the hedged item or transaction, the nature of the risk being hedged, hedge ratio and how the Corporation would assess the effectiveness of changes in the hedging instrument''s fair value in offsetting the exposure to changes in the hedged item''s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an on-going basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.

Hedges that meet the criteria for hedge accounting are accounted for, as described below:

3.2.11.2 Fair Value Hedges

Fair value hedges hedge the exposure to changes in the fair value of a recognised asset or liability, or an identified portion of such an asset, liability, that is attributable to a particular risk and could affect profit or loss.

For designated and qualifying fair value hedges, the cumulative change in the fair value of a hedging derivative is recognised in the statement of profit and loss in Finance Costs. Meanwhile, the cumulative change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item in the balance sheet and is also recognised in the statement of profit and loss in Finance Cost.

The Corporation classifies a fair value hedge relationship when the hedged item (or group of items) is a distinctively identifiable asset or liability hedged by one or a few hedging instruments. The financial instruments hedged for interest rate risk in a fair value hedge relationship is fixed rate debt issued and other borrowed funds. If the hedging instrument expires or is sold, terminated or exercised, or where the hedge no longer meets the criteria for hedge accounting, the hedge relationship is discontinued prospectively. If the relationship does not meet hedge effectiveness criteria, the Corporation discontinues hedge accounting from the date on which the qualifying criteria are no longer met. For hedged items recorded at amortised cost, the accumulated fair value hedge adjustment to the carrying amount of the hedged item on termination of the hedge accounting relationship is amortised over the remaining term of the original hedge using the recalculated EIR method by recalculating the EIR at the date when the amortisation begins. If the hedged item is derecognised, the unamortised fair value adjustment is recognised immediately in the statement of profit and loss.

3.2.11.3 Cash Flow Hedges

A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability (such as all or some future interest payments on variable rate debt) or a highly probable forecast transaction and could affect profit or loss.

For designated and qualifying cash flow hedges, the effective portion of the cumulative gain or loss on the hedging instrument is initially recognised directly in OCI within equity (cash flow hedge reserve). The ineffective portion of the gain or loss on the hedging instrument is recognised immediately as Finance Cost in the statement of profit and loss.

When the hedged cash flow affects the statement of profit and loss, the effective portion of the gain or loss on the hedging instrument is recorded in the corresponding income or expense line of the statement of profit and loss.

When a hedging instrument expires, is sold, terminated, exercised, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss that has been recognised in OCI at that time remains in OCI and is recognised when the hedged forecast transaction is ultimately recognised in the statement of profit and loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in OCI is immediately transferred to the statement of profit and loss.

3.2.12 Financial Guarantee Contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.

Financial guarantee contracts issued by the Corporation are initially measured at their fair values and, if not designated as at FVTPL and not arising from a transfer of a financial asset, are subsequently measured at the higher of:

• the amount of the loss allowance determined in accordance with Ind AS 109; and

• the amount initially recognised less, where appropriate, cumulative amount of income recognised in accordance with the Corporation''s revenue recognition policies.

The Corporation has not designated any financial guarantee contracts as FVTPL.

3.3 Property, Plant and Equipment (“PPE”)

PPE held for use are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses.

PPE is recognised when it is probable that future economic benefits associated with the item is expected to flow to the Corporation and the cost of the item can be measured reliably. PPE is stated at original cost net of tax/duty credits availed, if any, less accumulated depreciation and cumulative impairment, if any. Cost includes professional fees related to the acquisition of PPE.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of profit and loss.

3.4 Investment Property

Investment properties are properties held to earn rentals and/or capital appreciation and are measured and reported at cost, less accumulated depreciation and accumulated impairment losses.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on de-recognition of property is recognised in the Statement of Profit and Loss in the same period.

3.5 Intangible Assets

Intangible assets are recognised when it is probable that the future economic benefits that are attributable to the asset will flow to the Corporation and the cost of the asset can be measured reliably. Intangible assets are stated at original cost net of tax/duty credits availed, if any, less accumulated amortisation and cumulative impairment. Administrative and other general overhead expenses that are specifically attributable to acquisition of intangible assets are allocated and capitalised as a part of the cost of the intangible assets.

Intangible assets not ready for the intended use on the date of Balance Sheet are disclosed as “Intangible assets under development”.

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains and losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the assets are recognised in the statement of profit and loss when the asset is derecognised.

3.6 Capital work-in-progress

Capital work in progress includes assets not ready for the intended use and is carried at cost, comprising direct cost and related incidental expenses.

3.7 Depreciation and Amortisation

Depreciation is recognised using straight line method so as to write off the cost of the assets (other than freehold land) less their residual values over their estimated useful lives specified in Schedule II to the Act, or in case of assets where the estimated useful life was determined by technical evaluation, over the useful

life so determined. Depreciation method is reviewed at each financial year end to reflect expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful life and residual values are also reviewed at each financial year end with the effect of any change in the estimates of useful life/residual value is recognised on prospective basis.

Depreciation for additions to/deductions from, owned assets is calculated pro rata to the period of use.

Freehold land is not depreciated. Leasehold land is amortised over the duration of the lease. The useful life of the property, plant and equipment held by the Corporation is as follows:

Class of Assets

Useful Life

Buildings

60 years

Computer Hardware*

4 years

Furniture & Fittings

10 years

Office Equipment

5 years

Vehicles*

5 years

Computer Software*

4 years

* For the above class of assets, based on internal assessment and independent technical evaluation carried out by external valuers, the management believes that the useful lives as given above best represent the period over which management expects to use these assets. Hence, the useful lives for these assets are different from the useful lives as prescribed under Part C of Schedule II of the Act.

Intangible assets with finite useful lives are amortised on straight line basis over the estimated useful life of 4 years. The method of amortisation and useful life are reviewed at the end of each accounting year with the effect of any changes in the estimate being accounted for on a prospective basis.

Intangible assets with indefinite useful lives are tested for impairment by comparing its recoverable amount with its carrying amount annually and whenever there is an indication that the intangible asset may be impaired.

3.8 Impairment of Assets other than Financial Instruments

As at the end of each accounting year, the Corporation reviews the carrying amounts of its PPE, investment property and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If such indication exists, the PPE, investment property and intangible assets are tested for impairment so as to determine the impairment loss, if any.

3.9 Employee Benefits

3.9.1 Share-based Payment Arrangements

Estimating fair value for share-based payment transactions requires use of an appropriate valuation model. The Corporation measures the cost of equity-settled transactions with Option holders using Black-Scholes Model to determine the fair value of the options on the grant date.

Inputs into the valuation model, includes assumption such as the expected life of the share option, volatility and dividend yield.

The stock options granted to employees pursuant to the Corporation''s Stock Options Schemes, are measured at the fair value of the options at the grant date using Black Scholes Model. The fair value of the options determined at grant date is accounted as employee compensation cost over the vesting period on a straight line basis over the period of option, based on the number of grants expected to vest, with corresponding increase in equity. On cancellation or lapse of option granted to employees, the compensation cost charged to statement of profit & loss is credited with corresponding decrease in equity.

3.9.2 Defined Contribution Plans

3.9.2.1 Superannuation Fund

The Corporation''s contribution to superannuation fund is considered as a defined contribution plan and is charged as an expense based on the amount of contribution required to be made.

3.9.3 Defined Benefit Plans

The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

3.9.3.1 Provident Fund

All employees of the Corporation are entitled to receive benefits under the Provident Fund. The Corporation makes a contribution to provident fund and the schemes thereunder, as recognised by the Income-tax authorities and administered by the trust. The contributions are recognised as an expense in the year in which they are incurred. The Rules of the Corporation''s Provident Fund administered by a Trust require that if the Board of Trustees is unable to pay interest at the rate declared for Employees'' Provident Fund by the Government under para 60 of the Employees'' Provident Fund Scheme, 1952 for the reason that the return on investment is less or for any other reason, then the deficiency shall be made good by the Corporation. Actuarial valuation of this Provident Fund interest shortfall is done as per the guidance note issued in this respect by The Institute of Actuaries of India (IAI) and provision towards this liability, if any is recognised.

3.9.32 Gratuity and Other Post Retirement Benefits

For defined benefit plans in the form of gratuity fund and post retirement pension scheme for whole-time Directors, the cost of providing benefits is determined using the Projected Unit Credit method, with actuarial valuations being carried out at each balance sheet date. Remeasurements are recognised in the Other Comprehensive Income in the period in which they occur. Past service cost is recognised immediately to the extent that the benefits are already vested and otherwise is amortised on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognised in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, as reduced by the fair value of planned assets.

3.9.33 Short-term Employee Benefits

The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised during the year when the employees render the service. These benefits include performance incentive and compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related service.

3.9.34 Long-term Employee Benefits

Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related service are recognised as a liability at the present value of the defined benefit obligation as at the balance sheet date, based on actuarial valuation.

3.10 Leases

The Corporation as Lessee

The Corporation''s lease asset classes primarily consist of leases for office premises. The Corporation assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Corporation assesses whether:

(i) the contract involves the use of an identified asset

(ii) the Corporation has substantially all of the economic benefits from use of the asset through the period of the lease and

(iii) the Corporation has the right to direct the use of the asset.

At the date of commencement of the lease, the Corporation recognizes a right-of-use asset (“ROU”) and a corresponding lease liability for all lease arrangements in which it is a lessee.

Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.

The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.

The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Corporation changes its assessment if whether it will exercise an extension or a termination option.

Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.

The Corporation as Lessor

Leases for which the Corporation is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.

For operating leases, rental income is recognized on a straight line basis over the term of the relevant lease.

3.11 Dividends on Ordinary Shares

The Corporation recognises a liability to make cash to equity holders of the Corporation when the dividend is authorised and the distribution is no longer at the discretion of the Corporation. As per the corporate laws in India, an interim dividend is authorised when it is approved by the Board of Directors and final dividend is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.

3.12 Cash and Cash Equivalents

Cash comprises of cash on hand and demand deposits with banks. Cash equivalents are short-term deposits with banks (with an original maturity of three months or less from the date of placement) and cheques on hand. Short term and liquid investments being subject to more than insignificant risk of change in value, are not included as part of cash and cash equivalents.

3.13 Securities Premium Account

Securities premium is credited when shares are issued at premium. It can be used to issue bonus shares, to provide for premium on redemption of shares and issue expenses of securities which qualify as equity instruments.

3.14 Borrowing Costs

Borrowing costs include interest expense calculated using the EIR on respective financial instruments measured at amortised cost, finance charges in respect of assets acquired on finance lease and exchange differences arising from foreign currency borrowings, to the extent they are regarded as an adjustment to interest costs.

3.15 Foreign Currencies

(i) Functional currency of the Corporation and foreign operations has been determined based on the primary economic environment in which the Corporation and its foreign operations operate considering the currency in which funds are generated, spent and retained.

(ii) Transactions in currencies other than the Corporation''s functional currency are recorded on initial recognition using the exchange rate at the transaction date. At each Balance Sheet date, foreign currency monetary items are reported at the rates prevailing at the year-end. Non-monetary items that are measured in terms of historical cost in foreign currency are not retranslated.

Exchange differences that arise on settlement of monetary items or on reporting of monetary items at each Balance Sheet date at the closing spot rate are recognised in the Statement of Profit and Loss in the period in which they arise except for Long Term Monetary Items outstanding as at March 31, 2018, for which differences are recognized in FCMITDA and amortised in Profit & Loss statement.

3.16 Segments

The Corporation''s main business is financing by way of loans for the purchase or construction of residential houses, commercial real estate or certain other purposes, in India. All other activities of the Corporation revolve around the main business. This in the context of Ind AS 108 - Operating Segments reporting is considered to constitute one reportable segment.

3.17 Investments in Subsidiaries, Joint Ventures and Associates

Investments in Subsidiaries and Associates are measured at cost as per Ind AS 27 - Separate Financial Statements.

3.18 Earnings Per Share

Basic earnings per share is computed by dividing profit or loss attributable to ordinary equity holders by the weighted average number of shares outstanding during the year. Diluted earnings per share is computed using the weighted average number of shares and dilutive potential shares, except where the result would be antidilutive.

3.19 Taxes on Income

The Corporation''s tax jurisdiction is in India. Significant judgements are involved in determining the provision for income taxes, including amount expected to be paid/recovered for certain tax positions.

Income tax expense comprises current and deferred taxes. Income tax expense is recognized in the statement of profit and loss except when they relate to items that are recognized outside statement of profit and loss

(whether in other comprehensive income or directly in equity), in which case tax is also recognized outside statement of profit and loss.

Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying values of assets and liabilities and their respective tax bases, and unutilized business loss and depreciation carry-forwards and tax credits. Deferred tax assets are recognized to the extent that it is probable that future taxable income will be available against which the deductible temporary differences, unused tax losses, depreciation carry-forwards and unused tax credits could be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date, and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured based on the tax rates that are expected to apply in the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Corporation intends to settle its current tax assets and liabilities on a net basis.

Significant accounting estimates and judgements are involved in determining Corporation''s tax charge for the year which includes an interpretation of local tax laws, judicial pronouncements and an assessment whether the tax authorities will accept the position taken. These judgements, also, take account of external advice, wherever appropriate, and the Corporation''s view on settling with the tax authorities.

The Corporation provides for current tax liabilities at the best estimate that is expected to be paid to the tax authorities where an outflow is probable.

3.20 Goods and Services Input Tax Credit

Goods and Services tax input credit is recognised for in the books in the period in which the supply of goods or service received is recognised and when there is no uncertainty in availing/utilising the credits.

3.21 Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognised only when:

(i) The Corporation has a present obligation (legal or constructive) as a result of a past event; and

(ii) It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

(iii) A reliable estimate can be made of the amount of the obligation.

Provision is measured using the cash flows estimated to settle the present obligation and when the effect of time value of money is material, the carrying amount of the provision is the present value of those cash flows.

Contingent liability is disclosed in case of:

(i) A present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation; or

(ii) A present obligation arising from past events, when no reliable estimate is possible.

Where the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under such contract, the present obligation under the contract is recognised and measured as a provision.

Contingent Assets:

Contingent assets are not recognised in the financial statements.

Contingent assets are disclosed where an inflow of economic benefits is probable.

Provisions, contingent liabilities and contingent assets are reviewed at each Balance Sheet date.

3.22 Commitments

Commitments are future liabilities for contractual expenditure, classified and disclosed as follows:

a) Estimated amount of contracts remaining to be executed on capital account and not provided for;

b) Uncalled liability on shares and other investments partly paid;

c) Funding related commitment to associate and joint venture companies; and

d) Other non-cancellable commitments, if any, to the extent they are considered material and relevant in the opinion of management.

3.23 Non-Current Assets held for sale

Non-current assets are classified as held for sale if their carrying amount is intended to be recovered principally through a sale (rather than through continuing use) when the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sale of such asset and the sale is highly probable and is expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets classified as held for sale are measured at lower of their carrying amount and fair value less costs to sell.

3.24 Statement of Cash Flows

Statement of Cash Flows is prepared segregating the cash flows into operating, investing and financing activities. Cash flow from operating activities is reported using indirect method adjusting the net profit for the effects of:

i. changes during the period in operating receivables and payables transactions of a non-cash nature;

ii. non-cash items such as depreciation, provisions, deferred taxes, unrealised foreign currency gains and losses; and

iii. All other items for which the cash effects are investing or financing cash flows.

Cash and cash equivalents (including bank balances) shown in the Statement of Cash Flows exclude items which are not available for general use as on the date of Balance Sheet.

4. Consequent to the outbreak of COVID-19 pandemic, the Indian government had announced lockdown in March 2020. Subsequently, the lockdown has been lifted by the government in a phased manner outside specified containment zones.

The extent to which the COVID-19 pandemic, including the current second wave that has significantly increased the number of cases in India, may continue to impact Corporation''s performance, will depend on ongoing and future developments, which are uncertain, including among other things, any new information concerning the severity of the COVID-19 pandemic and any action to contain its spread or mitigate its impact whether government mandated or elected by us.

In accordance with the RBI guidelines relating to COVID-19 Regulatory Package dated March 27, 2020, April 17, 2020 and May 23, 2020, the Corporation had offered moratorium on the payment of instalments falling due between March 1, 2020 and August 31, 2020 (''moratorium period'') to eligible borrowers. In respect of accounts where moratorium benefit was granted, the staging of those accounts as at March 31, 2021 is based on the days past due status considering the benefit of moratorium period in accordance with the COVID-19 Regulatory Package announced by the RBI vide aforesaid notifications.


Mar 31, 2019

1. Corporation Overview

Housing Development Finance Corporation Limited (‘HDFC’ or ‘the Corporation’ or ‘the Company’) was incorporated in 1977 as the first specialised Mortgage Company domiciled in India as a limited company having its Corporate office at HDFC House, H T Parekh Marg, Churchgate, Mumbai 400 020. The principal business is providing finance to individuals, corporates and developers for the purchase, construction, development and repair of houses, apartments and commercial properties in India. The business is conducted through its branches in India and its overseas offices at London, Singapore and Dubai supported by a network of agents for sourcing loans as well as deposits. HDFC is the holding company for investments in its associates and subsidiary companies. The Corporation is a public limited company and its shares are listed on the Bombay Stock Exchange (BSE), India, and the National Stock Exchange (NSE), India, and the Corporation’s Synthetic INR Denominated bonds are listed on the London Stock Exchange.

2. Basis of Preparation and Presentation

2.1 Statement of Compliance and basis of preparation and presentation

The standalone financial statements (“financial statements”) have been prepared in accordance with the Companies (Indian Accounting Standards) Rules, 2015 as per Section 133 of the Companies Act, 2013 and relevant amendment rules issued thereafter (“Ind AS”) on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period as explained below, the relevant provisions of the Companies Act, 2013 (the “Act”) and the guidelines issued by the National Housing Bank (“NHB”) to the extent applicable.

Effective April 1, 2018, the Corporation has adopted Ind AS and the adoption was carried out in accordance with Ind AS 101, First-time Adoption of Indian Accounting Standards, with April 1, 2017 as the transition date. The transition was carried out from Indian Accounting Principles generally accepted in India as prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 as amended (“IGAAP”), which was the previous generally accepted accounting principles.

The Balance Sheet, the Statement of Profit and Loss and the Statement of Changes in Equity are prepared and presented in the format prescribed in the Division III of Schedule III to the Act. The Statement of Cash Flows has been prepared and presented as per the requirements of Ind AS 7 “Statement of Cash Flows”.

Amounts in the financial statements are presented in Indian Rupees in crore rounded off to two decimal places as permitted by Schedule III to the Act. Per share data are presented in Indian Rupee to two decimal places. The Corporation presents its Balance Sheet in the order of liquidity. An analysis regarding recovery or settlement within 12 months after the reporting date and more than 12 months after the reporting date is presented in Note 39.

Accounting policies have been consistently applied except where a newly-issued Ind AS is initially adopted or a revision to an existing Ind AS requires a change in the accounting policy hitherto in use.

2.2 Functional and Presentation Currency

The financial statements are presented in Indian Rupees (?) which is the functional and the presentation currency of the Corporation and all values are rounded to the nearest crore with two decimals, except when otherwise indicated.

2.3 Basis of Measurement

The financial statements have been prepared on historical cost basis except for certain financial instruments that are measured at fair values.

A historical cost is a measure of value used in accounting in which the price of an asset on the balance sheet is based on its nominal or original cost when acquired by the Corporation.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Corporation takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for share based payment transactions that are within the scope of Ind AS 102, leasing transactions that are within the scope of Ind AS 17.

Fair value measurements under Ind AS are categorised into fair value hierarchy based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

- Level 1 quoted prices (unadjusted) in active markets for identical assets or liabilities that the Corporation can access on measurement date.

- Level 2 inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

- Level 3 where unobservable inputs are used for the valuation of assets or liabilities.

2.4 Use of Estimates and Judgements

The preparation of the financial statements in conformity with Indian Accounting Standards (“Ind AS”) requires the management to make estimates, judgements and assumptions. These estimates, judgements and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Accounting estimates could change from period to period. Actual results could differ from those estimates. Revisions to accounting estimates are recognised prospectively. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise.

2.4.1 Determination of Expected Credit Loss (“ECL”)

The measurement of impairment losses (ECL) across all categories of financial assets requires judgement.

In particular, the estimation of the amount and timing of future cash flows based on Corporation’s historical experience and collateral values when determining impairment losses along with the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances.

Elements of the ECL models that are considered accounting judgements and estimates include:

- Bifurcation of the financial assets into different portfolios when ECL is assessed on collective basis.

- Corporation’s criteria for assessing if there has been a significant increase in credit risk. (Refer Note 3.2.3.2)

- Development of ECL models, including choice of inputs / assumptions used.

The various inputs used and process followed by the Corporation in measurement of ECL has been detailed in Note 3.2.3.1

2.4.2 Fair Valuation of Investments (other than Investment in Subsidiaries and Associates)

Some of the Corporation’s Investments (other than Investment in Subsidiaries and Associates) are measured at fair value. In determining the fair value of such Investments, the Corporation uses quoted prices (unadjusted) in active markets for identical assets or based on inputs which are observable either directly or indirectly. However in certain cases, the Corporation adopts valuation techniques and inputs which are not based on market data. When Market observable information is not available, the Corporation has applied appropriate valuation techniques and inputs to the valuation model.

The Corporation uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

Information about the valuation techniques and inputs used in determining the fair value of Investments are disclosed in Note 44.3.2.

2.4.3 Income Taxes

The Corporation’s tax jurisdiction is in India. Significant judgements are involved in determining the provision for income taxes, including amount expected to be paid/recovered for certain tax positions.

2.4.4 Evaluation of Business Model

Classification and measurement of financial instruments depends on the results of the solely payments of principal and interest on the principal amount outstanding (“SPPI”) (Refer Note 1.5) and the business model test (Refer Note 1.4). The Corporation determines the business model at a level that reflects how the Corporation financial instruments are managed together to achieve a particular business objective.

The Corporation monitors financial assets measured at amortised cost or fair value through other comprehensive income that are derecognised prior to their maturity to understand the reason for their disposal and whether the reasons are consistent with the objective of the business for which the asset was held. Monitoring is part of the Corporation’s continuous assessment of whether the business model for which the remaining financial assets are held continues to be appropriate and if it is not appropriate whether there has been a change in business model and so a prospective change to the classification of those instruments.

2.4.5 Share-Based Payments

Estimating fair value for share-based payment transactions requires use of an appropriate valuation model. The Corporation measures the cost of equity-settled transactions with employees using Black-Scholes Model to determine the fair value of the options on the grant date.

Inputs into the valuation model, includes assumption such as the expected life of the share option, volatility and dividend yield.

Further details used for estimating fair value for share-based payment transactions are disclosed in Note 3.9.1.

2.4.6 Defined Benefit Plans

The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

3. First Time Adoption of Ind AS (Ind AS 101)

The Corporation has prepared financial statements for the year ended March 31, 2019, in accordance with Ind AS for the first time. For the periods upto and including the year ended March 31, 2018, the Corporation prepared its financial statements in accordance with the accounting standards notified under Section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Previous GAAP) and NHB guidelines. Accordingly, the Corporation has prepared its financial statements to comply with Ind AS for the year ending March 31, 2019, together with comparative information as at and for the year ended March 31, 2018, as described in the summary of significant accounting policies. In preparing these financial statements, the Corporation’s opening Balance Sheet was prepared as at April 1, 2017 i.e. the transition date to Ind AS for the Corporation.

This note explains the principal adjustments made by the Corporation in restating its Previous GAAP financial statements, including the Balance Sheet as at April 1, 2017, and the financial statements as at and for the year ended March 31, 2018.

3.1 Exemptions availed

3.1.1 Deemed Cost for Property, Plant and Equipment, Investment Property and Intangible Assets

The Corporation has elected to continue with the carrying value of all of its property, plant and equipment and intangible assets, measured as per the Previous GAAP and use that carrying value as its deemed cost as of the transition date under Ind AS.

3.1.2 Share-Based Payments

The Corporation has not applied Ind AS 102 to equity instruments that vested before the date of transition to Ind AS.

3.1.3 Investments in Subsidiaries and Associates

The Corporation has elected to apply Previous GAAP carrying amount of its investments in Subsidiaries and Associates as deemed cost as on the date of transition to Ind AS.

3.1.4 Classification and Measurement of Financial Assets

The Corporation has classified the financial assets in accordance with Ind AS 109 on the basis of facts and circumstances that exist at the date of transition to Ind AS.

3.1.5 Fair Value of Financial Assets and Liabilities

As per Ind AS exemption, the Corporation has not fair valued the financial assets and liabilities retrospectively and has measured the same prospectively.

3.1.6 Derecognition of Financial Assets

As per Ind AS exemption, the Corporation has not reassessed the securitisation / assignment transactions entered before the transition date and the same is continued to be derecognised.

3.1.7 Long Term Foreign Currency Monetary Items

As per Ind AS exemption, the Corporation has continued the policy adopted for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognised in the financial statements for the period ending immediately before the effective date as per the previous GAAP.

3.1.8 Business Combinations

Ind AS 103 Business Combinations has not been applied to acquisitions of subsidiaries, or of interests in associates and joint ventures and transactions which are considered businesses for Ind AS, that occurred before 1st April, 2017. The carrying amounts of assets and liabilities in accordance with previous GAAP are considered as their deemed cost at the date of acquisition. After the date of the acquisition, measurement is in accordance with Ind AS.

3.1.9 Estimates

On assessment of the estimates made under the previous GAAP financial statements, the Corporation has concluded that there is no necessity to revise the estimates under Ind AS, as there is no objective evidence of an error in those estimates. However, estimates that were required under Ind AS but not required under

Previous GAAP are made by the Corporation for the relevant reporting dates reflecting conditions existing as at that date.

3.1.10 Classification and measurement of financial assets

The classification of financial assets to be measured at amortised cost or fair value through other comprehensive income is made on the basis of the facts and circumstances that existed on the date of transition to Ind AS.

3.2 Reconciliation of Equity as at April 1, 2017 and March 31, 2018 and Total Comprehensive income for the year ended March 31, 2018

3.2.A. Amalgamation of Grandeur Properties Private Limited, Haddock Properties Private Limited, Pentagram Properties Private Limited, Winchester Properties Private Limited and Windermere Properties Private Limited with the Corporation

During the year ended March 31, 2018, Grandeur Properties Private Limited, Haddock Properties Private Limited, Pentagram Properties Private Limited, Winchester Properties Private Limited and Windermere Properties Private Limited (collectively referred to as ‘Transferor Companies’ primarily engaged in holding properties) were amalgamated with the Corporation on March 28, 2018 with the appointed date of April 1, 2016, as per the Order issued by the National Company Law Tribunal, Mumbai Bench on the Scheme of Amalgamation. The transition date balance sheet of the Corporation has been adjusted by net liabilities aggregating INR 334.74 crore representing the financial information of the aforesaid Transferor Companies, which is based on the financial statements of such Transferor Companies prepared in accordance with Previous GAAP, as adjusted for the differences arising from transition to Ind AS to give effect to the amalgamation from the beginning of the preceding period in the financial statements and based on “pooling of interest” method as per Ind AS 103 Business Combinations.

3.2.1 Impairment on Financial Instruments (Reversal of provision of Standard / Non-Performing Assets (NPA) and Provision for Expected Credit Losses (ECL)

Under the Previous GAAP, provision for standard asset and NPA, were presented under provisions. However, under Ind AS financial assets measured at amortised cost are presented net of provision for Expected Credit Losses. Consequently, the Corporation has reversed provisions for standard assets / NPA’s amounting to Rs. 3,011.00 crore and Rs. 4,944.15 crore as on April 1, 2017 and March 31, 2018 respectively and provision for ECL has been recognised amounting to Rs. 3,277 crore and Rs. 5,448.83 crore as on April 1, 2017 and March 31, 2018. The Corporation has reinstated interest income on credit impaired instruments amounting to Rs. 133.18 crore.

Above has led to increase in profit before tax of Rs. 48.18 crore and profit after tax of Rs. 30.59 crore for the year ended March 31, 2018.

3.2.2 Fair Valuation of Investments [other than Investments in Subsidiaries and Associates]:

Under Previous GAAP, long-term investments were measured at cost less diminution in value other than temporary. Under Ind AS, these financial assets have been classified as FVTPL or FVOCI and consequently the provisions for diminution on Investments held as per previous GAAP have been reversed as on the date of transition to Ind As.

Above has led to increase in profit before tax of Rs. 24.66 crore and profit after tax of Rs. 14.07 crore for the year ended March 31, 2018.

3.2.3 Deferred Tax

The Previous GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the Balance Sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the Balance Sheet and its tax base.

The application of ‘Ind AS 12 Income Taxes’ approach has resulted in the various transitional adjustments being temporary differences. Accordingly, the Corporation has accounted for such differences. These adjustments are recognised in co-relation to the underlying transaction either in retained earnings, OCI or the statement of profit and loss respectively.

The major change in Deferred Tax is on account of below:

As required by the NHB, the Corporation had recognised deferred tax liability (DTL) in respect of the balance in the Special Reserve (created under section 36(1)(viii) of the Income-tax Act, 1961) amounting to Rs. 3,413.45 crore as at April 1, 2017. The Corporation believes that the Special Reserve will not be utilised for payment of dividend or any other purpose and accordingly it does not result in a difference in tax base. Hence, DTL on Special Reserve has been reversed to comply with Ind AS 12 on Income Taxes.

3.2.4 Investment Property

Under the Previous GAAP, there was no requirement to present investment property separately and the same was included under non-current investments and measured at cost less provision for diminution other than temporary. Under Ind AS, investment property is required to be presented separately in the balance sheet and depreciation is charged on it. Accordingly, the carrying value of the investment property net of depreciation and Impairment as at April 1, 2017 of Rs. 399.53 crore and as at March 31, 2018 of Rs. 395.13 crore under the Previous GAAP has been reclassified to a separate line item on the face of the balance sheet and the depreciation provided based on estimated useful life.

3.2.5 Effective Interest Rate (EIR)

a. Under Previous GAAP, transaction costs charged to customers and incurred by the Corporation was recognised upfront while under Ind AS, such costs are included in the initial recognition amount of financial asset/financial liability and recognised as interest income/interest expense using the effective interest method. Consequently loan to customers on date of transition date have increased by Rs. 253.91 crore and interest income for the year ended March 31, 2018 has increased by Rs. 29.71 crore.

b. Under Previous GAAP, transaction costs incurred on borrowings was charged to statement of profit and loss upfront while under Ind AS, such costs are included in the initial recognition amount of financial liabilities and recognised as interest expense using the effective interest method. Consequently, Debt Securities on date of transition date have decreased by Rs. 106.54 crore and interest expense for the year ended March 31, 2018 has increased by Rs. 1,262.98 crore.

3.2.6 Derecognition of Assigned Loans

Under the Previous GAAP, retained interest receivable and servicing fees on loan assignment transaction were recognised over the period of such assigned loans. However, under Ind AS, on transfer of substantially all risks and rewards without retention of any residual interest, gain arising on said transactions are recorded in the Statement of Profit and Loss by discounting the future cash flows accruing in the form of differential interest on such assigned loan to their present values. The Corporation recognises a servicing asset, as the fee to be received is expected to be more than adequate compensation for the servicing activities. Corresponding amount is recognised in the statement of profit and loss. These loans is derecognised from the Balance Sheet immediately on assignment of the loan. The Corporation has recorded gain of Rs. 3.08 crore for the year ended March 31, 2018 on account of assignment of loans.

3.2.7 Share-Based Payments

Under Previous GAAP, the cost of equity-settled employee share-based payments was recognised using the intrinsic value method. Under Ind AS, the cost of equity-settled employee share-based payments is recognised based on the fair value of the options as on the grant date. The change does not affect total equity, but there is a decrease in profit before tax as well as profit after tax for the year ended March 31, 2018 by Rs. 937.61 crore.

3.2.8 Defined Benefit Obligation

Both under Previous GAAP and Ind AS, the Corporation recognised costs related to its post-employment defined benefit plan on an actuarial basis. Under Previous GAAP, the entire cost, including actuarial gain and losses, were charged to the statement profit or loss. Under Ind AS, remeasurements (comprising of actuarial gains and losses, the effect of assets ceiling, excluding amounts included in net interest on the net defined benefit liability and return on plan assets excluding amount included in net interest on the net defined benefit liability) are recognised in Other Comprehensive Income (OCI). Thus, employee benefit expense is adjusted by Rs. 9.58 crore and is recognised in OCI for the year ended March 31, 2018.

Current tax amounting to Rs. 3.35 crore is also regrouped from the statement of profit and loss to OCI for the year ended March 31, 2018. The above change does not affect total equity as at March 31, 2018. However, profit before tax and profit after tax for the year ended March 31, 2018, is increased by Rs. 9.58 crore and Rs. 6.23 crore respectively.

3.2.9 Other Comprehensive Income (OCI)

Under Previous GAAP, there was no concept of OCI. Under Ind AS, for equity instruments other than held for trading, the Corporation has exercised irrevocable option to recognise in other comprehensive income subsequent changes in the fair value.

Fair valuation of Bonds and re-measurement of defined benefit plan liability are recognised in OCI.

3.2.10 The Corporation designates certain Currency swaps and Interest rate swaps as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions.

When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in Other Comprehensive Income and accumulated in the cash flow hedging reserve, and is transferred to the Statement of Profit and Loss upon the occurrence of the related forecasted transaction.

On a standalone basis, Rs. 48.56 crore is regrouped from profit or loss to OCI (net of tax) for the year ended March 31, 2018.

4.1 Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Corporation, and earn interest at the respective short-term deposit rates.

5.1 Fixed deposit placed with banks earns interest at fixed rate or floating rates.

6.1 Trade Receivables includes amounts due from the related parties Rs. 122.04 crore (As at March 31, 2018 of Rs. 74.80 crore and as at April 01, 2017 of Rs. 57.73 crore) [Refer Note 43].

No trade or other receivable are due from directors or other officers of the Corporation either severally or jointly with any other person. Nor any trade or other receivable are due from firms or private companies respectively in which any director is a partner, a director or a member.

There are no receivables for which there has been a significant increase in credit risk or which have become credit impaired.

Reconciliation of impairment allowance on trade and other receivables:

7 (a) Loans granted by the Corporation are secured or partly secured by one or a combination of the following securities:

- Registered / equitable mortgage of property;

- Non disposal undertakings in respect of shares, pledge of shares, units, other securities, assignment of life insurance policies;

- Hypothecation of assets;

- Bank guarantees, company guarantees or personal guarantees;

- Negative lien;

- Assignment of receivables;

- Liquidity Support. Collateral [e.g. DSRA (Debt Service Reserve Account), Lien of Fixed Deposit]

7 (b) Loans including Installment and Interest outstanding due from the directors amounts to Rs. 0.04 crore (As at March 31, 2018 of Rs. 0.05 crore and As at April 1, 2017 of Rs. 0.06 crore) and other related parties Rs. 112.79 crore (As at March 31, 2018 of Rs. 113.82 crore and As at April 1, 2017 of Rs. 115.01 crore) [Refer Note 43].

7 (c) There were no loans given against the collateral of gold jewellery and hence the percentage of such loans to the total outstanding asset is Nil (As at March 31, 2018 is Nil crore and As at April 1, 2017 is Nil).

7 (d) Loans including Installment and Interest outstanding amounts to Rs. 447.20 crore (As at March 31, 2018 of Rs. 228.32 crore and April 1, 2017 of Rs. 130.46 crore) in respect of properties held for disposal under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

7 (e) Expected Credit Loss

Expected Credit loss is a calculation of the present value of the amount expected not to be recover on a financial asset, for financial reporting purposes. Credit risk is the potential that the obligor and counterparty will fail to meet its financial obligations to the lender. This requires an effective assessment and management of the credit risk at both individual and portfolio level.

The key components of Credit Risk assessment are:

- Probability of Default (PD): represents the likelihood of default over a defined time horizon.

- Exposure at Default (EAD): represents the gross exposure at the time of default.

- Loss Given Default (LGD): represents the proportion of EAD that is likely loss post-default.

The definition of default is taken as more than 90 days past due for all individual loans, corporate loans and others.

Delinquency buckets have been considered as the basis for the staging of all loans with:

- 0-30 days past due loans classified as stage 1,

- 31-90 days past due loans classified as stage 2 and

- > 90 days past due loans classified as stage 3

EAD is the total amount outstanding including accrued interest as on the reporting date.

The ECL is computed as a product of PD, LGD and EAD.

7 (f) Macro Economic Factors

Macro-economic variables relevant to the underlying loan portfolio such as Gross Domestic Product, Inflation, Housing price index. Lending rate (repo rate) and the equity indices were analysed for their correlations. The correlation was minimal and the same was not considered in the ECL framework.

8.1 Individual Loans

8.1.1 Credit quality of assets

The Corporation has classified all individual loans as amortized cost and has assessed it at the collective pool level.

The individual loan book has been divided into the housing and non-housing sub portfolios.

The vintage analysis methodology has been used to create the PD term structure which incorporates both 12 month (Stage 1 Loans) and lifetime PD (Stage 2 Loans).

The vintage analysis captures a vintage default experience across a particular portfolio by tracking the yearly slippages from advances originating in a particular year. The vintage slippage experience/default rate is then used to build the PD term structure.

The vintage analysis methodology has been used to create the LGD vintage. The LGD vintage takes into account the recovery experience across accounts of a particular portfolio post default. The recoveries are tracked and discounted to the date of default using the interest rate. The housing and non-housing portfolio has been considered together for the LGD computation.

8.2 Corporate Lending

8.2.1 Credit Quality of Assets

Measurement of ECL for stage 1 and certain stage 2 non individual / corporate loans is based on portfolio approach where PD and LGD is calculated based on historic performance of the portfolio further segmented into:

i) Corporate Finance

ii) Construction Finance

iii) Lease Rental Discounting

iv) Inter-Corporate Deposits.

Certain loans classified as stage 2 and all the loans classified as Stage 3 are assessed for ECL provisioning based on case to case approach by calculating probability weighted average cashflows under different recovery scenarios.

The 12 month PD has been applied on stage 1 loans. The PD term structure i.e Lifetime PD has been applied on the stage 2 loans according to the repayment schedule for stage 2 loans and PD is considered to be 100% for stage 3 loans. PD has been separately calculated for each segment as described above.

The vintage analysis methodology has been used to create the LGD vintage for measurement of ECL, based on portfolio approach. The LGD vintage takes into account the recovery experience across accounts of a particular portfolio post default. The recoveries are tracked and discounted to the date of default using the effective interest rate.

The Corporation has identified certain non individual accounts as Watch List under Stage 2 based on the following criteria.

- Builder’s Cash flows are insufficient to service the loan due to slow sales or the project is stalled.

- Borrower’s operational cashflows are insufficient indicating possibility of further delayed payments

- Security cover is insufficient for repayment of loans

- Where the borrowing company has been proceeded upon under Insolvency and Bankruptcy Code (IBC) by creditors and such reference has been admitted by the National Company Law Tribunal (NCLT).

Such accounts identified as watchlist are upgraded by the Corporation, where the management is satisfied that the risks associated with the account has abated.

8.3 An analysis of changes in the gross carrying amount and the corresponding ECL allowances in relation to loans is, as follows:

9.1 The Board of Directors of Gruh Finance Limited (‘GRUH’) a listed Subsidiary of the Corporation, at its meeting held on 7 January 2019, approved a Scheme of Amalgamation between GRUH and Bandhan Bank Limited (Bandhan) with effect from proposed Appointed Date of 1 January 2019 under section 230 and 232 of the Companies Act, 2013. In this regards, Competition Commission of India, BSE and NSE have approved proposed scheme of merger. The Scheme remains, subject to receipt of approval of National Company Law Tribunal and the respective Shareholders and Creditors of GRUH and Bandhan.

10.1 Inter Corporate Deposits are secured or partly secured by one or a combination of the following securities:

- Registered / equitable mortgage of property;

- Non disposal undertakings in respect of shares, pledge of shares, units, other securities, assignment of life insurance policies;

- Hypothecation of assets;

- Bank guarantees, company guarantees or personal guarantees;

- Negative lien;

- Assignment of receivables;

- Liquidity Support. Collateral [e.g. DSRA (Debt Service Reserve Account), Lien of Fixed Deposit]

10.2 Inter Corporate Deposits include amounts due from related parties Rs. Nil (As at March 31, 2018 of Rs. Nil crore and As at April 1, 2017 of Rs. 13.30 crore) [Refer Note 43].

The fair value of the Corporation’s investment properties as at March 31, 2019, March 31, 2018 and April 1, 2017 has been arrived at on the basis of a Internal Valuation (Level 3).

11.1 Leasing Arrangements

In accordance with the Indian Accounting Standard (Ind AS) 17 on ‘Leases’, the following disclosures in respect of Operating Leases are made:

Income from Leases includes Rs. 39.69 crore (Previous Year Rs. 6.30 crore) in respect of properties and certain assets leased out by the Corporation under Operating Leases. Out of the above, in respect of the non-cancellable leases, the future minimum lease payments are as follows:

12.1 Other Advances includes amounts due from the related parties Rs. 11.31 crore (As at March 31, 2018 Rs. 9.82 crore and As at April 1, 2017 Rs. 9.52 crore) [Refer Note 43].

13.1.1 The information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of Information available with the Corporation. The amount of principal and interest outstanding during the year is given below.

13.1.2 Trade Payables includes Rs. 62.21 crore (As at March 31, 2018 Rs. 92.96 crore and As at April 1, 2017 Rs. 52.83 crore) due to related parties [Refer Note 43].

14.1 All secured debts are secured by negative lien on the assets of the Corporation and/or mortgage of property as the case may be, subject to the charge created in favour of its depositors pursuant to the regulatory requirements under section 29B of the National Housing Bank Act, 1987.

14.2 Non-Convertible Debentures includes Rs. 1,901.80 crore (As at March 31, 2018 Rs. 2,995 crore and As at April 1, 2017 Rs. 1,257 crore) from related parties [Refer Note.43].

14.3 The Corporation has raised Rs. 11,100 crore through Rupee Denominated Bonds to overseas investors till date. The Corporation was the first Indian corporate issuer of such bonds.

The Corporation had established a Medium Term Note Programme (MTN Programme) for USD 2,800 mn so as to enable the Corporation to issue debt instruments in the international capital markets, subject to regulatory approval.

During the year, the Corporation raised Rs. 1,500 crore through issue of Rupee Denominated Bonds under the MTN Programme through the approval route. The Corporation shall finance eligible projects and borrowers as permitted by the external commercial borrowing guidelines issued by Reserve Bank of India (RBI) regulations.

The Corporation has raised Rs. 6,100 crore till date under the MTN Programme in accordance with the RBI guidelines.

The bonds are listed on the London Stock Exchange. These bonds are unsecured and the currency risk is borne by the investor.

15.1 All secured borrowings are secured by negative lien on the assets of the Corporation, subject to the charge created in favour of its depositors pursuant to the regulatory requirement under section 29B of the National Housing Bank Act, 1987.

15.2 The Corporation has availed a loan of USD 100 million from the Asian Development Bank (Loan II). In respect of tranches 1 and 2 aggregating to USD 60 million, as per the agreements with a scheduled bank, the Corporation has handed over the dollar funds to the bank overseas and has obtained rupee funds in India amounting to Rs. 200 crore by way of a term loan and Rs. 100 crore through the issue of bonds which have been subscribed by the bank.

In respect of tranche 3 of USD 40 million, as per the agreement with a financial institution, the Corporation has handed over the dollars to the Bank of India, Cayman Island and under a back-to-back arrangement obtained rupee funds in India. All payments in foreign currency are the responsibility of the financial institution. In terms of the agreements, the Corporation’s foreign exchange liability is protected.

The loan availed from Asian Development Bank and the deposit placed with Bank of India, Cayman Island are revalued at the closing rate of exchange and are shown separately in the financial statement.

15.3 The Corporation had availed External Commercial Borrowing (ECBs) of USD 1,625 million and JPY 53,200 million for financing prospective owners of low cost affordable housing units as per the ECB guidelines issued by Reserve Bank of India (“RBI”) from time to time. The borrowing has a maturity of five years. In terms of the RBI guidelines, part of the borrowings have been swapped into rupees for the entire maturity by way of principal only swaps and balance borrowing has been hedged through forward contracts for shorter tenor. The currency exposure on the interest has been hedged by way of forward contracts for part of foreign currency borrowings.

The charges for raising of the aforesaid ECB has been amortised over the tenure of the ECB.

15.4 As on March 31, 2019, the Corporation has foreign currency borrowings of USD 2,797.36 million and JPY 53,200 million (Previous Year USD 3,029.15 million and JPY Nil). The Corporation has undertaken currency swaps, forward contracts and option contracts of a notional amount of USD 2,670.00 million and JPY 53,200 million (Previous Year USD 2,325 million and JPY Nil) and dollar denominated assets and foreign currency arrangements of USD 111.12 million (PY USD 367.39 million) to hedge the foreign currency risk. As on March 31, 2019, the Corporation’s net foreign currency exposure on borrowings net of risk management arrangements is USD 16.24 million (Previous Year USD 336.76 million).

As a part of asset liability management on account of the Corporation’s Adjustable Rate Home Loan product as well as to reduce the overall cost of borrowings, the Corporation has entered into INR interest rate swaps of a notional amount of Rs. 55,650 crore (Previous Year Rs. 48,270 crore) and Cross Currency Interest rate swaps of a notional amount of Rs. Nil (Previous Year Rs. 100 crore) as on March 31, 2019 for varying maturities into floating rate liabilities linked to various benchmarks.

16.1 Deposits includes Rs. 220 crore (As at March 31, 2018 Rs. 156.51 crore and As at April 1, 2017 Rs. 118.55 crore) from related parties [Refer Note 43].

16.2 Public deposits as defined in paragraph 2(1)(y) of the Housing Finance Companies (NHB) Directions, 2010, are secured by floating charge and Lien in favour of the Trustee’s for Depositors on the Statutory Liquid Assets maintained in terms of sub-sections (1) & (2) of Section 29B of the National Housing Bank Act, 1987.

17.1 These debentures are subordinated to present and future senior indebtedness of the Corporation and qualify as Tier II capital under National Housing Bank (NHB) guidelines for assessing capital adequacy. Based on the balance term to maturity as at March 31, 2019, 65.45% (Previous Year 74.55%) of the book value of the subordinated debt is considered as Tier II capital for the purpose of capital adequacy computation.

18.1 As required under Section 125 of the Companies Act 2013, the Corporation has transferred Rs. 3.18 crore (Previous Year Rs. 2.76 crore) to the Investor Education and Protection Fund (IEPF) during the year. As of March 31, 2019, no amount was due for transfer to the IEPF. Further, in compliance with the said section, during the year the Corporation transferred 73,237 equity shares of Rs. 2 each (Previous Year 14,15,471) Corresponding to the said unclaimed dividend in the name of IEPF. However, 12 equity shares could not be transferred as the depositories informed that the aforesaid shares were not available in the demat accounts of the respective shareholders.

19.1 Terms and rights attached to equity shares:

The Corporation has only one class of shares referred to as equity shares having Face Value of Rs. 2 each. Each holder of equity share is entitled to one vote per share.

The holders of equity shares are entitled to dividends, if any, proposed by the Board of Directors and approved by Shareholders at the Annual General Meeting.

As at March 31, 2019 6,48,95,193 shares (As at March 31, 2018 11,04,53,219 shares and As at April 1, 2017 12,29,51,224 shares) were reserved for issuance as follows:

a) 6,48,95,193 shares of Rs. 2 each (As at March 31, 2018 7,44,67,819 and As at April 1, 2017 8,64,51,224 shares of Rs. 2 each) towards outstanding Employees Stock Options granted / available for grant, including lapsed options [Refer Note 42].

b) Nil shares of Rs. 2 each (As at March 31, 2018 3,59,85,400 and As at April 1, 2017 365,00,000 shares of Rs. 2 each) towards outstanding share warrants [Refer Note 26.5].

19.2 Dividend

The Board of Directors of the Corporation at its meeting held on March 6, 2019, inter alia, has approved the payment of an interim dividend of Rs. 3.50 per equity share (Previous Year Rs. 3.50 per equity share) of face value of Rs. 2 each of the Corporation, for the financial year 2018-19.

The Corporation has not remitted any amount in foreign currencies on account of dividends during the year and does not have information as to the extent to which remittances, if any, in foreign currencies on account of dividends have been made by/on behalf of non-resident shareholders. The particulars of dividends payable to non-resident shareholders (including Foreign Portfolio Investors) are as under:

19.3 The Corporation had on October 5, 2015 issued 3,65,00,000 warrants, convertible into 3,65,00,000 equity share of Rs. 2 each at an exercise price of Rs. 1,475.00 each, simultaneously with the issue of 5,000 secured redeemable non-convertible debentures of face value of Rs. 1,00,00,000 each, to eligible qualified institutional buyers by way of a qualified institutions placement in accordance with Chapter VIII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, and Sections 42 and 71 of the Companies Act, 2013 and the rules made thereunder. An amount of Rs. 51.10 crore was received towards subscription of warrants. The said warrants were exercisable at any time on or before October 5, 2018. During the year, 3,59,84,871 warrants were exchanged with 3,59,84,871 equity shares of Rs. 2 each and realised an amount of Rs. 5,307.77 crore. 529 warrants were not submitted for exchange with equity shares of the Corporation and the said warrants has lapsed and ceased to be valid. The amount of Rs. 14 per Warrant paid on 529 warrants stands forfeited.

19.4 The Corporation has not allotted any share pursuant to contracts without payment being received in cash or as bonus shares nor has it bought back any shares during the preceding period of 5 financial years.

20.1 Capital Reserve: It has been created during the Business Combinations in earlier periods.

20.2 Securities Premium: Securities premium is credited when shares are issued at premium. It can be used to issue bonus shares, to provide for premium on redemption of shares or debentures, write-off equity related expenses like underwriting costs, etc.

20.3 General Reserve: It is a free reserve which is created by appropriation from profits of the current year and/or undistributed profits of previous years, before declaration of dividend duly complying with any regulations in this regard.

20.4 Special Reserve has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961 out of the distributable profits of the Corporation.

Special Reserve No. I relates to the amounts transferred upto the Financial Year 1996-97 Special Reserve No. II relates to the amounts transferred thereafter.

20.5 Statutory Reserve: As per Section 29C of The National Housing Bank Act, 1987 (the “NHB Act”), the Corporation is required to transfer at least 20% of its net profits every year to a reserve before any dividend is declared. For this purpose any Special Reserve created by the Corporation under Section 36(1)(viii) of the Income-tax Act, 1961 is considered to be an eligible transfer. The Corporation has transferred an amount of Rs. 1,850 crore (Previous Year Rs. 1,355 crore) to Special Reserve No. II in terms of Section 36(1)(viii) of the Income-tax Act, 1961 and an amount of Rs. 100 crore (Previous Year Rs. 1,078 crore) to “Statutory Reserve (As per Section 29C of The NHB Act)”.

20.6 Shelter Assistance Reserve: It represents funding various development and grassroot level organisations for the purposes as mentioned in Schedule VI to the Companies Act, 2013 and in accordance with the Corporation’s Policy.

20.7 Other Comprehensive Income:

Effective portion of Cash Flow Hedge: It represents the cumulative gains/(losses) arising on revaluation of the derivative instruments designated as cash flow hedges through OCI.

Cost of Hedge: It represent the cumulative charge for the derivative instrument, in the form of premium amortisation and changes in time value on option contracts, designated as cash flow hedges through OCI.

20.8 Employee Share Option Outstanding:

The Corporation has stock option schemes under which options to subscribe for the Corporation’s shares have been granted to eligible employees and key management personnel. The share-based payment reserve is used to recognise the value of equity-settled share-based payments.

20.9 Pursuant to the notification dated December 29, 2011 issued by the Ministry of Corporate Affairs amending the Accounting Standard 11, the Corporation has exercised the option as per Para 46A inserted in the Standard for all long term monetary assets and liabilities. Further the Corporation has availed the exemption as per para D13AA of Ind AS 101 and has continued the policy adopted for recognising exchange differences arising from translation of long-term foreign currency monetary items recognised in the financial statements for the period ending immediately before the effective date as per the previous GAAP. Consequently, an amount of Rs. 7.43 crore (without considering future tax benefit of Rs. Nil) [(Previous Year net debit of Rs. 50.71 crore) (without considering future tax benefits of Rs. 17.72 crore)] is carried forward in the Foreign Currency Monetary Items Translation Difference Account as on March 31, 2019. This amount is to be amortised over the period of the monetary assets/liabilities ranging upto 1 year.

During the year, there was a net reduction of Rs. 58.14 crore (Previous Year net addition of Rs. 412.84 crore) in the Foreign Currency Monetary Items Translation Difference Account.

21.1 Dividend Income includes Rs. 603.35 crore (Previous Year Rs. 625.04 crore) received from subsidiary companies and Rs. 0.05 crore (Previous year Rs. 0.05 crore) received from Investment in Equity shares classified as fair value through other comprehensive income.

21.2 Income from lease rental includes Rs. 39.69 crore (previous year Rs. 35.35 crore) from Investment properties.

21.3 Fees and Commission Income includes brokerage of Rs. 0.06 crore (Previous Year Rs. 0.05 crore) received in respect of insurance/agency business undertaken by the Corporation.

21.4 Fees and Commission Income includes Rs. 155.04 crore (Previous Year Rs. 102.61 crore) received from related parties.

21.5 Interest Income on Stage 3 Assets is recognised on the net carrying value (the gross carrying value as reduced by the impairment allowance). Accordingly the total Interest Income is net of such interest on Credit Impaired Assets amounting to Rs. 154 crore (Previous Year Rs. 113 crore).

22.1 Profit on sale of Investment in subsidiaries

22.1.1 Profit on Sale of Investments during the year ended 31 March 2019 include profit of Rs. 895.71 crore on offering of up to 85,92,970 equity shares of Rs. 5 each of equity shares of its subsidiary, HDFC Asset Management Company Limited (HDFC AMC) by way of offer for sale in the Initial Public Offering (IPO) of HDFC AMC.

22.1.2 Profit on Sale of Investments during the year ended 31 March 2019 include profit of Rs. 314.27 crore on sale of investment in GRUH Finance Ltd (subsidiary).

22.1.3 Previous year Profit on Sale of Investments includes Rs. 265.46 crore on account of sale of equity shares of HDFC Developers Limited and HDFC Realty Limited (Subsidiary Companies).

22.1.4 During the previous year, the Corporation has offered 19,12,46,050 equity shares of Rs. 10 each of HDFC Standard Life Insurance Company Limited (HDFC Life), a material subsidiary representing 9.52% of its issued and paidup share capital in the initial public offering of HDFC Life, resulting in a profit of Rs. 5,256.59 crore (Net of expenses).

22.2 The Corporation has derecognised loans on account of assignment transactions resulting in a gains of Rs. 859.99 crore (Previous year Rs. 533.71 crore)

23.1 The Finance cost for the year include foreign currency exchange loss of Rs. 445.99 crore (Previous year Rs. 310.26 crore)

24.1 The details relating to movement in Impairment on Loans (Expected credit loss) is disclosed in note 9.4

24.2 The above amounts are net of the interest on Credit Impaired Assets mentioned in Note 28.5.

25.1 There has been a Supreme Court (SC) judgement dated 28 February 2019, relating to components of salary structure that need to be taken into account while computing the contribution to provident fund under the EPF Act. There are interpretative aspects related to the Judgement including the effective date of application. The Corporation will continue to assess any further developments in this matter for the implications on financial statements, if any.

25.2 Operating Leases

In accordance with the Indian Accounting Standard (Ind AS) 17 on ‘Leases’, the following disclosures in respect of Operating Leases are made:

The Corporation has acquired properties under non-cancellable operating leases for periods ranging from 12 months to 36 months. The total minimum lease payments for the current year, in respect thereof, included under Rent, amounts to Rs. 0.33 crore (Previous Year Rs. 0.29 crore).

Auditors’ Remuneration for the year ended March 31, 2018 comprises of remuneration of Rs. 1.00 crore paid to the previous auditor.

Audit Fees in the previous year include Rs. 0.04 crore paid to Branch Auditors.

Auditors’ Remuneration above is excluding Goods and Service Tax.

25.2 Expenditure incurred for corporate social responsibility is Rs. 173.52 crore. The amount required to be spend is Rs. 166.81 crore

26.1 During the year, the Corporation has sold Investment in Equity share classified as fair value through other comprehensive income amounting to Rs. 78.44 crore (Previous year Rs. 7.27 Crore) and incurred a loss of Rs. 10.17 crore (Previous year profit of Rs. 2.41 crore).

27. Earnings Per Share

In accordance with the Indian Accounting Standard (Ind AS) 33 on ‘Earnings Per Share’:

In calculating the Basic Earnings Per Share, the Profit After Tax of Rs. 9,632.46 crore (Previous Year Rs. 10,959.34 crore) has been adjusted for amounts utilised out of Shelter Assistance Reserve of Rs. 14.94 crore (Previous Year Rs. 175.05 crore).

The Basic Earnings Per Share has been computed by dividing the adjusted Profit After Tax by the weighted average number of equity shares for the respective periods; whereas the Diluted Earnings Per Share has been computed by dividing the adjusted Profit After Tax by the weighted average number of equity shares, after giving dilutive effect of the outstanding Stock Options for the respective periods. The relevant details as described above are as follows :

28. Segment Reporting

The Corporation’s main business is financing by way of loans for the purchase or construction of residential houses, commercial real estate and certain other purposes, in India. All other activities of the Corporation revolve around the main business. As such, there are no separate reportable segments, as per the Indian Accounting Standard (Ind AS) 108 on ‘Segment Reporting’. Segment reporting is done in the Consolidated financial statements as prescribed by Ind AS 108.

29. Employee Benefit Plan

29.1 Defined Contribution Plans

The Corporation recognised Rs. 14.35 crore (Previous Year Rs. 13.54 crore) for superannuation contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Corporation are at rates specified in the rules of the schemes.

29.2 Defined Benefit Plans

Provident Fund

The fair value of the assets of the provident fund and the accumulated members’ corpus is Rs. 441.38 crore and Rs. 440.06 crore respectively (Previous Year Rs. 382.06 crore and Rs. 379.49 crore respectively). In accordance with an actuarial valuation, there is no deficiency in the interest cost as the present value of the expected future earnings on the fund is greater than the expected amount to be credited to the individual members based on the expected guaranteed rate of interest of 8.65%. The actuarial assumptions include discount rate of 7.77% (Previous Year 7.73%) and an average expected future period of 14 years (Previous Year 14 years). Expected guaranteed interest rate (weighted average yield) is 8.80% (Previous Year 8.77%).

The Corporation recognised Rs. 21.49 crore (Previous Year Rs. 18.29 crore) for provident fund contributions in the statement of profit and loss. The contributions payable to these plans by the Corporation are at rates specified in the rules of the schemes.

Characteristics of defined benefit plan

The Corporation has a defined benefit gratuity plan in India for its employees (funded). The Corporation’s gratuity plan requires contributions to be made to a separately administered fund. The fund is managed by a trust which is governed by the Board of Trustees. The Board of Trustees are responsible for the administration of the plan assets and for the definition of the investment strategy.

During the year, there were no plan amendments, curtailments and settlements.

A separate trust fund is created to manage the Gratuity plan and the contributions towards the trust fund is done as guided by rule 103 of Income Tax Rules, 1962.

Risks associated with defined benefit plan

Gratuity is a defined benefit plan and Corporation is exposed to the following risks:

Interest rate risk: A fall in the discount rate, which is linked to the Government Securities Rate, will increase the present value of the liability requiring higher provision. A fall in the discount rate generally increases the mark to market value of the assets depending on the duration of asset.

Salary Risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of members. As such, an increase in the salary of the members more than assumed level may increase the plan’s liability.

Investment Risk: The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan asset is below this rate, it will create a plan deficit. Currently, for the plan in India, it has a relatively balanced mix of investments in government securities, and other debt instruments.

Asset Liability Matching (ALM) Risk: The plan faces the ALM risk as to the matching cash flow.

Mortality Risk: Since the benefits under the plan is not payable for life time and payable till retirement age only, plan does not have any longevity risk.

Other Post Retirement Benefit Plan

The details of the Corporation’s post-retirement benefit plans for its employees including whole-time directors are given below which is as certified by the actuary and relied upon by the auditors:

The Principal Assumptions used for the purpose of the actuarial valuation were as follows.

The estimate of future salary increase, considered in the actuarial valuation takes account of inflation, seniority, promotion and other relevant factors.

The current service cost and the net interest expense for the year are included in the ‘Employee Benefits Expenses’ line item in the statement of profit and loss.

The remeasurement of the net defined benefit liability is included in other comprehensive income.

Compensated absences

The actuarial liability of compensated absences of privilege leave of the employees of the Corporation is Rs. 115.87 crore (Previous Year Rs. 104.80 crore).

The sensitivity analysis have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

The sensitivity analysis presented above may not be representative of the actual change in the projected benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the projected benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same method as applied in calculating the projected benefit obligation as recognised in the balance sheet.

30. Maturity Analysis of Assets and Liabilities

The table below shows an analysis of assets and liabilities according to when they are expected to be recovered or settled after factoring in rollover and prepayment assumptions.

31. Contingent Liabilities and Commitments

31.1 The Corporation is involved in certain appellate, judicial and arbitration proceedings (including those described below) concerning matters arising in the normal course of business including claims from revenue authorities, customers, contingencies arising from having issued guarantees to lenders or to other entities. The proceedings in respect of these matters are in various stages. Management has assessed the possible obligations arising from such claims against the Corporation, in accordance with the requirements of Indian Accounting Standard (Ind AS) 37 and based on judicial precedents, consultation with lawyers or based on its historical experiences. Accordingly, management is of the view that based on currently available information no provision in addition to that already recognised in its financial statements is considered necessary in respect of the above.

31.2 Given below are amounts in respect of claims asserted by revenue authorities and others:

Contingent liability in respect of income-tax demands, net of amounts provided for and disputed by the Corporation, amounts to Rs. 1,806.08 crore (As at 31 March 2018 Rs. 1,528.78 crore and As at 1 April 2017 Rs. 1,241.88 crore). The said amount has been paid/adjusted and will be received as refund if the matters are decided in favour of the Corporation.

Contingent liability in respect of disputed dues towards wealth tax, interest on lease tax, and payment towards employer’s contribution to ESIC not provided for by the Corporation amounts to Rs. 0.13 crore (As at 31 March 2018 Rs. 0.15 crore and As at 1 April 2017 Rs. 0.15 crore).

The Management is generally unable to reasonably estimate a range of possible loss for proceedings or disputes other than those included in the estimate above as plaintiffs / parties have not claimed an amount of money damages, the proceedings are in early stages and/or there are significant factual issues to be resolved.

The management believes that the above claims made are untenable and is contesting them.

31.3 Contingent liability in respect of guarantees and undertakings comprise of the following:

a) Guarantees Rs. 534.98 crore (As at 31 March 2018 Rs. 511.88 crore and As at 1 April 2017 Rs. 628.09 crore).

b) Corporate undertakings for securitisation of receivables aggregated to Rs. 1,838.13 crore (As at 31 March 2018 Rs. 1,838.21 crore and As at 1 April 2017 Rs. 1,838.21 crore). The outflows would arise in the event of a shortfall, if any, in the cash flows of the pool of the securitised receivables.

In respect of these guarantees and undertaking, the management does not believe, based on currently available information, that the maximum outflow that could arise, will have a material adverse effect on the Corporation’s financial condition.

31.4 Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs. 890.45 crore (As at 31 March 2018 Rs. 1,066.99 crore and as at 1 April 2017 Rs. 580.63 crore).

31.5 Proposed Dividend

The Board of Directors have proposed dividend on equity shares at Rs. 17.50 per share at their meeting held on 13 May 2019. As per the Companies (Accounting Standard) Amendment Rules, 2016, the dividend will be recorded after the approval in the ensuing Annual General Meeting.

32. Share-Based Payments

32.1 Under Employees Stock Option Scheme - 2017 (ESOS - 17), the Corporation had granted 4,28,45,977 options at an exercise price ranging between Rs. 1,569.85 and Rs. 1908.30 per option representing 4,28,45,977 equity shares of Rs. 2 each to the employees and directors of the Corporation. The options were granted at an excercise price ranging between Rs. 1,569.85 and Rs. 1908.30 per option being the latest available closing price of the equity shares of the Corporation on the stock exchange on which the shares are listed and having higher trading volume, prior to the meeting of the NRC at which the options were granted.

In terms of ESOS-17, the options would vest over a period of 1-3 years from the date of grant, but not later than March 16, 2021, depending upon opt


Mar 31, 2018

31. Exceptional items:

During the year, the Corporation has offered 19,12,46,050 equity shares of Rs, 10 each of HDFC Standard Life Insurance Company Limited (HDFC Life), a material subsidiary representing 9.52% of its issued and paid-up share capital in the initial public offering of HDFC Life, resulting in a profit of Rs, 5,256.59 crore (net of expenses).

In accordance with past practice and with the objective of further strengthening the Corporation''s balance sheet, the Corporation has made an additional provision of Rs, 1,575 crore to shore up the Provision and Contingencies Account and thereby recognise provisions towards specific loans against future risks.

The transaction has triggered the provision of Minimum Alternate Tax under section 115JB of the Income-tax Act, 1961. The tax expense has been adjusted accordingly.

32. In accordance with the Accounting Standard (AS) 20 on ''Earnings Per Share'':

(i) In calculating the Basic Earnings Per Share, the Profit After Tax of Rs, 12,163.69 crore (Previous Year Rs, 7,442.64 crore) has been adjusted for amounts utilised out of Shelter Assistance Reserve of Rs, 175.05 crore (Previous Year Rs, 146.27 crore).

Accordingly the Basic Earnings Per Share has been calculated based on the adjusted Profit After Tax of Rs, 11,988.63 crore (Previous Year Rs, 7,296.37 crore) and the weighted average number of shares during the year of Rs, 160.22 crore (Previous Year Rs, 158.34 crore).

34. Amalgamation of Grandeur Properties Pvt Ltd, Haddock Properties Pvt Ltd, Pentagram Properties Pvt Ltd, Windermere Properties Pvt Ltd, Winchester Properties Pvt Ltd with the Corporation

The National Company Law Tribunal, Mumbai Bench approved the merger of erstwhile Grandeur Properties Pvt Ltd (eGPPL), erstwhile Haddock Properties Pvt Ltd (eHPPL), erstwhile Pentagram Properties Pvt Ltd (ePPPL), erstwhile Windermere Properties Pvt Ltd (eWPPL), erstwhile Winchester Properties Pvt Ltd (eWtPPL) (Transferor Companies) into and with the Corporation vide its order dated March 28, 2018, having appointed date as April 1, 2016. The said order was filed with the Registrar of Companies on April 27, 2018. The entire business with all the assets, liabilities, reserves and surplus of Transferor Companies were transferred to and vested in the Corporation, on a going concern basis with effect from appointed date of April 1, 2016, while the Scheme has become effective from April 27, 2018. Since the Scheme received all the requisite approvals after the financial statements for the years ending March 31, 2017 were adopted by the shareholders, the impact of amalgamation has been given in the current financial year with effect from the appointed date.

The Amalgamation has been accounted as per “Pooling of Interest” method as prescribed by the Accounting Standard 14 “Accounting for Amalgamations”. Accordingly, the accounting treatment has been given as under:-

The assets and liabilities as at April 1, 2017 of eGPPL, eHPPL, ePPPL, eWPPL and eWtPPL were incorporated in the financial statement of the Corporation at its book value.

35. RELATED PARTY TRANSACTIONS

As per the Accounting Standard on ‘Related Party Disclosures'' (AS 18), the related parties of the Corporation are as follows:

A) Subsidiary Companies

HDFC Holdings Ltd. HDFC ERGO General Insurance Company Ltd.

HDFC Trustee Company Ltd. (Formerly HDFC General Insurance Limited from September

HDFC Standard Life Insurance Company Ltd. 14, 2016 and L&T General Insurance Company Limited upto

HDFC Venture Capital Ltd. September 13, 2016)

HDFC Ventures Trustee Company Ltd. HDFC Sales Pvt. Ltd.

GRUH Finance Ltd. HDFC Property Ventures Ltd.

Griha Investments (Subsidiary of HDFC Holdings Ltd.) HDFC Credila Financial Services Private Ltd.

HDFC Education and Development Services Pvt. Ltd. Griha Pte. Ltd. (Subsidiary of HDFC Investments Ltd.)

HDFC Investments Ltd. HDFC Pension Management Company Ltd.

HDFC Asset Management Company Ltd. (subsidiary of HDFC Standard Life Insurance Company Ltd.)

HDFC Capital Advisors Ltd. HDFC International Life and Re Company Limited

HDFC Realty Ltd. (till 24th January, 2018) (subsidiary of HDFC Standard Life Insurance Company Ltd.) HDFC Developers Ltd. (till 24th January, 2018)

B) Associate Companies C) Entities over which control is exercised

HDFC Bank Ltd. HDFC Investment Trust (HIT)

RuralShores Business Services Pvt. Ltd. HDFC Investment Trust - II (HIT- II)

Magnum Foundations Pvt. Ltd. H T Parekh Foundation True North Ventures Private Limited

D) Key Management Personnel E) Relatives of Key Management Personnel

Mr. Keki M. Mistry (Where there are transactions)

Ms. Renu Sud Karnad Mr. Nikhil Singhal

Mr. V. Srinivasa Rangan Ms. Swarn Sud

Mr. Rishi Sud

38. The Corporation has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Corporation has reviewed and ensured that adequate provision as required under any law / accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of accounts.

39. DISCLOSURES REQUIRED BY THE NATIONAL HOUSING BANK

39.1 Minimum Disclosures

The following additional disclosures have been made as required under the “Housing Finance Companies Corporate Governance (NHB) Directions 2016”.

39.2 Summary of Significant Accounting Policies

The accounting policies regarding key areas of operations are disclosed as note 1 to the accounts.

39.3.4.2 Exchange Traded Interest Rate (IR) Derivatives

The Corporation has not entered into any exchange traded derivatives.

39.3.4.3 Disclosures on Risk Exposure in Derivatives A. Qualitative Disclosure Financial Risk Management

The Corporation has to manage various risks associated with the lending business. These risks include liquidity risk, exchange risk, interest rate risk and counter party risk.

The Financial Risk Management and Hedging Policy as approved by the Board sets limits for exposures on currency and other parameters. The Corporation manages its interest rate and currency risk in accordance with the guidelines prescribed therein.

Liquidity risk and interest rate risks arising out of maturity mismatch of assets and liabilities are managed through regular monitoring of maturity profiles. The currency risk on the borrowings is actively managed mainly through a combination of principal only swaps, forward contracts, and dollar denominated assets. Counter party risk is reviewed periodically to ensure that exposure to various counter parties is well diversified and is within the limits fixed by the Derivative Committee.

As a part of Asset Liability Management, the Corporation has entered into interest rate swaps wherein it has converted its fixed rate rupee liabilities into floating rate linked to various benchmarks.

Constituents of Derivative Business

Financial Risk Management of the Corporation constitutes the Audit Committee, Asset Liability Committee (ALCO), Derivative Committee, Risk management and hedging team.

The Corporation periodically monitors various counter party risk and market risk limits, within the risk architecture and processes of the Corporation.

Hedging Policy

The Corporation has a Financial Risk Management policy and Hedging policy approved by the Board of Directors. For derivative contracts designated as hedges, the Corporation documents at inception, the relationship between the hedging instrument and hedged item. Hedge effectiveness is ascertained periodically on a forward looking basis and is reviewed by the Derivative Committee at each reporting period. Hedge effectiveness is measured by the degree to which changes in the fair value or cash flows of the hedged item that are attributed to the hedged risk are offset by changes in the fair value or cash flows of the hedging instrument.

Measurement and Accounting

The Guidance Note on Accounting for Derivative Contracts issued by the Institute of Chartered Accountants of India is effective from April 1, 2016.

On and from that date, all derivative contracts are recognized on the balance sheet and measured at fair value. The fair value changes are recognized in the Statement of Profit and Loss unless hedge accounting is used. Where hedge accounting is used, fair value changes of the derivative contracts are recognized through the Statement of Profit and Loss in the same period as the offsetting losses and gains on the hedged item. The tenor of hedging instrument may be less than or equal to the tenor of underlying hedged asset or liability.

The Corporation has entered into fair value hedges through interest rate swaps on fixed rate rupee liabilities as a part of the Asset Liability management whereby a portion of the fixed rate liabilities are converted to floating rate. The Corporation has a mark to market gain of '' 1,195 crore on outstanding Fair value hedges.

The long term monetary items other than derivatives continue to be amortized, through the Statement of Profit and Loss over the balance period of such long term asset or liability. Pursuant to the notification dated December 29, 2011 issued by the Ministry of Corporate Affairs amending the Accounting Standard 11, the Corporation has exercised the option as per Para 46A inserted in the Standard for all long term monetary assets and liabilities.

Foreign exchange forward contracts outstanding at the Balance Sheet date, are effectively valued at the closing spot rate. The premium or discount arising at the inception of such forward exchange contract is amortized as expense or income over the life of the contract.

The Corporation has entered into cash flow hedges to hedge the floating rate benchmark on certain foreign currency loans and forward contracts to cover future interest on foreign currency borrowings. Under the cash flow hedge, the hedging instrument is measured at fair value and any gain or loss that is determined to be an effective hedge is recognized in equity i.e., Cash flow Hedge reserve. In order to match the gains and losses of the hedged item and the hedging instrument in the Statement of Profit and Loss, the changes in fair value of the hedging instrument and the hedged item is recognized at the same time in the Statement of Profit and Loss. The outstanding notional of forward contracts to cover future interest on foreign currency borrowings is USD 34.77mn.

39.4.6 Management

Refer to the Management Discussion and Analysis report for the relevant disclosures.

39.4.7 Net Profit or Loss for the period, prior period items and changes in accounting policies

There are no prior period items that have impact on the current year''s profit and loss.

39.4.8 Revenue Recognition

There have been no instances in which revenue recognition has been postponed pending the resolution of significant uncertainties.

39.4.9 Accounting Standard 21 - Consolidated Financial Statements (CFS)

Refer to the Consolidated Financial Statements for the relevant disclosures.

39.5.2 Draw Down from Reserves

During FY 2017-18, there were no draw down from Reserves.

39.5.3 Concentration of Public Deposits, Advances, Exposures and NPAs

40. Previous year''s figures have been regrouped/reclassified wherever necessary to correspond with the current year''s classification/disclosure.

Personnel) Rules, 2014 and any other rules framed there under read with Schedule V to the Companies Act, 2013, including any amendment, modification, variation or re-enactment thereof and the Articles of Association of the Corporation, approval of the Members of the Corporation be and is hereby accorded to the re-appointment of Mr. Keki M. Mistry (DIN: 00008886) as the Managing Director (designated as “Vice Chairman & Chief Executive Officer") of the Corporation for a period of three years, with effect from November 14, 2018, who shall be liable to retire by rotation, upon the terms and conditions including those relating to remuneration more


Mar 31, 2017

Notes:

1) Unquoted investments include Rs, 94.09 crore (Previous Year Rs, 100.17 crore) in respect of equity shares, which are subject to restrictive covenant. Quoted investments include Rs, 35.08 crore (Previous Year Rs, Nil) in respect of equity shares which are subject to a lock-in period and include Rs, 60.74 crore (Previous Year Rs, 60.74 crore) in respect of equity shares, which are subject to restrictive covenant.

2) Market value of Investments in Unquoted Mutual Funds represents the repurchase price of the units issued by the Mutual Funds.

3) NHB Sumeru Zero Coupon Bonds are held as Capital Assets under Section 2(48) of the Income Tax Act, 1961.

4. DEFERRED TAX ASSET/LIABILITY

In compliance with the Accounting Standard (AS 22) relating to Rs,Accounting for Taxes on IncomeRs,, the Corporation has taken debit of Rs, 495.00 crore (Previous Year Rs, 142.00 crore) in the Statement of Profit and Loss for the year ended March 31, 2017 towards deferred tax liability (net) for the year, arising on account of timing differences, Rs, 1,119.08 crore (Previous Year Rs, 559.54 crore) has been adjusted against the General Reserve (as per Note 3.2).

53 Loans granted by the Corporation aggregating to Rs, 2,63,167.07 crore (Previous Year Rs, 2,33,106.17 crore) and Corporate Deposits aggregating to Rs, 2,957.08 crore (Previous Year Rs, 3.80 crore) are secured or partly secured by one or a combination of the following securities;

(a) Registered / equitable mortgage of property;

(b) Non disposal undertakings in respect of shares, pledge of shares, units, other securities, assignment of life insurance policies;

(c) Hypothecation of assets;

(d) Bank guarantees, company guarantees or personal guarantees;

(e) Negative lien;

(f) Assignment of receivables;

(g) Liquidity Support, Collateral''s [e.g. DSRA (Debt Service Reserve Account), Lien of Fixed Deposit]

6. Loans include Rs, 95.73 crore (Previous Year Rs, 75.77 crore) in respect of properties held for disposal under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

7. Long-term loans and advances includes Sub-Standard and Doubtful Loans of Rs, 2,377.69 crore (Previous Year Rs, 1,832.75 crore).

8. Bank deposits, with maturities beyond twelve months from the balance sheet date, includes earmarked balances Rs, 132.88 crore (Previous Year Rs, 161.70 crore) against foreign currency loans [Refer Note 4.4] and Rs, Nil (Previous Year Rs, 0.14 crore) towards letter of credit issued by Bank.

9. Loans granted by the Corporation, aggregating Rs, 29,357.81 crore (Previous Year Rs, 21,225.01 crore) are secured and considered good [Refer Note 15.3].

10. Out of the Corporate Deposits, amounts aggregating to Rs, 2,134.50 crore (Previous Year Rs, 522.87 crore) are secured and considered good [Refer Note 15.3].

11. Corporate Deposits includes amounts due from the related parties Rs, 13.30 crore (Previous Year Rs, 14.08 crore) [Refer Note 35].

12. Other Advances includes amounts due from the related parties Rs, 9.52 crore (Previous Year Rs, 10.53 crore) [Refer Note 35].

13. Investments in Debentures and Corporate Deposits amounting to Rs, 817.68 crore (Previous Year Rs, 905.59 crore) are towards financing Real Estate Projects. The Debentures are classified as investments in Note 17.

14. Current maturities of staff loans includes amounts due from the directors Rs, 0.01 crore (Previous Year Rs, 0.01 crore) [Refer Note 35].

15. Receivables on Sale of Investments in the previous year represents amount receivable on sale of shares of HDFC Standard Life Insurance Company Limited.

16. CONTINGENT LIABILITIES AND COMMITMENTS

The Company is involved in certain appellate, judicial and arbitration proceedings (including those described below) concerning matters arising in the course of conduct of the Company''s businesses and is exposed to other contingencies arising from having issued guarantees to lenders and other entities. Some of these proceedings in respect of matters under litigation are in various stages, and in some other cases, the claims are indeterminate.

17. Given below are amounts in respect of claims asserted by revenue authorities and others;

a) Contingent liability in respect of income-tax demands, net of amounts provided for and disputed by the Corporation, amounts to Rs, 1,241.88 crore (Previous Year Rs, 1,290.84 crore). The said amount has been paid/ adjusted and will be received as refund if the matters are decided in favour of the Corporation.

b) Contingent liability in respect of disputed dues towards wealth tax, interest on lease tax, and payment towards employersRs, contribution to ESIC not provided for by the Corporation amounts to Rs, 0.15 crore (Previous Year Rs, 0.15 crore).

The Management is generally unable to reasonably estimate a range of possible loss for proceedings or disputes other than those included in the estimate above as plaintiffs/parties have not claimed an amount of money damages, the proceedings are in early stages and/or there are significant factual issues to be resolved.

The management believes that the above claims made are untenable and is contesting them.

18. Contingent liability in respect of guarantees and undertakings comprise of the following;

a) Guarantees Rs, 628.09 crore (Previous Year Rs, 500.32 crore).

b) Corporate undertakings for securitization of receivables aggregated to Rs, 1,838.21 crore (Previous Year Rs, 1,889.83 crore). The outflows would arise in the event of a shortfall, if any, in the cash flows of the pool of the securitized receivables.

In respect of these guarantees and undertaking, the management does not believe, based on currently available information, that the maximum outflow that could arise, will have a material adverse effect on the Company''s financial condition.

19. Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs, 580.63 crore (Previous Year Rs, 652.74 crore).

20. a) Other Interest includes interest on investments amounting to Rs, 500.74 crore (Previous Year Rs, 389.96 crore), including Rs, 31.32 crore (Previous Year Rs, 21.95 crore) in respect of investments classified as current investments.

b) Other Interest includes interest on income tax refund Rs, 32.59 crore (Previous Year Rs, Nil).

21. Dividend income includes Rs, 524.93 crore (Previous Year Rs, 477.22 crore) received from subsidiary companies which have been classified as Long-Term Investments [Refer Note 35].

22. Surplus from deployment in Cash Management Schemes of Mutual Funds amounting to Rs, 444.64 crore (Previous Year Rs, 307.87 crore) is in respect of investments held as current investments.

13. Fees and Other Charges is net of amounts incurred towards Commission to Direct Selling Agents Rs, 502.38 crore (Previous Year Rs, 442.16 crore).

24. Fees and Other Charges includes brokerage of Rs, 0.07 crore (Previous Year Rs, 0.05 crore) received in respect of insurance/agency business undertaken by the Corporation.

25. Profit on sale of investments includes profit of Rs, 919.90 crore on account of sale of equity shares of HDFC ERGO General Insurance Company Ltd. (Subsidiary Company) [Previous Year Rs, 1,513.41 crore on account of sale of equity shares of HDFC Standard Life Insurance Company Ltd. (Subsidiary Company)].

26. Other Income includes rent of Rs, 26.73 crore (Previous Year Rs, 26.51 crore).

27. In accordance with the Accounting Standard (AS) 19 on ''Leases'', the following disclosures in respect of Operating Leases are made:

Income from Leases includes Rs, 7.47 crore (Previous Year Rs, 4.83 crore) in respect of properties and certain assets leased out by the Corporation under Operating Leases. Out of the above, in respect of the non-cancellable leases, the future minimum lease payments are as follows:

a) The above amounts are net of tax deducted at source.

b) The above expenses include Rs, 15.06 crore (Previous Year - Rs, Nil) debited to Securities Premium, being expenses incurred in respect of issuance of Synthetic INR Denominated Bonds.

28 Salaries and Bonus include provisions made in respect of accumulated leave salary and leave travel assistance which is in the nature of Long-Term Employee Benefits and has been actuarially determined as per the Accounting Standard (AS) 15 on Employee Benefits.

29 Expenditure shown in Note 27 is net of recovery from subsidiary companies in respect of Salaries Rs, 4.11 crore (Previous Year Rs, 4.14 crore).

30 Employee Benefits

(a) Defined contribution plans

The Company makes Provident Fund and Superannuation Fund contributions to defined contribution retirement benefit plans for eligible employees. Under the schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The contributions as specified under the law are paid to the provident fund set up as a trust by the Company. The Company is liable for annual contributions and any deficiency in interest cost compared to interest computed based on the rate of interest declared by the Central Government under the Employees'' Provident Fund Scheme, 1952 and recognises such deficiency as an expense in the year it is determined.

The fair value of the assets of the provident fund and the accumulated members'' corpus is Rs, 334.12 crore and Rs, 332.90 crore respectively (Previous Year Rs, 287.31 crore and Rs, 286.17 crore respectively). In accordance with an actuarial valuation, there is no deficiency in the interest cost as the present value of the expected future earnings on the fund is greater than the expected amount to be credited to the individual members based on the expected guaranteed rate of interest of 8.65%. The actuarial assumptions include discount rate of 7.27% (Previous Year 7.86%) and an average expected future period of 13.27 years (Previous Year 13 years).

The Company recognized Rs, 15.90 crore (Previous Year Rs, 13.73 crore) for provident fund contributions and Rs, 12.88 crore (Previous Year Rs, 12.16 crore) for superannuation contributions in the statement of profit and loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.

(b) Defined benefit plans

The details of the Corporation''s post-retirement benefit plans for its employees including whole-time directors are given below which is as certified by the actuary and relied upon by the auditors:

a) Audit Fees include Rs, 0.04 crore (Previous Year Rs, 0.04 crore) paid to Branch Auditors.

b) AuditorsRs, Remuneration exclude Rs, 1.55 crore (Net of tax Rs, 1.01 crore) being certification fee in respect of issue of Rupee Denominated Bonds and for Medium Term Note Programme (MTN Programme), utilized out of Securities Premium Account. Previous Year exclude Rs, 0.75 crore (Net of tax Rs, 0.49 crore) being certification fee in respect of Qualified Institutional Placement (QIP) of Non-Convertible Debentures with Warrants of the Corporation, utilized out of Securities Premium Account.

c) Auditors'' Remuneration above is excluding Service Tax, Swachh Bharat Cess and Krishi Kalyan Cess.

31. In accordance with the Accounting Standard (AS) 20 on ''Earnings Per Share'':

(i) In calculating the Basic Earnings Per Share, the Profit After Tax of Rs, 7,439.32 crore (Previous Year Rs, 7,093.10 crore) has been adjusted for amounts utilized out of Shelter Assistance Reserve of Rs, 146.27 crore (Previous Year Rs, 85.32 crore).

Accordingly the Basic Earnings Per Share has been calculated based on the adjusted Profit After Tax of Rs, 7,293.05 crore (Previous Year Rs, 7,007.79 crore) and the weighted average number of shares during the year of 158.34 crore (Previous Year 157.72 crore).

32. RELATED PARTY TRANSACTIONS

As per the Accounting Standard on ‘Related Party Disclosures'' (AS) 18, the related parties of the Corporation are as follows:

A) Subsidiary Companies

HDFC Developers Ltd. HDFC ERGO General Insurance Company Ltd.

HDFC Holdings Ltd. HDFC General Insurance Ltd. (with effect from 9th September, 2016)

HDFC Trustee Company Ltd. (subsidiary of HDFC ERGO General Insurance Company Ltd.)

HDFC Standard Life Insurance Company Ltd. HDFC Sales Pvt. Ltd.

HDFC Venture Capital Ltd. HDFC Property Ventures Ltd.

HDFC Ventures Trustee Company Ltd. HDFC Credila Financial Services Private Ltd.

GRUH Finance Ltd. (formerly known as "Credila Financial Services Pvt. Ltd.")

Griha Investments (Subsidiary of HDFC Holdings Ltd.) Griha Pte. Ltd. (Subsidiary of HDFC Investments Ltd.)

HDFC Education and Development Services Pvt. Ltd. HDFC Pension Management Company Ltd.

Windermere Properties Pvt. Ltd. (subsidiary of HDFC Standard Life Insurance Company Ltd.)

Winchester Properties Pvt. Ltd. HDFC International Life and Re Company Limited

HDFC Investments Ltd. (subsidiary of HDFC Standard Life Insurance Company Ltd.)

HDFC Asset Management Company Ltd. Grandeur Properties Pvt. Ltd.

HDFC Capital Advisors Ltd. Pentagram Properties Pvt. Ltd.

HDFC Realty Ltd. Haddock Properties Pvt. Ltd.

B) Associate Companies C) Entities over which control is exercised

HDFC Bank Ltd. HDFC Investment Trust (HIT)

RuralShores Business Services Pvt. Ltd. HDFC Investment Trust - II (HIT- II)

Magnum Foundations Pvt. Ltd.

True North Ventures Private Limited

(formerly known as "India Value Fund Advisors Pvt. Ltd.’)

D) Key Management Personnel E) Relatives of Key Management Personnel

Mr. Keki M. Mistry (Where there are transactions)

Ms. Renu Sud Karnad Ms. Arnaaz K. Mistry

Mr. V. Srinivasa Rangan Mr. Nikhil Singhal

Ms. Swarn Sud Mr. Rishi Sud

33. SEGMENT REPORTING

The Corporation''s main business is financing by way of loans for the purchase or construction of residential houses, commercial real estate and certain other purposes, in India. All other activities of the Corporation revolve around the main business. As such, there are no separate reportable segments, as per the Accounting Standard (AS) 17 on ''Segment Reporting''.

34. Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / disclosure.

35. DISCLOSURES REQUIRED BY THE NATIONAL HOUSING BANK

36 Minimum Disclosures

The following additional disclosures have been given in terms of Notification no. NHB.HFC.CG-DIR.1/ MD&CEO/2016 dated February 9, 2017 issued by the National Housing Bank.

37 Summary of Significant Accounting Policies

The accounting policies regarding key areas of operations are disclosed as note 1 to the accounts.

38 Exchange Traded Interest Rate (IR) Derivative

The Corporation has not entered into any exchange traded derivative.

39 Disclosures on Risk Exposure in Derivatives A. Qualitative Disclosure

Financial Risk Management

The Corporation has to manage various risks associated with the lending business. These risks include liquidity risk, exchange risk, interest rate risk and counterparty risk.

The Financial Risk Management and Hedging Policy as approved by the Audit Committee sets limits for exposures on currency and other parameters. The Corporation manages its interest rate and currency risk in accordance with the guidelines prescribed therein.

Liquidity risk and interest rate risks arising out of maturity mismatch of assets and liabilities are managed through regular monitoring of maturity profiles. The currency risk on the borrowings is actively managed mainly through a combination of principal only swaps, forward contracts and dollar denominated assets. Counterparty risk is reviewed periodically to ensure that exposure to various counterparties is well diversified and is within the limits fixed by the Derivative Committee.

As a part of Asset Liability Management, the Corporation has entered into interest rate swaps wherein it has converted its fixed rate rupee liabilities into floating rate linked to various benchmarks.

Constituents of Derivative Business

Financial Risk Management of the Corporation constitutes the Audit Committee, Asset Liability Committee (ALCO), Derivative Committee, Risk management and hedging team (front office), mid office, back office and internal auditors.

The Treasury front-office enters into derivative transactions with various counterparties. The Corporation has an independent back-office and mid-office. The Corporation periodically monitors various counterparty risk and market risk limits, within the risk architecture and processes of the Corporation.

Measurement and Accounting

The Guidance Note on Accounting for Derivative Contracts issued by the Institute of Chartered Accountants of India is effective from April 1, 2016.

On and from that date, all derivative contracts are recognized on the balance sheet and measured at fair value. The fair value changes are recognized in the Statement of Profit and Loss unless hedge accounting is used. Where hedge accounting is used, fair value changes of the derivative contracts are recognized through the Statement of Profit and Loss in the same period as the offsetting losses and gains on the hedged item. The tenor of hedging instrument may be less than or equal to the tenor of underlying hedged asset or liability.

The Corporation has entered into fair value hedges through interest rate swaps on fixed rate rupee liabilities as a part of the Asset Liability management whereby a portion of the fixed rate liabilities are converted to floating rate. The Corporation has a mark to market gain of '' 1,059 crore on outstanding Fair value hedges.

The long term monetary items other than derivatives continue to be amortized, through the Statement of Profit and Loss over the balance period of such long term asset or liability. Pursuant to the notification dated December 29, 2011 issued by the Ministry of Corporate Affairs amending the Accounting Standard 11, the Corporation has exercised the option as per Para 46A inserted in the Standard for all long term monetary assets and liabilities.

Valuation of derivatives is based on inputs sourced from quoted market data and application of appropriate mathematical and statistical models to determine fair value.

Foreign exchange forward contracts outstanding at the Balance Sheet date, are effectively valued at the closing spot rate. The premium or discount arising at the inception of such forward exchange contract is amortized as expense or income over the life of the contract.

The Corporation has entered into cash flow hedges to hedge the floating rate benchmark on foreign currency loans. Under the cash flow hedge, the hedging instrument is measured at fair value and any gain or loss that is determined to be an effective hedge is recognized in equity i.e., Cash flow Hedge reserve. In order to match the gains and losses of the hedged item and the hedging instrument in the statement of profit and loss, the changes in fair value of the hedging instrument and the hedged item is recognized at the same time in the Statement of Profit and Loss. The outstanding notional of cash flow hedges is USD 70 mn.

40 Details of financing of parent company products

These details are not applicable since the Corporation is not a subsidiary of any company.

41 Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the HFC

The Corporation has not exceeded Single Borrower Limit (SGL) / Group Borrower Limit (GBL) during the financial year.

42 Advances against Intangible Collateral

43 Disclosure of Penalties imposed by NHB and other regulators

During FY 2016-17, there were no penalties imposed by NHB or any other regulators.

44 Related party Transactions

Details of all material transactions with related parties are disclosed in note 35.

45 Rating assigned by Credit Rating Agencies and migration of rating during the year

Note: The Corporation has been assigned the highest ratings in all the above-mentioned instruments. There were no changes in any of the ratings or outlook during the year.

46 Remuneration of Directors

Details of Remuneration of Directors are disclosed as part of the Directors Report.

47 Management

Refer to the Management Discussion and Analysis report for the relevant disclosures.

48 Net Profit or Loss for the period, prior period items and changes in accounting policies There are no prior period items that have impact on the current year''s profit and loss.

48 Revenue Recognition

There have been no instances in which revenue recognition has been postponed pending the resolution of significant uncertainties.


Mar 31, 2015

1. CONTINGENT LIABILITIES AND COMMITMENTS

The Company has certain matters in appellate, judicial and arbitration proceedings (including those described below) arising in the course of conduct of the Company''s businesses and is exposed to other contingencies arising from having issued guarantees and undertakings. Some of these proceedings in respect of matters under litigation are in various stages, and in some other cases, the claims are indeterminate.

1.1 Given below are amounts in respect of claims asserted by revenue authorities and others;

a) Contingent liability in respect of income-tax demands, net of amounts provided for and disputed by the Corporation, amounts to Rs. 1,103.51 crore (Previous Year Rs. 919.19 crore). The said amount has been paid/ adjusted and will be received as refund if the matters are decided in favour of the Corporation.

b) Contingent liability in respect of disputed dues towards wealth tax, interest on lease tax and payment towards employers'' contribution to ESIC not provided for by the Corporation amounts to Rs. 0.15 crore (Previous Year Rs. 0.15 crore).

Management is generally unable to reasonably estimate a range of possible loss for proceedings or disputes other than those included in the estimate above as plaintiffs/parties have not claimed an amount of money damages, the proceedings are in early stages and/or there are significant factual issues to be resolved.

The management believes that the above claims made are untenable and is contesting them.

1.2 Contingent liability in respect of guarantees and undertakings comprise of the following;

a) Guarantees Rs. 361.68 crore (Previous Year Rs. 435.26 crore).

b) Corporate undertakings for securitisation of receivables aggregated to Rs. 1,919.65 crore (Previous Year Rs. 1,943.05 crore). The outflows would arise in the event of a shortfall, if any, in the cash flows of the pool of the securitised receivables.

In respect of these guarantees and undertaking, management does not believe, based on currently available information, that the maximum outflow that could arise, will have a material adverse effect on the Company''s financial condition.

1.3 Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs. 252.82 crore (Previous Year Rs. 59.30 crore).

2.1 a) Other Interest includes interest on investments amounting to Rs. 387.05 crore (Previous Year Rs. 372.38 crore), including Rs. 43.03 crore (Previous Year Rs. 8.18 crore) in respect of investments classified as current investments.

b) Other Interest includes interest on income tax refund Rs. 44.31 crore (Previous Year Rs. 33.78 crore).

2.2 Dividend income includes Rs. 400.02 crore (Previous Year Rs. 308.86 crore) received from subsidiary companies [Refer Note 35].

2.3 Surplus from deployment in Cash Management Schemes of Mutual Funds amounting to Rs. 364.55 crore (Previous Year Rs. 337.38 crore) is in respect of investments held as current investments.

2.4 Fees and Other Charges is net of the amounts paid to Direct Selling Agents Rs. 354.75 crore (Previous Year Rs. 307.82 crore).

3. Profit on sale of investments includes profit of Rs. 260.47 crore (Previous Year Rs. Nil) on account of sale of shares of HDFC Standard Life Insurance Company Ltd. (Subsidiary Company) and is net of loss of Rs. Nil (Previous Year Rs. 0.01 crore) on account of sale of IPF Online Ltd. (Associate Company).

4. Other Income includes rent of Rs. 12.56 crore (Previous Year Rs. 9.19 crore).

4.1 In accordance with the Accounting Standard on ''Leases'' (AS 19), the following disclosures in respect of Operating Leases are made:

5.1 Other Charges is net of exchange loss Rs. 0.32 crore (Previous Year includes exchange gain of Rs. 0.66 crore).

6.1 Salaries and Bonus include Rs. 22.02 crore (Previous Year Rs. 12.49 crore) towards provision made in respect of accumulated leave salary and leave travel assistance which is in the nature of Long Term Employee Benefits and has been actuarially determined as per the Accounting Standard on Employee Benefits (AS 15).

6.2 Expenditure shown in Note 27 is net of recovery from subsidiary companies in respect of Salaries Rs. 3.53 crore (Previous Year Rs. 2.68 crore).

6.3 Employee Benefits

(a) Defined contribution plans

The Corporation makes Provident Fund and Superannuation Fund contributions to defined contribution retirement benefit plans for eligible employees. Under the schemes, the Corporation is required to contribute a specified percentage of the payroll costs to fund the benefits. The contributions as specified under the law are paid to the provident fund set up as a trust by the Corporation. The Corporation is liable for annual contributions and any deficiency in interest cost compared to interest computed based on the rate of interest declared by the Central Government under the Employees'' Provident Fund Scheme, 1952 and recognises, if any, as an expense in the year it is determined.

The fair value of the assets of the provident fund and the accumulated members'' corpus is Rs. 245.40 crore and Rs. 244.59 crore respectively (Previous Year Rs. 207.38 crore and Rs. 207.04 crore respectively). In accordance with an actuarial valuation, there is no deficiency in the interest cost as the present value of the expected future earnings on the fund is greater than the expected amount to be credited to the individual members based on the expected guaranteed rate of interest of 8.75%. The actuarial assumptions include discount rate of 7.96% (Previous Year 9.31%) and an average expected future period of 21.75 years (Previous Year 22 years).

The Corporation recognised Rs. 12.55 crore (Previous Year Rs. 11.88 crore) for provident fund contributions and Rs. 10.17 crore (Previous Year Rs. 8.69 crore) for superannuation contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Corporation are at rates specified in the Rules of the Schemes.

7.1 In accordance with the Accounting Standard on ''Leases'' (AS 19), the following disclosures in respect of Operating Leases are made:

The Corporation has acquired properties under non-cancellable operating leases for periods ranging from 12 months to 60 months. The total minimum lease payments for the current year, in respect thereof, included under Rent, amounts to Rs. 23.50 crore (Previous Year Rs. 32.72 crore). Out of the above, the Corporation has sub-leased a property, the total sub-lease payments received in respect thereof amounting to Rs. 14.09 crore (Previous Year Rs. 18.79 crore) have been netted off from rent expenses. The future minimum lease payments in respect of the properties acquired under non-cancellable operating leases are as follows:

8.1 Miscellaneous Expenses exclude Rs. 10.83 crore (Previous Year Rs. 13.02 crore) in respect of amounts utilised out of Shelter Assistance Reserve during the year.

8.2 Miscellaneous Expenses include Provision for Wealth Tax amounting to Rs. 2.51 crore (Previous Year Rs. 0.60 crore) and Securities Transaction Tax amounting to Rs. 0.29 crore (Previous Year Rs. 0.26 crore).

9.3 Miscellaneous Expenses includes Rs. 18.07 crore (Previous Year Rs. Nil) towards Corporate Social Responsibility (CSR) under Section 135 of the Companies Act, 2013.

9. PROVISION FOR NON-PERFORMING LOANS

9.1 As per the Housing Finance Companies (NHB) Directions, 2010, non-performing assets are recognised on the basis of ninety days overdue. The total provision carried by the Corporation in terms of paragraph 29 (2) of the Housing Finance Companies (NHB) Directions, 2010, and subsequent NHB Circulars - NHB.HFC. DIR.3/CMD/2011 dated August 5, 2011, NHB.HFC.DIR.4/CMD/2012 dated January 19, 2012 and NHB.HFC. DIR.9/CMD/2013 dated September 6, 2013 in respect of Housing and Non-Housing Loans is as follows [Refer Notes 6.1 & 15]:

9.2 Provision for Contingencies debited to the Statement of Profit and Loss includes Provision for Diminution in the Value of Investments amounting to Rs. 10.04 crore (Previous Year Rs. 14.40 crore). The balance of the Provision represents provision made against non-performing assets and other contingencies [Refer Note 6.2].

10. In accordance with the Accounting Standard on ''Earnings Per Share'' (AS 20):

(i) In calculating the Basic Earnings Per Share, the Profit After Tax of Rs. 5,990.14 crore (Previous Year Rs. 5,440.24 crore) has been adjusted for amounts utilised out of Shelter Assistance Reserve of Rs. 10.83 crore (Previous Year Rs. 13.02 crore).

Accordingly the Basic Earnings Per Share has been calculated based on the adjusted Profit After Tax of Rs. 5,979.31 crore (Previous Year Rs. 5,427.22 crore) and the weighted average number of shares during the year of 156.82 crore (Previous Year 155.54 crore).

(iii) The Basic Earnings Per Share has been computed by dividing the adjusted Profit After Tax by the weighted average number of equity shares for the respective periods; whereas the Diluted Earnings Per Share has been computed by dividing the adjusted Profit After Tax by the weighted average number of.

11. SEGMENT REPORTING

The Corporation''s main business is financing by way of loans for the purchase or construction of residential houses, commercial real estate and certain other purposes, in India. All other activities of the Corporation revolve around the main business. As such, there are no separate reportable segments, as per the Accounting Standard on ''Segment Reporting'' (AS 17).

12. Previous year''s figures have been regrouped/reclassified wherever necessary to correspond with the current year''s classification/ disclosure.


Mar 31, 2013

1.1 4,77,13,935 shares of Rs. 2 each (Previous Year 11,71,16,560 shares of Rs.2 each) were reserved for issuance as follows :

a) 4,77,13,935 shares of Rs. 2 each (Previous Year 6,24,07,930 shares of Rs.2 each) towards outstanding Employees Stock Options granted/available for grant, including lapsed options [Refer Note 2.4].

b) Nil shares of Rs. 2 each (Previous Year 5,47,08,630 shares of Rs.2 each) towards outstanding share warrants [Refer Note 3.8].

The Corporation has only one class of shares referred to as equity shares having Face Value of Rs. 2 each. Each holder of equity share is entitled to one vote per share.

The holders of equity shares are entitled to dividends, if any, proposed by the Board of Directors and approved by Shareholders at the Annual General Meeting.

1.2 During the year, Nomination and Compensation Committee of Directors (NCCD) at its meeting held on May 23, 2012 granted the 58,67,546 new stock options along with 2,34,929 options lapsed under previous Schemes i.e. ESOS-05 : 32,030 options, ESOS-07 : 1,32,087 options, ESOS-08 : 70,812 options in all aggregating to 61,02,475 stock options representing 3,05,12,375 equity shares of Rs. 2 each at an exercise price of Rs. 3,117.50 per option to Employees and Directors of the Corporation under Employees Stock Option Scheme - 2011 (ESOS-11). The said price was determined in accordance with the pricingformula approved bythe shareholders i.e. at the latest available closing price ofthe equity shares ofthe Corporation on the stock exchange on which the shares are listed and having higher trading volume, prior to the meeting of the NCCD at which the options are granted.

In terms of ESOS -11, the options would vest over a period of 1-3 years from the date of grant, but not later than May 22, 2015, depending upon option grantee completing continuous service of three years with the Corporation. Accordingly, no options have vested during the current year. The options can be exercised over a period of five years from the date of respective vesting.

Under Employees Stock Option Scheme - 2008 (ESOS - 08), the Corporation had on November 25, 2008, granted 57,90,000 stock options at an exercise price of Rs.1,350.60 per option representing 57,90,000 equity shares of Rs.10 each to the employees and directors of the Corporation. The said price was determined in accordance with the pricing formula approved by the shareholders i.e. at the latest available closing price on the stock exchange having higher trading volume, prior to grant of options.

In terms of ESOS - 08, the options would vest over a period of 1-3 years from the date of grant, but not later than November 24, 2011, depending upon option grantee completing continuous service of three years with the Corporation. Accordingly, during the year Nil options (Previous Year 64,042 options) were vested and 112 options (Previous Year 581 options) were lapsed after vesting. The options can be exercised over a period of five years from the date of respective vesting.

Under Employees Stock Option Scheme - 2007 (ESOS - 07), the Corporation had on September 12, 2007, granted 54,56,835 stock options at an exercise price of Rs.2,149 per option representing 54,56,835 equity shares of Rs. 10 each to the employees and directors of the Corporation. The said price was determined in accordance with the pricing formula approved by the shareholders i.e. at the latest available closing price on the stock exchange having higher trading volume, prior to grant of options.

In terms of ESOS - 07, the options would vest over a period of 1-3 years from the date of grant, but not later than September 11, 2010, depending upon option grantee completing continuous service of three years with the Corporation. All the options have been vested in the earlier years. In the current year 525 options (Previous Year 1,630 options) were lapsed after vesting. The options can be exercised over a period of five years from the date of respective vesting.

Under Employees Stock Option Scheme - 2005 (ESOS - 05), the Corporation had on October 25, 2005, granted 74,73,621 stock options at an exercise price of Rs. 912.90 per option representing 74,73,621 equity shares of Rs. 10 each to the employees and directors of the Corporation. The said price was determined in accordance with the pricing formula approved by the shareholders i.e. at the latest available closing price on the stock exchange having higher trading volume, prior to grant of options.

In terms of the ES0S-05, the options would vest over a period of 2-3 years from the date of grant, but not later than October 24, 2008, depending upon option grantee completing continuous service of three years with the Corporation. All the options have been vested in the earlier years. In the current year 12,285 options (Previous Year 524 options) were lapsed after vesting. The options can be exercised over a period of five years from the date of respective vesting. Accordingly, all the options vested under ESOS-05 have been exercised.

Method used for accounting for share based payment plan:

The Corporation has used intrinsic value method to account for the compensation cost of stock options to employees ofthe Corporation. Intrinsic value is the amount by which the quoted market price ofthe underlying share exceeds the exercise price of the option. Since the options under ESOS-11, ESOS-08, ESOS-07 and ES0S-05 were granted atthe market price, the intrinsic value ofthe option is Nil. Consequentlythe accounting value of the option (compensation cost) is also Nil.

2.1 Miscellaneous Expenses under Note 29.1 exclude Rs. 9.13 crores (Previous Year Rs. 6.89 crores) in respect of amounts utilised out of Shelter Assistance Reserve during the year.

2.2 During the year, in addition to the charges of Rs. 145 crores (Previous Year Rs. 80 crores) to the Statement of Profit and Loss, an amount of Rs. Nil (net of Deferred Tax Rs. Nil) [Previous Year Rs. 349.93 crores (net of Deferred Tax of Rs. 168.07 crores)], being one time charge on account of changes in the provisioning requirements by the National Housing Bank vide circulars no. NHB.HFC.DIR.3/CMD/2011 dated August 5, 2011 and NHB.HFC. DIR.4/CMD/2012 dated January 19, 2012 was transferred from Additional Reserve created as per Section 29C of the National Housing Bank Act, 1987 pursuant to circular NHB(ND)/DRS/Pol-No.03/2004-05 dated August 26, 2004 as under:

2.3 Special Reserve has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961 out of the distributable profits of the Corporation. Special Reserve No. I relates to the amounts transferred upto Financial Year 1996-97, whereas Special Reserve No. II relates to the amounts transferred thereafter.

2.4 As per Section 29 C of the National Housing Bank Act, 1987, the Corporation is required to transfer at least 20% of its net profits every year to a reserve before any dividend is declared. For this purpose any Special Reserve created by the Corporation under Section 36(1)(viii) of the Income- tax Act, 1961 is considered to be an eligible transfer. The Corporation has transferred an amount of Rs. 775 crores (Previous Year Rs. 730 crores) to Special Reserve II in terms of Section 36(1)(viii) of the Income-tax Act, 1961 and an amount of Rs. 825 crores (Previous Year Rs. 620 crores) to "Additional Reserve (u/s 29C of the NHB Act)".

2.5 During the year, Corporation utilised Rs. 438.04 crores (net of tax effect of Rs.175.54 crores) [(Previous Year Rs. 485.07 crores (net of tax effect of Rs. 223.25 crores)] in accordance with Section 78 of the Companies Act, 1956, towards the proportionate premium payable on redemption of Zero Coupon Secured Redeemable Non Convertible Debentures (ZCD).

2.6 Additional Tax on dividend 2011-12 credit taken, Rs. 24.62 crores (Previous Year Rs. 4.66 crores), pertains to the dividend tax paid by the subsidiary companies of the Corporation on the dividend paid to the Corporation as per Section 115(O)(1A) of the Income Tax Act, 1961.

2.7 In respect of equity shares issued pursuant to Employee Stock Option Schemes and exchange of warrants, the Corporation paid dividend of Rs. 12.83 crores for the year 2011-12 (Rs. 2.74 crores for the year 2010-11) and tax on dividend of Rs. 2.08 crores (Previous Year Rs. 0.44 crores) as approved by the shareholders at the Annual General Meeting held on July 11, 2012.

2.8 Duringthe year 2009-10, the Corporation had made a simultaneous issue ofZero Coupon Secured Redeemable Non-Convertible Debentures (ZCD) aggregating to Rs. 4,000 crores and 1,09,53,706 warrants at a issue price of Rs. 275 per warrant aggregating to Rs. 301.23 crores. Each of the warrants entitled the holder to acquire one equity share of the Corporation at an exercise price of Rs. 3,000 per share of face value of Rs. 10 each (now exercise price of Rs. 600 per share of face value of Rs. 2 each) on or before August 23, 2012. The said issue of ZCD and Warrants was made under Chapter Xlll-A ofthe Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000. The Subscription amount received on Issue of warrants has been transferred from Capital Reserve to Securities Premium Account as the same is not refundable/adjustable in future.

3.1 All secured Longterm borrowings are secured by negative lien on the assets ofthe Corporation and mortgage of property.

3.2 Non-Convertible Debentures includes Rs. 625.00 crores (Previous Year Rs. 580.00 crores) and Deposits includes Rs. 3.01 crores (Previous Year Rs. 1.34 crores) from related parties [Refer Note 35].

3.3 The Corporation has availed a loan of USD 100 million from the Asian Development Bank (Loan II). In respect of tranches 1 and 2 aggregatingto USD 60 million, as perthe agreements with a scheduled bank, the Corporation has handed over the dollar funds to the bank overseas and has obtained rupee funds in India amounting to Rs. 200 crores by way of a term loan and Rs. 100 crores through the issue of bonds which have been subscribed by the bank.

In respect of tranche 3 of USD 40 million, as per the agreement with a financial institution, the Corporation has handed over the dollars to a financial institution overseas and under a back-to-back arrangement obtained rupee funds in India. All payments in foreign currency are the responsibility of the financial institution. In terms of the agreements, the Corporation''s foreign exchange liability is protected.

3.4 The Corporation had availed USD 175 million under the Foreign Currency Borrowing scheme of the Reserve Bank of India (RBI) under the "approval route" in terms of the RBI Press Release No. 2008-2009/700 dated November 17, 2008, with a maturity of three years. In terms of the RBI guidelines, these borrowings have been swapped into rupees for the entire maturity by way of principal only swaps. The said loans have been fully repaid in the current year [Refer Note 9.1].

3.5 As on March 31, 2013, the Corporation has foreign currency borrowings of USD 632.96 million equivalent (Previous Year USD 875.78 million). The Corporation has undertaken currency swaps, principal only swaps, currency options and forward contracts on a notional amount of USD 286.75 million equivalent (Previous Year USD 406.76 million) to hedge the foreign currency risk. Further, interest rate swaps on a notional amount of USD 130 million equivalent (Previous Year USD 123 million) are outstanding, which have been undertaken to hedge the interest rate risk on the foreign currency borrowings. As on March 31, 2013, the Corporation''s net foreign currency exposure on borrowings net of risk management arrangements is USD Nil (Previous Year USD Nil).

As a part of asset liability management on account of the Corporation''s Adjustable Rate Home Loan product as well as to reduce the overall cost of borrowings, the Corporation has entered into interest rate swaps wherein it has converted its fixed rate rupee liabilities of a notional amount of Rs. 21,185 crores (Previous Year Rs. 25,210 crores) as on March 31, 2013 for varying maturities into floating rate liabilities linked to various benchmarks. In addition, the Corporation has entered into cross currency swaps of a notional amount of USD 476.45 million equivalent (Previous Year USD 588.07 million) wherein it has converted its rupee liabilities into foreign currency liabilities and the interest rate is linked to the benchmarks of respective currencies.

3.6 Monetary assets and liabilities denominated in foreign currencies net of risk management arrangement are revalued at the rate of exchange prevailing at the year end. Cross Currency Interest Rate Swaps are recorded by marking the foreign currency component to spot rates.

For Forward contracts or instruments that are in substance, forward exchange contracts, the premiums on such contracts are being amortised over the life of contracts. The amount of exchange difference in respect of such contracts to be recognised as expense in the Statement of Profit and Loss over subsequent accounting periods is Rs. 29.90 crores (Previous Year Rs. Nil).

3.7 Public deposits as defined in Paragraph 2(l)(y) ofthe Housing Finance Companies (NHB) Directions, 2010, are secured by floating charge on the Statutory Liquid Assets maintained in terms of sub-sections (1) & (2) of Section 29B of the National Housing Bank Act, 1987.

3.8 Pursuant to the notification dated December 29, 2011 issued by the Ministry of Corporate Affairs amending the Accounting Standard 11, the Corporation has exercised the option as per Para 46A inserted in the Standard for all long term monetary assets and liabilities. Consequently, an amount of Rs. 169.79 crores (without considering future tax benefit of Rs. 57.71 crores) [Previous Year Rs. 206.24 crores (without considering the future tax benefit of Rs. 66.90 cores)] representingtranslation difference is carried forward in the Foreign Currency Monetary Item Translation Difference Account as on March 31, 2013. This amount is to be amortised over the period of the monetary assets/liabilities.

3.9 During the year, the Corporation raised Rs. Nil (Previous Year Rs. 1000 crores) through issue of Long Term Unsecured Redeemable Non-Convertible Debentures (subordinated debt). As at March 31, 2013, the Corporation''s outstanding subordinated debt is Rs. 3,475 crores (Previous Year Rs. 3,475 crores). These debentures are subordinated to present and future senior indebtedness of the Corporation and qualifies as Tier II capital under National Housing Bank (NHB) guidelines for assessing capital adequacy. Based on the balance term to maturity as at March 31, 2013, 85.90% (Previous Year 91.51%) of the book value of the subordinated debt is considered as Tier II capital for the purpose of capital adequacy computation.

4.1 Provision for Contingencies includes provisions for standard assets and all other contingencies. As per National Housing Bank Circular No. NHB/HFC/DIR.3/CMD/2011 dated August 5, 2011, and NHB/HFC/DIR.4/CMD/2012 dated January 19, 2012, in addition to provision for non-performing assets, all housing finance companies are required to carry a general provision. (i) at the rate of 2% on housing loans disbursed at comparatively lower rate of interest in the initial few years, after which rates are reset at higher rates; (ii) at the rate of 1% of Standard Assets in respect of Commercial Real Estates and (iii) at the rate of 0.40% of the total outstanding amount of loans which are Standard Assets other than (i) & (ii) above.

Accordingly, the Corporation is required to carry a minimum provision of Rs. 1,119.48 crores (Previous Year Rs. 1,075.82 crores) towards standard assets.

5.1 Secured short term borrowing are secured by negative lien on the assets of the Corporation.

5.2 Deposits includes Rs. 21.53 crores (Previous Year Rs. 249.17 crores) due from related parties [Refer Note 35].

6.1 Trade Payables include Rs. Nil (Previous Year Rs. Nil) payable to "Suppliers" registered under the Micro, Small and Medium Enterprises Development Act, 2006. No interest has been paid/payable by the Corporation during the year to the "Suppliers" covered under the Micro, Small and Medium Enterprises Development Act, 2006. The above information takes into account only those suppliers who have responded to inquiries made by the Corporation for this purpose.

6.2 Trade Payables include Rs. Nil (Previous Year Rs. 0.09 crores) being amount payable to HDFC Provident Fund Trust towards deficiency in the fund account.

6.3 As required under Section 205C of the Companies Act, 1956, the Corporation has transferred Rs. 1.11 crores (Previous Year Rs. 0.79 crores) to the Investor Education and Protection Fund (IEPF) during the year. As of March 31, 2013, no amount was due for transfer to the IEPF.

7.1 Current maturities of long term borrowings are secured by negative lien on all assets of the Corporation and mortgage of property.

7.2 Current maturities of Non-Convertible Debentures includes Rs. 95.00 crores (Previous Year Rs. 25.00 crores) and Deposits includes Rs. 2.69 crores (Previous Year Rs. 2.98 crores) from related parties [Refer Note 35].

8. DEFERRED TAX ASSET

In compliance with theAccountingStandard relatingto ''AccountingforTaxeson Income'' (AS22), notified bythe Companies (Accounting Standards) Rules, 2006, the Corporation has taken credit of Rs. 3.18 crores (Previous Year Rs. 12 crores) in the Statement of Profit and Loss for the year ended March 31, 2013 towards deferred tax asset (net) for the year, arising on account of timing differences and Rs. NIL. (Previous Year Rs. 168.07 crores) has been adjusted against the utilisation from Additional Reserve u/s 29C as per Note no. 3.2.

9.1 Loans includes amounts due from the directors Rs. 0.15 crores (Previous Year Rs. 0.17 crores) [Refer Note 35].

9.2 Investments in Debentures, Pass Through Certificates, Security Receipts and Corporate Deposits amountingto Rs. 212.10 crores (Previous Year Rs. 865.05 crores) are towards financing Real Estate Projects. The Debentures, Pass Through Certificates and Security Receipts are reflected in Note 13.

9.3 Loans granted by the Corporation aggregating to Rs. 1,50,256.20 crores (Previous Year Rs. 1,24,368.87 crores) are secured or partly secured by:

(a) Equitable mortgage of property and/or

(b) Pledge of shares, units, other securities, assignment of life insurance policies and/or

(c) Hypothecation of assets and/or

(d) Bank guarantees, company guarantees or personal guarantees and/or

(e) Negative lien and/or

(f) Assignment of hire purchase receivables and/or

(g) Undertaking to create a security.

9.4 Loans include Rs. 27.99 crores (Previous Year Rs. 34.78 crores) in respect of properties held for disposal under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

9.5 Long term loans and advances includes non-performing loans of Rs. 1,198.86 crores (Previous Year Rs. 1,069.13 crores).

9.6 Out of the Corporate Deposits, amounts aggregating to Rs. Nil (Previous Year Rs. 645 crores) are secured.

9.7 Movement in Provision for Non-Performing Loans is as under: [Refer 32.2]

10.1 Out of Current maturities of Long term loans and advances, amounts aggregating Rs. 16,933.97 crores (Previous Year Rs. 13,480.91 crores) are secured [Refer Note 15.3].

10.2 Out of the Corporate Deposits, amounts aggregating to Rs. 1,192.42 crores (Previous Year Rs. 2,101.44 crores) are secured and amounts aggregating to Rs. 2 crores (Previous Year Rs. Nil) considered as doubtful.

10.3 Corporate Deposits includes amounts due from the related parties Rs. 10.00 crores (Previous Year Rs. 29.10 crores) [Refer Note 35].

10.4 Other Advances includes amounts due from the related parties Rs. 10.05 crores (Previous Year Rs. 8.86 crores) [Refer Note 35].

10.5 Corporate Deposits amounting to Rs. 834.66 crores (Previous Year Rs. 2,108.44 crores) are towards financing Real Estate Projects.

10.6 Current maturities of staff loans includes amounts due from the directors Rs. 0.02 crores (Previous Year Rs. 0.02 crore) [Refer Note 35].

11. CONTINGENT LIABILITIES AND COMMITMENTS

11.1 Contingent Liability in respect of guarantees provided by the Corporation aggregated to Rs. 203.00 crores (Previous Year Rs. 783.95 crores).

11.2 Contingent liability in respect of income-tax demands, net of amounts provided for and disputed by the Corporation, amounts to Rs. 818.73 crores (Previous Year Rs. 606.17 crores). The matters in dispute are under appeal. The said amount has been paid/adjusted and will be received as refund if the matters are decided in favour of the Corporation.

11.3 Contingent Liability in respect of corporate undertakings provided by the Corporation for securitisation of receivables aggregated to Rs. 1,939.31 crores (Previous Year Rs. 1,940.13 crores). The outflows would arise in the event of a shortfall, if any, in the cash flows of the pool of the securitised receivables.

11.4 Contingent Liability in respect of disputed dues towards sales tax, wealth tax, interest on lease tax and payment towards employers'' contribution to ESIC not provided for by the Corporation amounts to Rs. 0.15 crores (Previous Year Rs. 0.15 crores).

11.5 Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs. 102.34 crores (Previous Year Rs. 206.70 crores).

12.1 a) Other Interest includes Interest on Investments amounting to Rs. 328.99 crores (Previous Year Rs. 203.22 crores), including Rs. 9.79 crores (Previous Year Rs. 15.29 crores) in respect of current investments.

b) Other Interest includes Interest on Income Tax Refund Rs. 5.83 crores (Previous Year Rs. Nil).

12.2 a) Dividend income includes Rs. 269.42 crores (Previous Year Rs. 148.21 crores) received from subsidiary companies.

b) Dividend income includes Rs. 0.38 crores (Previous Year Rs. 2.40 crores) in respect of current investments.

12.3 Surplus from deployment in Cash Management Schemes of Mutual Funds amounting to Rs. 252.34 crores (Previous Year Rs. 319.78 crores) is in respect of investments held as current investments.

12.4 Fees and Other Charges is net of the amounts paid to Direct Selling Agents Rs. 264.00 crores (Previous Year Rs. 248.54 crores).

13. a) Profit on sale of investments includes profit of Rs. 0.83 crores (Previous Year Rs. Nil) in respect of investments held as current investments.

b) Profit on sale of investments includes profit of Rs. 0.77 crores (Previous Year Rs. Nil) on account of sale of shares of Indian Association for Savings and Credit (Associate Company) and Rs. Nil (Previous Year Rs. 0.12 crores) on account of shares bought back by India Value Fund Advisors Pvt. Ltd. (Associate Company).

14. Other Income includes rent of Rs. 10.15 crores (Previous Year Rs. 10.00 crores), of which Rs. 0.10 crores (Previous Year Rs. 0.24 crores) is in respect of rent for certain assets given on operating lease and also includes sub- lease payments received Rs. 0.31 crores (Previous Year Rs. 0.07 crores) in respect of a property acquired under operating lease as per Note 28.1.

15.1 In accordance with the Accounting Standard on ''Leases'' (AS 19), notified by the Companies (Accounting Standards) Rules, 2006, the following disclosures in respect of Operating Leases are made :

16.1 Other Charges includes Exchange loss of Rs. 0.10 crore (Previous Year net of Exchange gain of Rs. 0.97 crore).

16.2 A net gain of Rs. 53.23 crores (Previous Year Rs. 25.36 crores) has been recognised in the Statement of Profit and Loss being net gain on translation of foreign currency monetary assets and liabilities as shown below:

17.1 Salaries and Bonus include Rs. 12.03 crores (Previous Year Rs. 8.77 crores) towards provision made in respect of accumulated leave salary and leave travel assistance which is in the nature of Long Term Employee Benefits and has been actuarially determined as per the AS 15 (Revised).

17.2 Expenditure shown in Note 27 is net of recovery from subsidiary companies in respect of Salaries Rs. 3.00 crores (Previous Year Rs. 1.82 crores).

17.3 EMPLOYEE BENEFITS

In accordance with the Accounting Standard on Employee Benefits (AS 15) (Revised 2005) notified by the Companies (Accounting Standards) Rules, 2006, the following disclosures have been made:

18.1 In accordance with the Accounting Standard on ''Leases'' (AS 19), notified by the Companies (Accounting Standards) Rules, 2006, the following disclosures in respect of Operating Leases are made :

The Corporation has acquired properties under non-cancellable operating leases for periods ranging from 12 months to 36 months. The total minimum lease payments for the current year, in respect thereof, included under Rent, amounts to Rs. 26.79 crores (Previous Year Rs. 2.65 crores). Out of the above, the Corporation has sub-leased a property, the total sub-lease payments received in respect thereof included under Other Income amount to Rs. 0.31 crores (Previous Year Rs. 0.07 crores). The future minimum lease payments in respect of the properties acquired under non-cancellable operating leases are as follows:

19.1 Miscellaneous Expenses exclude Rs. 9.13 crores (Previous Year Rs. 6.89 crores) in respect of amounts utilised out of Shelter Assistance Reserve during the year.

19.2 Miscellaneous Expenses include Provision for Wealth Tax amounting to Rs. 0.60 crores (Previous Year Rs. 0.65 crores) and Securities Transaction Tax amounting to Rs. 0.45 crores (Previous Year Rs. 0.23 crores).

19.3 Expenditure shown in Note 29 is net of recovery from a subsidiary company in respect of Miscellaneous expenses Rs. Nil (Previous Year Rs. 0.89 crores).

20. PROVISION FOR NON PERFORMING LOANS

20.1 As per the Housing Finance Companies (NHB) Directions, 2010, non-performing assets are recognised on the basis of ninety days overdue. The total provision carried by the Corporation in terms of paragraph 29 (2) of the Housing Finance Companies (NHB) Directions, 2010 and NHB circular NHB.HFC. DIR-3/CMD/2011 dated August 5, 2011 in respect of Housing and Non-Housing Loans is as follows [Refer Note 15]:

20.2 Provision for Contingencies debited to the Statement of Profit and Loss includes Provision for Diminution in the Value of Investments amounting to Rs. 7.09 crores (Previous Year Rs. 25.21 crores). The balance of the Provision represents provision made against non-performing assets and other contingencies [Refer Note 6.2].

21. In accordance with the Accounting Standard on ''Earnings Per Share'' (AS 20), notified by the Companies (Accounting Standards) Rules, 2006 :

(i) In calculating the Basic Earnings Per Share, the Profit After Tax of Rs. 4,848.34 crores (Previous Year Rs. 4,122.62 crores) has been adjusted for amounts utilised out of Shelter Assistance Reserve of Rs. 9.13 crores (Previous Year Rs. 6.89 crores).

Accordingly the Basic Earnings Per Share has been calculated based on the adjusted Profit After Tax of Rs. 4,839.21 crores (Previous Year Rs. 4,115.73 crores) and the weighted average number of shares during the year of 151.97 crores (Previous Year 147.17 crores).

22. DIVIDEND PAYABLE TO NON-RESIDENT SHAREHOLDERS

The Corporation has not remitted any amount in foreign currencies on account of dividends during the year and does not have information as to the extent to which remittances, if any, in foreign currencies on account of dividends have been made by/on behalf of non-resident shareholders. The particulars of dividends payable to non-resident shareholders (including Foreign Institutional Investors) are as under:

23. RELATED PARTY TRANSACTIONS

As per the Accounting Standard on ''Related Party Disclosures'' (AS 18), notified by the Companies (Accounting Standards) Rules, 2006, the related parties ofthe Corporation are as follows:

A) Subsidiary Companies

HDFC Developers Ltd. HDFC Investments Ltd.

HDFC Holdings Ltd. HDFC Asset Management Company Ltd.

HDFC Trustee Company Ltd. HDFC Realty Ltd.

HDFC Standard Life Insurance Company Ltd. HDFC ERGO General Insurance Company Ltd.

HDFC Venture Capital Ltd. HDFC Sales Pvt. Ltd.

HDFC Ventures Trustee Company Ltd. HDFC Property Ventures Ltd.

GRUH Finance Ltd. Credila Financial Services Pvt. Ltd

Griha Investments (Subsidiary of HDFC Holdings Ltd.) Griha Pte. Ltd. (Subsidiary of HDFC Investments Ltd.)

HDFC Education and Development Services Pvt. Ltd. (w.e.f. 28th December 2012)

HDFC Asset Management Company (Singapore) Pte. Ltd. HDFC Life Pension Fund Management Company Ltd.

(Subsidiary of HDFC Asset Management Company Ltd.) (Subsidiary of HDFC Standard Life Insurance Company Ltd.)

H. T. Parekh Foundation (w.e.f. 19th October, 2012)

B) Associate Companies

HDFC Bank Ltd.

India Value Fund Advisors Pvt. Ltd. RuralShores Business Services Pvt. Ltd. IPF Online Ltd.

Indian Association for Savings and Credit (Up to 26th September, 2012)

C) Entities over which control is exercised

HDFC Property Fund - Scheme - HDFC IT Corridor Fund HDFC Investment Trust

D) Key Management Personnel

Mr Keki M. Mistry Ms Renu Sud Karnad Mr V. Srinivasa Rangan

E) Relatives of Key Management Personnel

(where there are transactions)

Ms Arnaaz K. Mistry Mr Rishi R. Sud

Mr Ashok Sud Ms Riti Karnad

Mr Ketan Karnad Ms Swam Sud

Ms Abhinaya S. Rangan

24. SEGMENT REPORTING

The Corporation''s main business is financing by way of loans for the purchase or construction of residential houses, commercial real estate and certain other purposes in India. All other activities of the Corporation revolve around the main business. As such, there are no separate reportable segments, as per the Accounting Standard on ''Segment Reporting'' (AS 17), notified by the Companies (Accounting Standards) Rules, 2006.

25. INTEREST IN JOINT VENTURES

In compliance with the Accounting Standard relating to ''Financial Reporting of Interests in Joint Ventures'' (AS 27), notified by the Companies (Accounting Standards) Rules, 2006, the Corporation has interests in the following jointly controlled entities, which are incorporated in India.

26. Previous year''s figures have been regrouped/reclassified wherever necessary to correspond with the current year''s classification/disclosure.


Mar 31, 2012

1.1 11,71,16,560 shares of Rs 2 each (Previous Year 9,78,62,150 shares of Rs2 each) were reserved for issuance as follows:

a) 6,24,07,930 shares of Rs 2 each (Previous Year 4,30,93,620 shares of Rs 2 each) towards Employees Stock Options granted/available for grant including lapsed options [Refer Note 2.4]

b) 5,47,08,630 shares of Rs 2 each (Previous Year 5,47,68,530 shares of Rs 2 each) towards outstanding Share Warrants [Refer Note 3.8].

The Corporation has only one class of shares referred to as equity shares having face value of Rs 2 each. Each holder of equity share is entitled to one vote per share. The holders of equity shares are entitled to dividends, if any, proposed by the Board of Directors and approved by Shareholders at the Annual General Meeting.

1.2 The Shareholders of the Corporation at the Annual General Meeting held on July 8, 2011, have approved the issue of 58,67,546 new options, representing 2,93,37,730 equity shares of Rs 2 each to the employees and Directors of the Corporation, under Employees Stock Option Scheme - 2011 (ESOS - 11), along with such number of options that the Nomination and Compensation Committee of Directors (NCCD) may decide to grant under ESOS-11 out of the lapsed options under the previous schemes. Till date no options have been granted under ESOS-11. In terms of the Shareholders' resolution, options could be granted at the latest available closing price of the equity shares of the Corporation on the stock exchange on which the shares are listed, prior to the date of the meeting of the NCCD at which the options are granted.

Under Employees Stock Option Scheme - 2008 (ESOS - 08), the Corporation had on November 25, 2008, granted 57,90,000 stock options at an exercise price of Rs 1,350.60 per option representing 57,90,000 equity shares of Rs 10 each to the employees and directors of the Corporation. The said price was determined in accordance with the pricing formula approved by the shareholders i.e. at the latest available closing price on the stock exchange having higher trading volume, prior to grant of options.

In terms of ESOS - 08, the options would vest over a period of 1-3 years from the date of grant, but not later than November 24, 2011, depending upon option grantee completing continuous service of three years with the Corporation. Accordingly, during the year 64,042 options (Previous Year 1,09,685 options) were vested and 581 options (Previous Year 1,545 options) were lapsed after vesting. The options can be exercised over a period of five years from the date of respective vesting.

Under Employees Stock Option Scheme - 2007 (ESOS - 07), the Corporation had on September 12, 2007, granted 54,56,835 stock options at an exercise price of Rs 2,149 per option representing 54,56,835 equity shares of Rs 10 each to the employees and directors of the Corporation. The said price was determined in accordance with the pricing formula approved by the shareholders i.e. at the latest available closing price on the stock exchange having higher trading volume, prior to grant of options.

In terms of ESOS - 07, the options would vest over a period of 1-3 years from the date of grant, but not later than September 11, 2010, depending upon option grantee completing continuous service of three years with the Corporation. Accordingly, during the year NIL options (Previous Year 44,983 options) were vested and 1,630 options (Previous Year 3,573 options) were lapsed after vesting. The options can be exercised over a period of five years from the date of respective vesting.

Under Employees Stock Option Scheme - 2005 (ESOS - 05), the Corporation had on October 25, 2005, granted 74,73,621 stock options at an exercise price of Rs 912.90 per option representing 74,73,621 equity shares of Rs 10 each to the employees and directors of the Corporation. The said price was determined in accordance with the pricing formula approved by the shareholders i.e. at the latest available closing price on the stock exchange having higher trading volume, prior to grant of options.

In terms of the ESOS-05, the options would vest over a period of 2-3 years from the date of grant, but not later than October 24, 2008, depending upon option grantee completing continuous service of three years with the Corporation. All the options have been vested in the earlier years. In the current year 524 options (Previous Year NIL options) were lapsed after vesting. The options can be exercised over a period of five years from the date of respective vesting.

Method used for accounting for share based payment plan:

The Corporation has used intrinsic value method to account for the compensation cost of stock options to employees of the Corporation. Intrinsic value is the amount by which the quoted market price of the underlying share exceeds the exercise price of the option. Since the options under ESOS-08, ESOS-07 and ESOS-05 were granted at the market price, the intrinsic value of the option is Nil. Consequently the accounting value of the option (compensation cost) is also Nil.

With effect from August 21, 2010, the nominal face value of equity shares of the Corporation was sub- divided from Rs 10 per share to Rs 2 per share. Accordingly, each options exercised after August 21, 2010 is entitled to 5 equity shares of Rs 2 each.

Fair Value Methodology:

The fair value of options have been estimated on the date of grant using Black-Scholes model as under:

The key assumptions used in Black-Scholes model for calculating fair value under ESOS -2008, ES0S-2007 and ES0S-2005 as on the date of grant viz. November 25, 2008, September 12, 2007 and October 25, 2005, are as follows :

Since all the stock options granted under ESOS -2008, ES0S-2007 and ES0S-2005 have been vested, the stock based compensation expenses determined under fair value based method is Rs Nil (Previous Year Rs Nil). Accordingly there is no change in the reported and proforma net profit and Basic and Diluted EPS.

2.1 Miscellaneous Expenses under Note 29 exclude Rs 6.89 crores (Previous Year Rs 11.48 crores) in respect of amounts utilised out of Shelter Assistance Reserve during the year.

2.2 During the year, in addition to the charge of Rs 80 crores (Previous Year Rs 70 crores) to the Statement of Profit and Loss, an amount of Rs 349.93 crores (net of Deferred Tax of Rs 168.07 crores) [(Previous Year Rs 298.60 crores)(net of deferred tax of Rs 143.40 crores)], being one time charge on account of changes in the provisioning requirements by the National Housing Bank vide Circulars no. NHB.HFC.DIR.3/CMD/2011 dated August 5, 2011 and NHB.HFC.DIR.4/CMD/2012 dated January 19, 2012 has been transferred from Additional Reserve created as per Section 29C of the National Housing Bank Act, 1987 pursuant to circular NHB(ND)/DRS/Pol-No.03/2004-05 dated August 26, 2004 as under:

2.3 Special Reserve has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961 out of the distributable profits of the Corporation. Special Reserve No. I relates to the amounts transferred upto Financial Year 1996-97, whereas Special Reserve No. II relates to the amounts transferred thereafter.

2.4 As per Section 29C of the National Housing Bank Act, 1987, the Corporation is required to transfer at least 20% of its net profits every year to a reserve before any dividend is declared. For this purpose any Special Reserve created by the Corporation under Section 36(1)(viii) of the Income- tax Act, 1961 is considered to be an eligible transfer. The Corporation has transferred an amount of Rs 730 crores (Previous Year Rs 625 crores) to Special Reserve II in terms of Section 36(1)(viii) of the Income-tax Act, 1961 and an amount of Rs 620 crores (Previous Year Rs 530 crores) to "Additional Reserve (u/s 29C of the NHB Act)".

2.5 During the year, Corporation utilised Rs 485.07 crores (net of tax effect of Rs 223.25 crores) [(Previous Year Rs 532.09 crores) (net of tax effect of Rs Nil)] in accordance with Section 78 of the Companies Act, 1956, towards the proportionate premium payable on redemption of Zero Coupon Secured Redeemable Non Convertible Debentures (ZCD). The Corporation has written back Rs Nil (Previous Year Rs 93.76 crores) on conversion of FCCBs to the Securities Premium Account.

2.6 Additional Tax on dividend 2010-11, credit taken Rs 4.66 crores, pertains to the dividend tax paid by the subsidiary companies of the Corporation on the dividend paid to the Corporation as per Section 115(0)(1A) of the Income Tax Act, 1961. [ Previous Year Additional Tax on Dividend 2009-10, Rs 1.07 crores, pertains to the short-fall of the dividend tax of the subsidiary companies of the Corporation on dividend paid to the Corporation as per Section 115(0)(1A) of the Income Tax Act, 1961].

2.7 In respect of equity shares issued pursuant to Employee Stock 0ption Schemes and conversion of FCCBs, the Corporation paid dividend of Rs 2.74 crores for the year 2010-11 (Rs 13.83 crores for the year 2009-10) and tax on dividend of Rs 0.44 crore (Previous Year Rs 2.29 crores ) as approved by the shareholders at the Annual General Meeting held on July 8, 2011.

2.8 During the year 2009-10, the Corporation had made a simultaneous issue of Zero Coupon Secured Redeemable Non-Convertible Debentures (ZCD) aggregating to Rs 4,000 crores and 1,09,53,706 warrants at a warrant issue price of Rs 275 per warrant aggregating to Rs 301.23 crores. Each of the warrants entitles the holder to acquire one equity share of the Corporation at an exercise price of Rs 3,000 per share of face value of Rs 10 each (now exercise price of Rs 600 per share of face value of Rs 2 each) on or before August 23, 2012. The said issue of ZCD and Warrants was made under Chapter XIII-A of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000. The Subscription amount received on Issue of warrants has been credited to Capital Reserve as the same is not refundable / adjustable in future.

3.1 All Secured Long Term Borrowing are secured by negative lien on the assets of the Corporation and mortgage of property.

3.2 Non-Convertible Debentures includes Rs 580 crores (Previous Year Rs 165 crores) and Deposits includes Rs 1.34 crores (Previous Year Rs 1.71 crores) due from related parties [Refer Note 34].

3.3 The Corporation has availed a loan of USD 100 million from the Asian Development Bank (Loan II). In respect of tranches 1 and 2 aggregating to USD 60 million, as per the agreements with a scheduled bank, the Corporation has handed over the dollar funds to the bank overseas and has obtained rupee funds in India amounting to Rs 200 crores by way of a term loan and Rs 100 crores through the issue of bonds which have been subscribed by the bank.

In respect of tranche 3 of USD 40 million, as per the agreement with a financial institution, the Corporation has handed over the dollars to a financial institution overseas and under a back-to-back arrangement obtained rupee funds in India. All payments in foreign currency are the responsibility of the financial institution. In terms of the agreements, the Corporation's foreign exchange liability is protected.

3.4 The Corporation has availed USD 175 million under the Foreign Currency Borrowing scheme of the Reserve Bank of India (RBI) under the "approval route" in terms of the RBI Press Release No. 2008-2009/700 dated November 17, 2008, with a maturity of three years. In terms of the RBI guidelines, these borrowings have been swapped into rupees for the entire maturity by way of principal only swaps.

3.5 As on March 31, 2012, the Corporation has foreign currency borrowings(excluding FCCBs) of USD 875.78 million equivalent (Previous Year USD 1,103.90 million). The Corporation has undertaken currency swaps, principal only swaps, currency options and forward contracts on a notional amount of USD 406.76 million equivalent (Previous Year USD 963.30 million) to hedge the foreign currency risk. Further, interest rate swaps on a notional amount of USD 123 million equivalent (Previous Year USD 15 million) are outstanding, which have been undertaken to hedge the interest rate risk on the foreign currency borrowings. As on March 31, 2012, the Corporation's net foreign currency exposure on borrowings net of risk management arrangements is USD Nil (Previous Year USD Nil).

As a part of asset liability management on account of the Corporation's Adjustable Rate Home Loan product as well as to reduce the overall cost of borrowings, the Corporation has entered into interest rate swaps wherein it has converted its fixed rate rupee liabilities of a notional amount of Rs 25,210 crores (Previous Year Rs 23,255 crores) as on March 31, 2012 for varying maturities into floating rate liabilities linked to various benchmarks. In addition, the Corporation has entered into cross currency swaps of a notional amount of USD 588.07 million equivalent (Previous Year USD 697.50 million) wherein it has converted its rupee liabilities into foreign currency liabilities and the interest rate is linked to the benchmarks of respective currencies.

3.6 Monetary assets and liabilities denominated in foreign currencies net of risk management arrangement are revalued at the rate of exchange prevailing at the year end. The Corporation has changed its Accounting Policy for Cross Currency Interest Rate Swaps. Such swaps which were hitherto recorded at fair value have now been recorded at a higher liability by marking only the foreign currency component to spot rates and excluding the benefit of interest rate differentials. As a result of this change, the liability on account of such swaps is higher by Rs 24.53 crores as compared to the liability, had the basis of the previous year being followed.

Forward Contracts or instruments that are in substance, Forward Exchange Contracts, the premiums on such contracts are being amortised over the life of the contracts.

The amount of exchange difference in respect of such contracts to be recognised as expense in the Statement of Profit and Loss over subsequent accounting periods is Rs Nil (Previous Year Rs 0.50 crore).

3.7 Public deposits as defined in Paragraph 2(1)(y) of the Housing Finance Companies (NHB) Directions, 2010, are secured by floating charge on the Statutory Liquid Assets maintained in terms of sub-sections (1) & (2) of Section 29B of the National Housing Bank Act, 1987.

3.8 Pursuant to the notification dated December 29, 2011 issued by the Ministry of Corporate Affairs amending the Accounting Standard 11, the Corporation has exercised the option as per para 46 A inserted in the Standard for all long term monetary assets and liabilities. Consequently an amount of Rs 206.24 crores (without considering the future tax benefits of Rs 66.91crores) representing translation difference is carried forward in the foreign exchange monetary items translation difference account as on March 31, 2012. This amount is to be amortised over the period of the monetary assets/liabilities.

3.9 During the year, the Corporation raised Rs 1,000 Crores (Previous Year Rs 1,000 crores) through issue of Long Term Unsecured Redeemable Non Convertible Debentures ( Subordinated Debt). As at March 31, 2012 the Corporation's outstanding subordinated debt is Rs 3,475 crores (Previous Year Rs 2,875 crores). These debentures are subordinated to present and future senior indebtedness of the Corporation and qualifies as Tier II Capital under National Housing Bank (NHB) guidelines for assessing capital adequacy. Based on the balance term to maturity as at March 31, 2012, 91.51% (Previous Year 82.61%) of the book value of the subordinated debt is considered as Tier II Capital for the purpose of the Capital Adequacy computation.

3.10 Refer Note 38 for terms of redemption of bonds and debentures and repayment terms of term loans.

4.1 Provision for Contingencies includes provision for standard assets and other contingencies. As per National Housing Bank Circular No. NHB/HFC/DIR.3/CMD/2011 dated August 5, 2011 and NHB/HFC/DIR.4/CMD/ 2012 dated January 19, 2012, in addition to provision for non performing assets, all housing finance companies are required to carry a general provision. (i) at the rate of 2% on housing loans disbursed at comparatively lower rate of interest in the initial few years, after which rates are reset at higher rates; (ii) at the rate of 1% of Standard Assets in respect of Commercial Real Estates and (iii) at the rate of 0.40% of the total outstanding amount of loans which are Standard Assets other than (i) & (ii) above.

Accordingly, the Corporation is required to carry a minimum provision of Rs 1,075.82 crores (Previous Year Rs 621.65 crores) towards standard assets which is included in Provisions for Contingencies.

5.1 Secured short term borrowing are secured by negative lien on the assets of the Corporation.

5.2 Deposits includes Rs 249.17 crores (Previous Year Rs 172.10 crores) due from related parties [Refer Note 34].

6.1 Trade Payables include Rs Nil (Previous Year Rs Nil) payable to "Suppliers" registered under the Micro, Small and Medium Enterprises Development Act, 2006. No interest has been paid / payable by the Corporation during the year to the "Suppliers" covered under the Micro, Small and Medium Enterprises Development Act, 2006. The above information takes into account only those suppliers who have responded to inquiries made by the Corporation for this purpose.

6.2 Trade Payable include Rs 0.09 crore (Previous Year Rs 0.43 crore) being amount payable to HDFC Provident Fund Trust towards deficiency in the fund account.

6.3 As required under Section 205C of the Companies Act, 1956, the Corporation has transferred Rs 0.79 crore (Previous Year Rs 0.66 crore) to Investor Education and Protection Fund (IEPF) during the year as of March 31, 2012, no amount was due for transfer to IEPF.

7.1 Current maturities of long term borrowings are secured by negative lien on all assets of the Corporation and mortgage of property.

7.2 Current maturities of Non-Convertible Debentures includes Rs 25.00 crores (Previous Year Rs 305.00 crores) and Deposits includes Rs 2.98 crores (Previous Year Rs 2.86 crores) due from related parties [Refer Note 34].

Notes :

1) Buildings include Rs 0.01 crore (Previous Year Rs 0.01 crore) being the cost of shares in Co-operative Housing Societies and Limited Companies.

2) Depreciation charge for the financial year, excludes Rs 2.42 crores (Previous Year Rs 2.44 crores) being depreciation charge on investment in Properties.

3) Freehold land includes Properties amounting to Rs 0.77 crore (Previous Year Rs 0.77 crore) acquired in satisfaction of debts.

Notes:

1) Unquoted investments include Rs 22.20 crores (Previous Year Rs 10.95 crores) in respect of equity shares, which are subject to a lock-in period and include Rs 20.95 crores (Previous Year Nil) in respect of equity shares, which are subject to restrictive covenant. Quoted investments include Rs 4,013.97 crores (Previous YearRs 4,016.43 crores) in respect of equity shares which are subject to a lock-in period and include Rs 60.74 crores (Previous Year Rs 60.74 crores) in respect of equity shares, which are subject to restrictive covenant.

2) Market value of Investments in Unquoted Mutual Funds represents the repurchase price of the units issued by the Mutual Funds.

3) NHB Sumeru Zero Coupon Bonds are held as Capital Assets under Section 2(48) of the Income Tax Act, 1961.

8 DEFERRED TAX ASSETS

In compliance with the Accounting Standard relating to 'Accounting for Taxes on Income' (AS 22), notified by the Companies (Accounting Standards) Rules, 2006, the Corporation has taken credit of Rs 12 crores (Previous Year Rs 19 crores) in the Statement of Profit and Loss for the year ended March 31, 2012 towards deferred tax asset (net) for the year, arising on account of timing differences and Rs 168.07 crores (Previous Year Rs 143.40 crores) has been adjusted against the utilisation from Additional Reserve u/s 29C as per Note no. 3.2.

9.1 Loans includes amount due from the directors Rs 0.19 crore (Previous Year Rs 0.21 crore) [Refer Note 34].

9.2 Investments in Debentures, Pass Through Certificates, Security Receipts and Corporate Deposits amounting to Rs 865.05 crores (Previous Year Rs 955.30 crores) are towards financing Real Estate Projects. The Debentures, Pass Through Certificates and Security Receipts are reflected in Note No. 13 and the Corporate Deposits are shown under Long Term Loans and Advances in Note No. 15 and Short Term Loans and Advances in Note No. 20.

9.3 Loans granted by the Corporation aggregating loans Rs 1,24,368.87 crores (Previous Year Rs 1,00,237.91 crores) are secured or partly secured by :

(a) Equitable mortgage of property and / or

(b) Pledge of shares, units, other securities, assignment of life insurance policies and / or

(c) Hypothecation of assets and / or

(d) Bank guarantees, company guarantees or personal guarantees and / or

(e) Negative lien and / or

(f) Assignment of hire purchase receivables and / or

(g) Undertaking to create a security.

9.4 Loans include Rs 34.78 crores (Previous Year Rs 36.61 crores) in respect of properties held for disposal under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

9.5 Long Term Loans and Advances include non-performing loans of Rs 1,069.13 crores (Previous Year Rs 900.76 crores).

9.6 Out of Corporate deposits, amounts aggregating to Rs 645 crores (Previous Year Rs Nil) are secured.

10.1 Bank deposits with maturities beyond twelve months include earmarked balances Rs 63.50 crores (Previous Year Rs 60.12 crores) against foreign currency loans.

11.1 Out of current maturities of Long term loans and advances, amounts aggregating to Rs 13,480.91 crores (Previous Year Rs 13,006.16 crores) are secured. [Refer Note 15.3]

11.2 Out of Corporate deposits, amounts aggregating to Rs 2,101.44 crores (Previous Year Rs 527.00 crores) are secured.

11.3 Corporate deposits includes amounts due from the related parties Rs 29.10 crores (Previous Year Rs 23.45 crores) [Refer Note 34].

11.4 Other Advances includes amounts due from the related parties Rs 8.86 crores (Previous Year Rs 8.96 crores) [Refer Note 34].

11.5 Corporate Deposits amounting to Rs 2,108.44 crores (Previous Year Rs 25.00 crores) are towards financing Real Estate Projects.

12 CONTINGENT LIABILITIES AND COMMITMENTS

12.1 Contingent Liability in respect of guarantees provided by the Corporation aggregated to Rs 783.95 crores (Previous Year Rs 2.45 crores).

12.2 Contingent liability in respect of income-tax demands, net of amounts provided for and disputed by the Corporation, amounts to Rs 606.17 crores (Previous Year Rs 483.04 crores). The matters in dispute are under appeal. The said amount has been paid/adjusted and will be received as refund if the matters are decided in favour of the Corporation.

12.3 Contingent Liability in respect of corporate undertakings provided by the Corporation for securitisation of receivables aggregated to Rs 1,940.13 crores (Previous Year Rs 1,539.27 crores). The outflows would arise in the event of a shortfall, if any, in the cash flows of the pool of the securitised receivables.

12.4 Contingent Liability in respect of disputed dues towards sales tax, wealth tax, interest on lease tax, and payment towards employers' contribution to ESIC not provided for by the Corporation amounts to Rs 0.15 crore (Previous Year Rs 0.19 crore).

12.5 Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs 206.70 crores (Previous Year Rs 269.95 crores).

13.1 0ther Interest includes Interest on Investments amounting to Rs 203.22 crores (Previous Year Rs 198.20 crores), including Rs 15.29 crores (Previous Year Rs 33.49 crores) in respect of current investments.

13.2 Dividend income includes Rs 148.21 crores (Previous Year Rs 83.73 crores) received from subsidiary companies and Rs 2.40 crores (Previous Year Rs 10.68 crores) in respect of current investments.

13.3 Surplus from deployment in Cash Management Schemes of Mutual Funds amounting to Rs 319.78 crores (Previous Year Rs 217.53 crores) is in respect of investments held as current investments.

13.4 Fees and 0ther Charges is net of the amounts paid to Direct Selling Agents Rs 248.54 crores (Previous Year Rs 199.45 crores).

14 Profit on sale of investments includes profit of Rs Nil (Previous year Rs 0.08 crore) in respect of investments held as current investments and Rs 0.12 crore (Previous Year Rs 0.12 crore) on account of shares bought back by India Value Fund Advisors Pvt. Ltd. (Associate Company).

15 0ther Income includes rent of Rs 10 crores (Previous Year Rs 9.97 crores), of which Rs 0.24 crore (Previous Year Rs 0.24 crore) is in respect of rent for certain assets given on operating lease and also includes sub-lease payments received Rs 0.07 crore (Previous Year Rs 0.07 crore) in respect of a property acquired under operating lease as per Note 28.1.

15.1 In accordance with the Accounting Standard on Leases (AS 19) (Revised 2005) notified by the Companies (Accounting Standards) Rules, 2006, the following disclosures in respect of Operating Leases are made:

16.1 Other Charges is net of Exchange Difference Rs 0.97 crore (Previous Year Rs 0.39 crore).

16.2 Interest on Deposits include Rs 0.19 crore (Previous Year Rs 0.26 crore) payable to the Chief Executive Officer of the Corporation.

16.3 A net gain of Rs 25.36 crores (Previous Year Net Loss of Rs 27.58 crores) has been recognised in the Statement of Profit and Loss being net gain on year end translation of foreign currency monetary assets and liabilities as shown below.

17.1 Salaries and Bonus include Rs 8.77 crores (Previous Year Rs 7.03 crores) towards provision made in respect of accumulated leave salary and leave travel assistance which is in the nature of Long Term Employee Benefits and has been actuarially determined as per the AS 15 (Revised) - [Refer Note 37].

17.2 Expenditure shown in Note 27 is net of recovery from a subsidiary company in respect of Salaries Rs 1.82 crores (Previous Year Rs 1.56 crores).

18.1 In accordance with the Accounting Standard on 'Leases' (AS 19), notified by the Companies (Accounting Standards) Rules, 2006, the following disclosures in respect of Operating Leases are made :

The Corporation has acquired properties under non-cancellable operating leases for periods ranging from 12 months to 36 months. The total minimum lease payments for the current year, in respect thereof, included under Rent, amounts to Rs 2.65 crores (Previous Year Rs 2.55 crores). Out of the above, the Corporation has sub-leased a property, the total sub-lease payments received in respect thereof included under Other Income amount to Rs 0.07 crore (Previous Year Rs 0.07 crore). The future minimum lease payments in respect of the properties acquired under non-cancellable operating leases are as follows:

19.1 Miscellaneous Expenses exclude Rs 6.89 crores (Previous Year Rs 11.48 crores) in respect of amounts utilised out of Shelter Assistance Reserve during the year.

19.2 Miscellaneous Expenses include Provision for Wealth Tax amounting to Rs 0.65 crore (Previous Year Rs 0.65 crore) and Securities Transaction Tax amounting to Rs 0.23 crore (Previous Year Rs 0.29 crore).

19.3 Expenditure shown in note 29 is net of recovery from subsidiary company in respect of Miscellaneous Expenses Rs 0.89 crore (Previous Year Rs Nil).

20 PROVISION FOR NON PERFORMING LOANS

20.1 As per the Housing Finance Companies (NHB) Directions, 2010, non-performing assets are recognised on the basis of ninety days overdue. The total provision carried by the Corporation in terms of paragraph 29 (2) of the Housing Finance Companies (NHB) Directions, 2010 and NHB circular NHB. HFC. DIR-3 / CMD /2011 dated August 5, 2011 in respect of Housing and Non-Housing Loans is as follows: [Refer Note 15]

20.2 Provision for Contingencies debited to the Statement of Profit and Loss includes Provision for Diminution in the Value of Investments amounting to Rs 25.21 crores (Previous Year Rs 22.58 crores). The balance of the Provision represents provision made against non-performing Loans and other contingencies. [Refer Note 6.2].

21 In accordance with the Accounting Standard on 'Earnings Per Share' (AS 20), notified by the Companies (Accounting Standards) Rules, 2006:

(i) In calculating the Basic Earnings Per Share the Profit After Tax of Rs 4,122.62 crores (Previous Year Rs 3,534.96 crores) has been adjusted for amounts utilised out of Shelter Assistance Reserve of Rs 6.89 crores (Previous Year Rs 11.48 crores).

Accordingly the Basic Earnings Per Share has been calculated based on the adjusted Profit After Tax of Rs 4,115.73 crores (Previous Year Rs 3,523.48 crores) and the weighted average number of shares during the year of 147.17 crores (Previous Year 145.72 crores).

(iii) The Basic Earnings Per Share has been computed by dividing the adjusted Profit After Tax by the weighted average number of equity shares for the respective periods; whereas the Diluted Earnings Per Share has been computed by dividing the adjusted Profit After Tax by the weighted average number of equity shares, after giving dilutive effect of the outstanding Stock Options and Warrants for the respective periods. The relevant details as described above are as follows :

(c) Asset Liability Management

Maturity pattern of certain items of assets and liabilities as on March 31, 2012:

Assets and Liabilities are classified in the maturity buckets as per the guidelines issued by the National Housing Bank

22 DIVIDEND PAYABLE TO NON-RESIDENT SHAREHOLDERS

The Corporation has not remitted any amount in foreign currencies on account of dividends during the year and does not have information as to the extent to which remittances, if any, in foreign currencies on account of dividends have been made by/on behalf of non-resident shareholders. The particulars of dividends payable to non-resident shareholders (including Foreign Institutional Investors) are as under:

23 SEGMENT REPORTING

The Corporation's main business is financing by way of loans. All other activities of the Corporation revolve around the main business. As such, there are no separate reportable segments, for the Corporation, as per the Accounting Standard on 'Segment Reporting' (AS 17), notified by the Companies (Accounting Standards) Rules, 2006.

24 EMPLOYEE BENEFITS

In accordance with the Accounting Standard on Employee Benefits (AS 15) (Revised 2005) notified by the Companies (Accounting Standards) Rules, 2006, the following disclosures have been made :

The Rules of the Corporation's Provident Fund administered by a Trust require that if the Board of Trustees are unable to pay interest at the rate declared for Employees' Provident Fund by the Government under para 60 of the Employees' Provident Fund Scheme, 1952 for the reason that the return on investment is less or for any other reason, then the deficiency shall be made good by the Corporation. The deficiency of Rs 0.15 crore (Previous Year Rs 0.87 crore) included in Staff Training and Welfare Expenses, was made good by the Corporation.

25 The Revised Schedule VI has become effective from April 1, 2011 for the preparation of Financial Statements. This has significantly impacted the disclosure and presentation made in the Financial Statements. Previous Year's figures have been regrouped/ reclassified wherever necessary to correspond with Current Year's classification / disclosure.


Mar 31, 2011

1 The Corporation has availed a loan of USD 100 million from the Asian Development Bank (Loan II). In respect of tranches 1 and 2 aggregating to USD 60 million, as per the agreements with a scheduled bank, the Corporation has handed over the dollar funds to the bank overseas and has obtained rupee funds in India amounting to Rs. 200 crores by way of a term loan and Rs. 100 crores through the issue of bonds which have been subscribed by the bank.

In respect of tranche 3 of USD 40 million, as per the agreement with a financial institution, the corporation has handed over the dollars to a financial institution overseas and under a back-to-back arrangement obtained rupee funds in India. All payments in foreign currency are the responsibility of the financial institution. In terms of the agreements, the Corporations foreign exchange liability is protected.

2 (i) The Corporation had raised USD 500 million through the issue of zero coupon Foreign Currency Convertible Bonds (FCCBs). The bonds were convertible at any time into equity shares of the Corporation of the face value of Rs. 10 each from August 24, 2006 upto July 29, 2010, at the option of the holders, at Rs. 1399.148 per equity share representing a conversion premium of 50% over the initial reference share price. The bonds were redeemable on September 27, 2010 with an yield to maturity of 4.62% per annum. During the year ended March 31, 2011, the entire amount outstanding of USD 90.60 million was converted into equity shares of the Corporation. As such, the entire FCCB amounting to USD 500 million (Previous Year USD 409.40 million) representing 1,56,23,732 (Previous Year 1,27,92,711) Equity shares, have been converted pursuant to the exercise of options by the bondholders of the Corporation. The Corporation had undertaken currency options and forward contracts amounting to USD Nil (Previous Year USD 75 million) to cover the net foreign currency exposure in the outstanding FCCBs.

(ii) The Corporation has availed USD 175 million under the Short Term Foreign Currency Borrowing scheme of the Reserve Bank of India (RBI) under the "approval route" in terms of the RBI Press Release No. 2008-2009/700 dated November 17, 2008, with a maturity of three years. In term of the RBI guidelines, these borrowings have been swapped into rupees for the entire maturity by way of principal only swaps.

(iii) As on March 31, 2011, the Corporation has foreign currency borrowings (excluding FCCBs) of USD 1,103.90 million equivalent (Previous Year USD 945.43 million). The Corporation has undertaken principal only swaps, currency options and forward contracts on a notional amount of USD 963.30 million equivalent (Previous Year USD 787.99 million) to hedge the foreign currency risk. Further, interest rate swaps on a notional amount of USD 15 million equivalent (Previous Year USD 90 million) are outstanding, which have been undertaken to hedge the interest rate risk on the foreign currency borrowings. As on March 31, 2011, the Corporations net foreign currency exposure on borrowings net of risk management arrangements is USD Nil (Previous Year USD Nil).

As a part of asset liability management on account of the Corporations Adjustable Rate Home Loan product as well as to reduce the overall cost of borrowings, the Corporation has entered into interest rate swaps wherein it has converted its fixed rate rupee liabilities of a notional amount of Rs. 23,255 crores (Previous Year Rs. 16,065 crores) as on March 31, 2011 for varying maturities into floating rate liabilities linked to various benchmarks. In addition, the Corporation has entered into cross currency swaps of a notional amount of USD 697.50 million equivalent (Previous Year USD 694 million) wherein it has converted its rupee liabilities into foreign currency liabilities and the interest rate is linked to the benchmarks of respective currencies.

(iv) Monetary assets and liabilities denominated in foreign currencies net of risk management arrangement are revalued at the rate of exchange prevailing at the year end. Cross currency Swaps are fair valued at the year end and loss is recognised in the Profit and Loss Account while the gains are not recognised keeping in view the principles of prudence as enumerated in Accounting Standard (AS 1) notified by the Companies (Accounting Standard) Rules, 2006. For forward contracts or instruments that are in substance, forward exchange contracts, the exchange differences on such contracts are being amortised over the life of contracts.

The amount of exchange difference in respect of such contracts to be recognised as expense in the Profit and Loss Account over subsequent accounting periods is Rs. 0.50 crores (Previous Year Rs. 1.85 crores). This shall be amortised over the next 1 year.

3 The maximum amount of Commercial Paper outstanding at any time during the year was Rs. 7,550 crores (Previous Year Rs. 8,280 crores).

4 Save and except the floating charge created in favour of the depositors in respect of public deposits as defined in Paragraph 2(1)(y) of the Housing Finance Companies (NHB) Directions, 2010, on the Statutory Liquid Assets maintained in terms of sub-sections (1) & (2) of Section 29B of the National Housing Bank Act, 1987;

(i) Loans are secured by Promissory Notes and / or a negative lien on all the assets of the Corporation.

(ii) Bonds are in the nature of Promissory Notes and are secured by a negative lien on all the assets of the Corporation.

(iii) Non-Convertible Debentures amounting to Rs. 41,623.90 crores (Previous Year Rs. 33,092.90 crores) are secured by a negative lien on all the assets of the Corporation and by a mortgage. These debentures are redeemable at par between 2011 and 2025.

5 During the year, the Corporation raised Rs. 1,000 crores (Previous Year Rs. 500 crores) through issue of Long Term Unsecured Redeemable Non-Convertible Debentures (subordinated debt). As at March 31, 2011, the Corporations outstanding subordinated debt is Rs. 2,875 crores (Previous Year Rs. 1,875 crores). These Debentures are redeemable at par between 2011 and 2021. The debt is subordinated to present and future senior indebtedness of the Corporation and qualifies as Tier II capital under National Housing Bank (NHB) guidelines for assessing capital adequacy. Based on the balance term to maturity as at March 31, 2011, 82.61% (Previous Year 82.93%) of the book value of the subordinated debt is considered as Tier II capital for the purpose of capital adequacy computation.

6 (i) Loan Funds include Rs. 10,18,29,197 (Previous Year Rs. 8,63,18,061) from Directors.

(ii) Deposits include Rs. 13,474.73 crores (Previous Year Rs. 14,509.05 crores) due within one year. (iii) Deposits include Rs. 172,10,00,000 (Previous Year Rs. 25,79,00,000) due to subsidiary companies. (iv) Loan Funds include Rs. 235,00,00,000 (Previous Year Rs. 175,00,00,000) due to subsidiary companies.

7 (i) Loans granted by the Corporation are secured or partly secured by :

(a) Equitable mortgage of property and / or

(b) Pledge of shares, units, other securities, assignment of life insurance policies and / or

(c) Hypothecation of assets and / or

(d) Bank guarantees, company guarantees or personal guarantees and / or

(e) Negative lien and / or

(f) Assignment of hire purchase receivables and / or

(g) Undertaking to create a security.

(ii) Loans include Rs. 36.61 crores (Previous year Rs. 34.78 crores) in respect of properties held for disposal under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

8 (i) There are no Sundry Debtors which are outstanding for a period over six months. Sundry Debtors include amounts due from subsidiary companies Rs. 3,90,594 (Previous Year Rs. 58,77,128).

(iv) Out of the total Loans and Advances (Schedule 6), amounts aggregating to Rs. 550,02,71,805 (Previous Year Rs. 627,64,00,476) are secured.

Advances recoverable in cash or in kind includes Advance Ta x (net of Provision for Taxation) Rs. 453,64,87,061 (Previous Year Rs. 372,88,10,994), Rs. 4,57,35,752 (Previous Year Rs. 7,44,19,755) towards advances of capital nature, and Rs. 45,76,87,488 (Previous Year Rs. 8,85,35,298) due from subsidiary companies.

(v) Corporate Deposits include Rs. 23,45,00,000 (Previous Year Rs. 20,00,00,000) due from a subsidiary company.

9 (i) Sundry Creditors include Rs. Nil (Previous Year Rs. Nil) payable to "Suppliers" registered under the Micro, Small and

Medium Enterprises Development Act, 2006. No interest has been paid / payable by the Corporation during the year to the "Suppliers" covered under the Micro, Small and Medium Enterprises Development Act, 2006. The above information takes into account only those suppliers who have responded to inquiries made by the Corporation for this purpose.

(ii) As required under Section 205C of the Companies Act, 1956, the Corporation has transferred Rs. 65,72,191 (Previous Year Rs. 65,55,580) to the Investor Education and Protection Fund (IEPF) during the year. As of March 31, 2011, no amount was due for transfer to the IEPF.

(iii) Sundry Creditors include Rs. Nil (Previous Year Rs. 19,911) due to a subsidiary company.

(iv) Sundry Creditors include Rs. 43,00,000 (Previous Year Rs. Nil) being amount payable to HDFC Provident fund trust towards deficiency in the fund account.

(v) Interest Accrued but not due includes Rs. 10,03,92,182 (Previous Year Rs. 7,48,03,734) due to Subsidiary Companies and Rs. 48,19,055 (Previous Year Rs. 53,99,783) due to the Directors of the Corporation.

10 Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs. 269.95 crores (Previous Year Rs. 304.69 crores).

11 (i) Profit on sale of investments includes profit of Rs. 8,22,000 (Previous Year Rs. 16,44,000) in respect of investments held

as current investments and Rs. 11,75,576 (Previous Year Rs. Nil) on account of shares bought back by India Value Fund Advisors Pvt. Ltd. (Associate Company).

(ii) Surplus from deployment in Cash Management Schemes of Mutual Funds amounting to Rs. 217,53,39,542 (Previous Year Rs. 189,84,42,216) is in respect of investments held as current investments.

(iii) Dividend income includes Rs. 83,73,25,003 (Previous Year Rs. 97,02,94,818) received from subsidiary companies and Rs. 10,67,54,945 (Previous Year Rs. 31,26,62,788) in respect of current investments.

(iv) Other Interest includes Interest on Investments amounting to Rs. 198,20,20,862 (Previous Year Rs. 157,28,02,047), including Rs. 33,48,78,022 (Previous Year Rs. 3,86,05,659) in respect of current investments.

(v) Fees and Other Charges is net of the amounts paid to Direct Selling Agents Rs. 199.45 crores (Previous Year Rs. 151.59 crores).

12 Other Income includes rent of Rs. 9,97,03,190 (Previous Year Rs. 11,71,47,500), of which Rs. 24,00,000 (Previous Year Rs. 24,00,000) is in respect of rent for certain assets given on operating lease and also includes sub-lease payments received Rs. 6,90,000 (Previous Year Rs. 1,00,74,150) in respect of a property acquired under operating lease as per Note 25(ii).

14 In accordance with the Accounting Standard on Employee Benefits (AS 15) (Revised 2005) notified by the Companies (Accounting Standards) Rules, 2006, the following disclosures have been made:

(i) Salaries and Bonus include Rs. 7,02,62,861 (Previous Year Rs. 3,18,78,173) towards provision made in respect of accumulated leave salary and leave travel assistance which is in the nature of Long Term Employee Benefits and has been actuarially determined as per the AS 15 (Revised).

16 (i) Expenditure shown in Schedule 11 is net of recovery from a subsidiary company in respect of Salaries Rs. 1,56,44,075 (Previous Year Rs. 1,32,85,336) and expenditure shown in Schedule 13 is net of recovery from a subsidiary company in respect of Miscellaneous Expenses Rs. Nil (Previous Year Rs. 4,00,000).

(ii) Miscellaneous Expenses under Schedule 13 exclude Rs. 11,47,63,981 (Previous Year Rs. 8,48,45,183) in respect of amounts utilised out of Shelter Assistance Reserve during the year.

17 (i) Interest on Deposits include Rs. 26,18,102 (Previous Year Rs. 7,89,108) payable to the Chief Executive Officer of the Corporation.

(ii) Other Expenses include Provision for Wealth Ta x amounting to Rs. 65,00,000 (Previous Year Rs. 65,00,000) and Securities Transaction Ta x amounting to Rs. 29,45,001 (Previous Year Rs. 71,97,658).

19 (i) Special Reserve has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961 out of the distributable profits of the Corporation. Special Reserve No. I relates to the amounts transferred upto Financial Year 1996-97, whereas Special Reserve No. II relates to the amounts transferred thereafter.

(ii) As per Section 29 C of the National Housing Bank Act, 1987, the Corporation is required to transfer atleast 20% of its net profits every year to a reserve before any dividend is declared. For this purpose any Special Reserve created by the Corporation under Section 36(1)(viii) of the Income-tax Act, 1961 is considered to be an eligible transfer. The Corporation has transferred an amount of Rs. 625 crores (Previous Year Rs. 500 crores) to Special Reserve II in terms of Section 36(1)(viii) of the Income-tax Act, 1961 and an amount of Rs. 530 crores (Previous Year Rs. 432 crores) to "Additional Reserve (u/s 29C of the NHB Act)".

(iii) During the year an amount of Rs. Nil (Previous Year Rs. 43,790) has been written back on account of Nil (Previous Year 8,185) stock options lapsed under Employee Stock Option Scheme 2002. The same has been included in the Accounts under Salaries and Bonus.

21 During the year, Corporation utilised Rs. 532,08,66,097 (Previous Year Rs. 198,80,56,461) out of the Securities Premium Account in accordance with Section 78 of the Companies Act, 1956. Out of the above, Rs. 532,08,66,097 (Previous Year Rs. 192,39,08,528) has been utilised towards the proportionate premium payable on redemption of Zero Coupon Secured Redeemable Non Convertible Debentures (ZCD) and an amount of Rs. Nil (Previous Year Rs. 6,41,47,933) has been utilised towards expenditure incurred for raising ZCD. The Corporation has written back Rs. 93,75,77,892 (Previous Year Rs. 3,45,91,573) on conversion of FCCBs to the Securities Premium Account, being the provision for premium on redemption of FCCBs created in the earlier years by debit to the Securities Premium Account.

22 (i) Contingent Liability in respect of guarantees provided by the Corporation aggregated to Rs. 2.45 crores (Previous Year Rs. 29.79 crores).

(ii) Contingent liability in respect of income-tax demands, net of amounts provided for and disputed by the Corporation, amounts to Rs. 483.04 crores (Previous Year Rs. 298.56 crores). The matters in dispute are under appeal. The said amount has been paid/adjusted and will be received as refund if the matters are decided in favour of the Corporation.

(iii) Contingent Liability in respect of corporate undertakings provided by the Corporation for securitisation of receivables aggregated to Rs. 1,539.27 crores (Previous Year Rs. 1,081.15 crores). The outflows would arise in the event of a shortfall, if any, in the cash flows of the pool of the securitised receivables.

(iv) Contingent Liability in respect of disputed dues towards sales tax, wealth tax, interest on lease tax, stamp duty and payments towards employers contribution to ESIC, not provided for by the Corporation, amounts to Rs. 19,44,596 (Previous Year Rs. 17,98,148).

23 The Corporations main business is to provide loans for the purchase or construction of residential houses, commercial real estate and loans for certain other purposes in India. All other activities of the Corporation revolve around the main business. As such, there are no separate reportable segments, as per the Accounting Standard on Segment Reporting (AS 17), notified by the Companies (Accounting Standards) Rules, 2006.

24 As per the Accounting Standard on Related Party Disclosures (AS 18), notified by the Companies (Accounting Standards) Rules, 2006, the related parties of the Corporation are as follows :

A) Subsidiary Companies

HDFC Developers Ltd. HDFC Investments Ltd.

HDFC Holdings Ltd. HDFC Asset Management Company Ltd.

HDFC Trustee Company Ltd. HDFC Realty Ltd.

HDFC Standard Life Insurance Company Ltd. HDFC ERGO General Insurance Company Ltd.

GRUH Finance Ltd. HDFC Sales Pvt Ltd.

HDFC Venture Capital Ltd. HDFC Property Ventures Ltd.

HDFC Ventures Trustee Company Ltd. Griha Investments

HDFC Asset Management Company (Singapore) Pte. Ltd. (Subsidiary of HDFC Holdings Ltd.)

(Subsidiary of HDFC Asset Management Company Ltd.) Credila Financial Services Pvt. Ltd. (w.e.f. July 9, 2010)

B) Associate Companies HDFC Bank Ltd.

India Value Fund Advisors Pvt. Ltd. Indian Association for Savings and Credit RuralShores Business Services Pvt. Ltd. Credila Financial Services Pvt. Ltd. (upto July 8, 2010)

C) Entities over which control is exercised HDFC PROPERTY FUND – SCHEME –

HDFC IT Corridor Fund HDFC Investment Trust

D) Key Management Personnel Mr Keki M Mistry

Ms Renu Sud Karnad Mr V Srinivasa Rangan

E) Relatives of Key Management Personnel - (where there are transactions)

Ms Arnaaz K Mistry Mr Rishi R. Sud Ms Swarn Sud

Mr Ashok Sud Ms Riti Karnad Mr Ketan Karnad

Ms Abinaya S Rangan

25 In accordance with the Accounting Standard on Leases (AS 19), notified by the Companies (Accounting Standards) Rules, 2006, the following disclosures in respect of Operating Leases are made :

26 In accordance with the Accounting Standard on Earnings Per Share (AS 20), notified by the Companies (Accounting Standards) Rules, 2006 : (i) In calculating the Basic Earnings Per Share the Profit After Ta x of Rs. 3534,95,81,311 (Previous Year Rs. 2826,48,98,200) has been adjusted for amounts utilised out of Shelter Assistance Reserve of Rs. 11,47,63,981 (Previous Year Rs. 8,48,45,183).

Accordingly the Basic Earnings Per Share has been calculated based on the adjusted Profit After Ta x of Rs. 3523,48,17,330 (Previous Year Rs. 2818,00,53,017) and the weighted average number of shares during the year of 145,71,70,870 (Previous Year 142,61,76,790).

27 In compliance with the Accounting Standard relating to Accounting for Taxes on Income (AS 22), notified by the Companies (Accounting Standards) Rules, 2006, the Corporation has taken credit of Rs. 19,00,00,000 (Previous Year credit of Rs. 1,50,00,000) in the Profit and Loss Account for the year ended March 31, 2011 towards deferred tax asset (net) for the year, arising on account of timing differences.

29 (i) Provision for Contingencies as on March 31, 2011 amounting to Rs. 1,124.37 crores (Previous Year Rs. 655.57 crores) includes provisions for non–performing assets, standard assets and all other contingencies. In addition to the provisions against non-performing assets, vide the National Housing Bank circular No. NHB(ND)/DRS/DIR-18-07/1336/2007 dated March 26, 2007, all housing finance companies are required to carry a general provision at the rate of 0.40% of the total outstanding amount of non-housing loans which are standard assets. Further, vide the National Housing Bank circular No. NHB.HFC.DIR.2/CMD/2010 dated December 24, 2010, all housing finance companies are required to carry a general provision (i) at the rate of 0.20% by March 31, 2011 and at the rate of 0.40% by September 2011 on all outstanding loans other than housing loans to individuals and (ii) at the rate of 2% on housing loans disbursed at comparatively lower rate of interest in the initial few years after which rates are reset at higher rates. Accordingly, the Corporation is required to carry a minimum provision of Rs. 813.53 crores (Previous Year Rs. 325.29 crores) towards non-performing assets and standard assets, as per the prudential norms of the National Housing Bank.

30 Under Employees Stock Option Scheme - 2008 (ESOS-08), the Corporation had on November 25, 2008, granted 57,90,000 stock options at an exercise price of Rs. 1,350.60 per option representing 57,90,000 equity shares of Rs. 10 each to the employees and directors of the Corporation. The said price was determined in accordance with the pricing formula approved by the shareholders i.e. at the latest available closing price on the stock exchange having higher trading volume, prior to grant of options.

In terms of ESOS-08, the options would vest over a period of 1-3 years from the date of grant, but not later than November 24, 2011, depending upon option grantee completing continuous service of three years with the Corporation. Accordingly, during the year 1,09,685 options (Previous Year 55,51,237 options) were vested and 1,545 options (Previous Year 3,650 options) were lapsed after vesting. The options can be exercised over a period of five years from the date of respective vesting.

Under Employees Stock Option Scheme - 2007 (ESOS-07), the Corporation had on September 12, 2007, granted 54,56,835 stock options at an exercise price of Rs. 2,149 per option representing 54,56,835 equity shares of Rs. 10 each to the employees and directors of the Corporation. The said price was determined in accordance with the pricing formula approved by the shareholders i.e. at the latest available closing price on the stock exchange having higher trading volume, prior to grant of options.

In terms of ESOS-07, the options would vest over a period of 1-3 years from the date of grant, but not later than September 11, 2010, depending upon option grantee completing continuous service of three years with the Corporation. Accordingly, during the year 44,983 options (Previous Year 96,541 options) were vested and 3,573 options (Previous Year 76,569 options) were lapsed after vesting. The options can be exercised over a period of five years from the date of respective vesting.

Under Employees Stock Option Scheme - 2005 (ESOS-05), the Corporation had on October 25, 2005, granted 74,73,621 stock options at an exercise price of Rs. 912.90 per option representing 74,73,621 equity shares of Rs. 10 each to the employees and directors of the Corporation. The said price was determined in accordance with the pricing formula approved by the shareholders i.e. at the latest available closing price on the stock exchange having higher trading volume, prior to grant of options.

In terms of ESOS-05, the options would vest over a period of 2-3 years from the date of grant, but not later than October 24, 2008, depending upon option grantee completing continuous service of three years with the Corporation. All the options have been vested in the earlier years. In the current year Nil option (Previous Year 16,388 options) were lapsed after vesting. The options can be exercised over a period of five years from the date of respective vesting.

With effect from August 21, 2010, the nominal face value of equity shares of the Corporation was sub-divided from Rs. 10 per share to Rs. 2 per share. Accordingly, each option exercised after August 21, 2010 is entitled to 5 equity shares of Rs. 2 each.

Method used for accounting for share based payment plan:

The Corporation has used intrinsic value method to account for the compensation cost of stock options to employees of the Corporation. Intrinsic value is the amount by which the quoted market price of the underlying share exceeds the exercise price of the option. Since the options under ESOS-08, ESOS-07 and ESOS-05 were granted at the market price, the intrinsic value of the option is Nil. Consequently the accounting value of the option (compensation cost) is also Nil.

32 (i) Additional Ta x on dividend 2009-10, Rs. 1,06,60,197, pertains to the shortfall of dividend tax of the subsidiary companies of the Corporation on the dividend paid to the Corporation as per Section 115 (O)(1A) of the Income Ta x Act, 1961. [Previous Year credit taken Rs. 15,16,32,924 pertains to the dividend tax paid by the subsidiary companies of the Corporation on dividend paid to the Corporation.]

(ii) In respect of equity shares issued pursuant to Employee Stock Option Schemes and conversion of FCCBs, the Corporation paid dividend of Rs. 13,82,78,916 for the year 2009-10 (Rs. 31,93,320 for the year 2008-09) and tax on dividend of Rs. 2,29,66,399 (Previous Year Rs. 5,42,705) as approved by the shareholders at the Annual General Meeting held on July 14, 2010.

33 Figures for the previous year have been regrouped wherever necessary.


Mar 31, 2010

1 The Corporation has availed a loan of USD 100 million from the Asian Development Bank (Loan II). In respect of tranches 1 and 2 aggregating to USD 60 million, as per the agreements with a scheduled bank, the Corporation has handed over the dollar funds to the bank overseas and has obtained rupee funds in India amounting to Rs. 200 crores by way of a term loan and Rs. 100 crores through the issue of bonds which have been subscribed by the bank.

In respect of tranche 3 of USD 40 million, as per the agreement with a financial institution, the Corporation has handed over the dollars to a financial institution overseas and under a back-to-back arrangement obtained rupee funds in India. All payments in foreign currency are the responsibility of the financial institution. In terms of the agreements, the Corporation’s foreign exchange liability is protected.

2 (i) The Corporation had raised USD 500 million through the issue of zero coupon Foreign Currency Convertible Bonds (FCCBs). The bonds are convertible at any time into equity shares of the Corporation of the face value of Rs. 10 each from August 24, 2006 upto July 29, 2010, at the option of the holders, at Rs. 1399.148 per equity share representing a conversion premium of 50% over the initial reference share price. The premium payable on redemption of the bonds is charged to Securities Premium Account over the life of the bonds. The bonds are redeemable on September 27, 2010 with an yield to maturity of 4.62% per annum. Upto March 31, 2010, 81.88% (Previous Year 77.88%) of the bonds amounting to USD 409.40 million (Previous Year USD 389.40 million) representing 1,27,92,711 (Previous Year 1,21,67,765) Equity shares, have been converted pursuant to the exercise of options by the bondholders of the Corporation. As on March 31, 2010, the FCCB outstanding was USD 90.60 million (Previous Year USD 110.60 million). The Corporation has undertaken currency options and forward contracts amounting to USD 75 million (Previous Year USD 110.60 million) to cover the net foreign currency exposure in the outstanding FCCBs.

(ii) During the year, the Corporation raised USD 175 million under the Short Term Foreign Currency Borrowing scheme of the Reserve Bank of India (RBI) under the “approval route” in terms of the RBI Press Release No. 2008-2009/700 dated 17th November, 2008, with a maturity of three years. In term of the RBI guidelines, these borrowings have been swapped into rupees for the entire maturity by way of principal only swaps.

(iii) As on March 31, 2010, the Corporation has foreign currency borrowings (excluding FCCBs) of USD 945.43 million equivalent (Previous Year USD 984.62 million). The Corporation has undertaken principal only swaps, currency options and forward contracts on a notional amount of USD 787.99 million equivalent (Previous Year USD 892.86 million) to hedge the foreign currency risk. Further, interest rate swaps on a notional amount of USD 90 million equivalent (Previous Year USD 215 million) are outstanding, which have been undertaken to hedge the interest rate risk on the foreign currency borrowings. As on March 31, 2010, the Corporation’s net foreign currency exposure on borrowings net of risk management arrangements is USD Nil (Previous Year USD Nil).

As a part of asset liability management and on account of the increasing response to the Corporation’s Adjustable Rate Home Loan product as well as to reduce the overall cost of borrowings, the Corporation has entered into interest rate swaps wherein it has converted its fixed rate rupee liabilities of a notional amount of Rs. 16,065 crores (Previous Year Rs. 11,815 crores) as on March 31, 2010 for varying maturities into floating rate liabilities linked to various benchmarks. In addition, the Corporation has entered into cross currency swaps of a notional amount of USD 694 million equivalent (Previous Year USD 733 million) wherein it has converted its rupee liabilities into foreign currency liabilities and the interest rate is linked to the benchmarks of respective currencies.

(iv) Monetary assets and liabilities denominated in foreign currencies net of risk management arrangement are revalued at the rate of exchange prevailing at the yearend. Cross currency swaps have been marked to market at the year end. For forward contracts or instruments that are in substance, forward exchange contracts, the exchange differences on such contracts are being amortised over the life of contracts. Loss on mark to market of cross currency interest rate swaps is recognised in the Profit and Loss Account and the net gains is not recognised keeping in view the principles of prudence as enumerated in Accounting Standard (AS 1) notified by the Companies (Accounting Standard) Rules, 2006.

The amount of exchange difference in respect of such contracts to be recognised as expense in the Profit and Loss Account over subsequent accounting periods is Rs. 1.85 crores (Previous Year Rs. 761.73 crores). The period is ranging upto 2 years.

3 (i) Out of the total Bonds issued by the Corporation, Bond certificates aggregating to Rs. Nil (Previous Year Rs. 150.00 crores) have been purchased under a buy-back arrangement. These certificates have been extinguished in the current year.

(ii) The maximum amount of Commercial Paper outstanding at any time during the year was Rs. 8,280 crores (Previous Year Rs. 7,055 crores).

4 Save and except the floating charge created in favour of the depositors in respect of ‘public deposits’ as defined in Paragraph 2(1)(w) of the Housing Finance Companies (NHB) Directions, 2001, on the Statutory Liquid Assets maintained in terms of sub-sections (1) & (2) of Section 29B of the National Housing Bank Act, 1987;

(i) Loans are secured by Promissory Notes and/or a negative lien on all the assets of the Corporation.

(ii) Bonds are in the nature of Promissory Notes and are secured by a negative lien on all the assets of the Corporation.

(iii) Non-Convertible Debentures amounting to Rs. 33,092.90 crores (Previous Year Rs. 32,394.90 crores) are secured by a negative lien on all the assets of the Corporation and by a mortgage. These debentures are redeemable at par between 2010 and 2019.

5 During the year, the Corporation raised Rs. 500 crores (Previous Year Rs.Nil) through issue of long term Unsecured Redeemable Non-Convertible Debentures (subordinated debt). As at March 31, 2010, the Corporation’s outstanding subordinated debt is Rs. 1,875 crores (Previous Year Rs. 1,375 crores). These

Debentures are redeemable at par between 2011 and 2020. The debt is subordinated to present and future senior indebtedness of the Corporation and qualifies as Tier II capital under National Housing Bank (NHB) guidelines for assessing capital adequacy. Based on the balance term to maturity as at March 31, 2010, 82.93% (Previous Year 82.55%) of the book value of the subordinated debt is considered as Tier II capital for the purpose of capital adequacy computation.

6 (i) Loan Funds include Rs. 8,63,18,061 (Previous Year Rs. 11,02,45,311) from Directors.

(ii) Deposits include Rs. 14,509.05 crores (Previous year Rs. 11,339.58 crores) due within one year.

(iii) Deposits include Rs. 25,79,00,000 (Previous Year Rs. 31,85,25,000) due to subsidiary companies.

7 (i) Loans granted by the Corporation are secured or partly secured by :

(a) Equitable mortgage of property and / or

(b) Pledge of shares, units, other securities, assignment of life insurance policies and / or

(c) Hypothecation of assets and / or

(d) Bank guarantees, company guarantees or personal guarantees and / or

(e) Negative lien and / or

(f) Assignment of hire purchase receivables and / or

(g) Undertaking to create a security.

(ii) In respect of loans aggregating to Rs. Nil (Previous Year Rs. 135.81 crores), the Corporation has been assigned the right to future receivables along with a power of attorney authorising the Corporation, inter-alia, to obtain possession of the property in case of default.

(iii) Loans include Rs. 34.78 crores (Previous year Rs. 33.41 crores) in respect of properties held for disposal under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

8 (i) There are no Sundry Debtors which are outstanding for a period over six months. Sundry Debtors include amounts due from subsidiary companies Rs. 58,77,128 (Previous Year Rs. 26,35,28,986).

(iv) Out of the total Loans and Advances (Schedule 6), amounts aggregating to Rs. 627,64,00,476 (Previous Year Rs. 1308,61,64,094) are secured.

Advances recoverable in cash or in kind includes Advance Tax (net of Provision for Taxation) Rs. 372,88,10,994 (Previous Year Rs. 308,20,48,742), Rs. 7,44,19,755 (Previous Year Rs. 13,67,82,110) towards advances of capital nature, and Rs. 8,85,35,298 (Previous Year Rs. 98,58,546) due from subsidiary companies.

(v) Corporate Deposits include Rs. 20,00,00,000 (Previous Year Rs. 402,05,00,000) due from subsidiary companies.

(vi) Interest Accrued on Deposits includes Rs. Nil (Previous Year Rs. 12,15,36,986) due from subsidiary companies.

9 (i) Sundry Creditors include Rs. Nil (Previous Year Rs. Nil) payable to “Suppliers” registered under the Micro, Small and Medium Enterprises Development Act, 2006. No interest has been paid / payable by the Corporation during the year to the “Suppliers” covered under the Micro, Small and Medium Enterprises Development Act, 2006. The above information takes into account only those suppliers who have responded to inquiries made by the Corporation for this purpose.

(ii) As required under Section 205C of the Companies Act, 1956, the Corporation has transferred Rs. 66,55,580 (Previous Year Rs. 64,07,098) to the Investor Education and Protection Fund (IEPF) during the year. As of March 31, 2010, no amount was due for transfer to the IEPF.

(iii) Sundry Creditors include Rs. 19,911 (Previous Year Rs. 4,03,09,035) due to a subsidiary company.

(iv) Interest Accrued but not due includes Rs. 7,48,03,734 (Previous Year Rs. 4,79,84,021) due to Subsidiary Companies and Rs. 53,99,783 (Previous Year Rs. 47,78,652) due to the Directors of the Corporation.

10 Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs. 304.69 crores (Previous Year Rs. 279.03 crores).

11 (i) Profit on sale of investments includes profit of Rs. 16,44,000 (Previous Year Rs. Nil) in respect of investments held as current investments.

(ii) Surplus from deployment in Cash Management Schemes of Mutual Funds amounting to Rs. 189,84,42,216 (Previous Year Rs. 157,97,31,748) is in respect of investments held as current investments.

(iii) Dividend income includes Rs. 97,02,94,818 (Previous Year Rs. 108,22,75,140) received from subsidiary companies and Rs. 31,26,62,788 (Previous Year Rs. Nil) in respect of current investments.

(iv) Other Interest includes Interest on Investments amounting to Rs. 157,28,02,047 (Previous Year Rs. 146,24,59,036), including Rs. 3,86,05,659 (Previous Year Rs. 14,51,81,576) in respect of current investments.

(v) In accordance with the Guidance Note on accounting for Leases issued by the Institute of Chartered Accountants of India, an amount of Rs. Nil (Previous Year Rs. 2,17,27,220) towards Lease Equalisation has been reduced from Income from Leases, in respect of Leases entered prior to the applicability of Accounting Standard on ‘Leases’ (AS 19) notified by the Companies (Accounting Standards) Rules, 2006.

(vi) Fees and Other Charges is net of the amounts paid to Direct Selling Agents Rs. 151.59 crores (Previous Year Rs. 109.14 crores).

12 Other Income includes rent of Rs. 11,71,47,500 (Previous Year Rs. 12,65,82,207), of which Rs. 24,00,000 (Previous Year Rs. 24,00,000) is in respect of rent for certain assets given on operating lease and also includes sub-lease payments received Rs. 93,84,150 (Previous Year Rs. 1,54,26,000) in respect of a property acquired under operating lease as per Note 24(ii).

14 In accordance with the Accounting Standard on Employee Benefits (AS 15) (Revised 2005) notified by the Companies (Accounting Standards) Rules, 2006, the following disclosures have been made:

(i) Salaries and Bonus include Rs. 3,18,78,173 (Previous Year Rs. 8,77,66,575) towards provision made in respect of accumulated leave salary and leave travel assistance which is in the nature of Long Term Employee Benefits and has been actuarially determined as per the AS 15 (Revised).

16 (i) Expenditure shown in Schedule 11 is net of recovery from a subsidiary company in respect of Salaries Rs. 1,32,85,336 (Previous Year Rs. 1,32,05,916) and expenditure shown in Schedule 13 is net of recovery from a subsidiary company in respect of Miscellaneous Expenses Rs. 4,00,000 (Previous Year Rs. Nil).

(ii) Miscellaneous Expenses under Schedule 13 exclude Rs. 8,48,45,183 (Previous Year Rs. 5,21,59,522) in respect of amounts utilised out of Shelter Assistance Reserve during the year.

17 (i) Interest on Deposits include Rs. 7,89,108 (Previous Year Rs.11,97,637) payable to the Chief Executive Officer of the Corporation.

(ii) Other Expenses include Provision for Wealth Tax amounting to Rs. 65,00,000 (Previous Year Rs. 65,00,000) and Securities Transaction Tax amounting to Rs. 71,97,658 (Previous Year Rs. 11,78,680).

18 (i) The Corporation has only one reportable segment of business viz. Housing Finance business for the purposes of paragraph 25(2) of the Housing Finance Companies (NHB) Directions, 2001 and all other activities revolve around the main business of Housing Finance.

(iii) During the year, in addition to the charge of Rs. 58 crores (Previous Year Rs. 50 crores) to the Profit and Loss Account an amount of Rs. NIL [(Previous Year Rs. 118.82 crores) (net of Deferred Tax of Rs. 61.18 crores)], has been transferred from Additional Reserve created as per Section 29C of the National Housing Bank Act, 1987 pursuant to circular NHB(ND)/DRS/Pol-No.03/2004-05 dated August 26, 2004 to Provision for Contingencies Account.

(iv) Provision for Contingencies debited to the Profit and Loss Account includes Provision for Diminution in the Value of Investments amounting to Rs. 7.23 crores (Previous Year Rs. 23.80 crores). The balance of the Provision represents provision made against non-performing assets and other contingencies.

19 (i) Special Reserve has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961 out of the distributable profits of the Corporation. Special Reserve No. I relates to the amounts transferred upto Financial Year 1996-97, whereas Special Reserve No. II relates to the amounts transferred thereafter.

(ii) As per Section 29 C of the National Housing Bank Act, 1987, the Corporation is required to transfer at least 20% of its net profits every year to a reserve before any dividend is declared. For this purpose any Special Reserve created by the Corporation under Section 36(1)(viii) of the Income-tax Act, 1961 is considered to be an eligible transfer. The Corporation has transferred an amount of Rs. 500 crores (Previous Year Rs. 400 crores) to Special Reserve II in terms of Section 36(1)(viii) of the Income-tax Act, 1961 and an amount of Rs. 432 crores (Previous Year Rs. 342 crores) to “Additional Reserve (u/s 29C of the NHB Act)”.

(iii) During the year an amount of Rs. 43,790 (Previous Year Rs. 26,750) has been written back on account of 8,185 (Previous Year 5,000) stock options lapsed under Employee Stock Option Scheme 2002. The same has been included in the Accounts under Salaries and Bonus.

(iv) During the year, the Corporation has made a simultaneous issue of Zero Coupon Secured Redeemable Non-Convertible Debentures (ZCD) aggregating to Rs. 4,000 crores and 1,09,53,706 warrants at a warrant issue price of Rs. 275 per warrant aggregating to Rs. 301.23 crores. Each of the warrants entitles the holder to acquire one equity share of the Corporation at an exercise price of Rs. 3,000 per share on or before August 23, 2012. The said issue of ZCD and Warrants was made under Chapter XIII-A of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000. The Subscription amount received on Issue of warrants has been credited to Capital Reserve as the same is not refundable / adjustable in future.

20 During the year, Corporation utilised Rs. 198,80,56,461 (Previous Year Rs. 43,12,82,956) out of the Securities Premium Account in accordance with Section 78 of the Companies Act, 1956. Out of the above, Rs. 6,41,47,933 (Previous Year Rs. Nil) has been utilised towards expenditure incurred for raising Zero Coupon Secured Redeemable Non Convertible Debentures (ZCD) to Qualified Institutional Buyers on a Qualified Institutions Placement (QIP) basis and Rs. 192,39,08,528 (Previous Year Rs. 43,12,82,956) has been utilised towards the proportionate premium payable on redemption of ZCD and FCCB. The Corporation has written back Rs. 3,45,91,573 (Previous Year Rs. 3,66,78,561) on conversion of FCCBs to the Securities Premium Account, being the provision for premium on redemption of FCCBs created in the earlier years by debit to the Securities Premium Account.

21 (i) Contingent Liability in respect of guarantees provided by the Corporation aggregated to Rs. 29.79 crores (Previous Year Rs. 156.56 crores).

(ii) Contingent liability in respect of income-tax demands, net of amounts provided for and disputed by the Corporation, amounts to Rs. 298.56 crores (Previous Year Rs. 315.11 crores). The matters in dispute are under appeal. The said amount has been paid/adjusted and will be received as refund if the matters are decided in favour of the Corporation.

(iii) Contingent Liability in respect of corporate undertakings provided by the Corporation for securitisation of receivables aggregated to Rs. 1,081.15 crores (Previous Year Rs. 594.85 crores). The outflows would arise in the event of a shortfall, if any, in the cash flows of the pool of the securitised receivables.

(iv) Contingent Liability in respect of disputed sales tax and stamp duty dues not provided for by the Corporation amounts to Rs. 3,79,922 (Previous Year Rs. 3,79,922).

22 The Corporation’s main business is to provide loans for the purchase or construction of residential houses in India. All other activities of the Corporation revolve around the main business. As such, there are no separate reportable segments, as per the Accounting Standard on ‘Segment Reporting’ (AS 17), notified by the Companies (Accounting Standards) Rules, 2006.

23 As per the Accounting Standard on ‘Related Party Disclosures’ (AS 18), notified by the Companies (Accounting Standards) Rules, 2006, the related parties of the Corporation are as follows :

A) Subsidiary Companies

HDFC Developers Ltd.

HDFC Holdings Ltd.

HDFC Trustee Company Ltd.

HDFC Standard Life Insurance Company Ltd.

GRUH Finance Ltd.

HDFC Venture Capital Ltd.

HDFC Ventures Trustee Company Ltd.

HDFC Asset Management Company (Singapore) Pte. Ltd.

(Subsidiary of HDFC Asset Management Company Ltd.)

HDFC Investments Ltd.

HDFC Asset Management Company Ltd.

HDFC Realty Ltd.

HDFC ERGO General Insurance Company Ltd.

HDFC Sales Pvt Ltd.

HDFC Property Ventures Ltd.

Griha Investments

(Subsidiary of HDFC Holdings Ltd.)

B) Associate Companies

HDFC Bank Ltd.

India Value Fund Advisors Pvt. Ltd.

Indian Association for Savings and Credit

RuralShores Business Services Pvt. Ltd.

Credila Financial Services Pvt. Ltd. (w.e.f. December 24, 2009)

C) Entities over which control is exercised

HDFC PROPERTY FUND – SCHEME – HDFC IT Corridor Fund

HDFC Investment Trust

D) Key Management Personnel

Mr. Deepak S Parekh (Non Executive Chairman w.e.f. January 01, 2010)

Mr. Keki M Mistry

Ms. Renu Sud Karnad

Mr. V Srinivasa Rangan (from January 01, 2010)

E) Relatives of Key Management Personnel - (where there are transactions)

Ms. Smita D Parekh* Mr. Aditya D Parekh* Mr. Siddharth D Parekh*

Ms. Amaya Ann Aditya Parekh* Ms. Harsha S Parekh* Ms. Arnaaz K Mistry

Mr. Rishi R Sud Ms. Swarn Sud Mr. Ashok Sud

Ms. Riti Karnad Mr. Ketan Karnad Ms. Abinaya S Rangan

* Upto December 31, 2009.

24 In accordance with the Accounting Standard on ‘Leases’ (AS 19), notified by the Companies (Accounting Standards) Rules, 2006, the following disclosures in respect of Operating and Finance Leases are made :

26 In compliance with the Accounting Standard relating to ‘Accounting for Taxes on Income’ (AS 22), notified by the Companies (Accounting Standards) Rules, 2006, the Corporation has taken credit of Rs. 1,50,00,000 (Previous Year credit of Rs. 8,00,00,000) in the Profit and Loss Account for the year ended March 31, 2010 towards deferred tax asset (net) for the year, arising on account of timing differences.

28 (i) Provision for Contingencies as on March 31, 2010 amounting to Rs. 655.57 crores (Previous Year Rs. 621.52 crores) includes provisions for non-performing assets, Standard Assets and all other contingencies. In addition to the provisions against non performing assets, vide the National Housing Bank circular No. NHB(ND)/DRS/DIR-18-07/1336/2007 dated March 26, 2007, all housing finance companies are required to carry a general provision at the rate of 0.40% of the total outstanding amount of non-housing loans which are Standard Assets. Accordingly, the Corporation is required to carry a minimum provision of Rs. 325.29 crores (Previous Year Rs. 316.64 crores) towards non performing assets and standard assets, as per the prudential norms of the National Housing Bank.

29 Under Employees Stock Option Scheme – 2008 (ESOS – 08), the Corporation had on November 25, 2008, granted 57,90,000 stock options at an exercise price of Rs. 1,350.60 per option representing 57,90,000 equity shares of Rs. 10/- each to the employees and directors of the Corporation. The said price was determined in accordance with the pricing formula approved by the shareholders i.e. at the latest available closing price on the stock exchange having higher trading volume.

In terms of ESOS - 08, the options would vest over a period of 1-3 years from the date of grant, but not later than November 24, 2011, depending upon option grantee completing continuous service of three years with the Corporation. Accordingly, during the year 55,51,237 options (Previous Year Nil options) were vested [including 3,650 options (Previous Year Nil options) vested and lapsed]. The options can be exercised over a period of five years from the date of respective vesting.

Under Employees Stock Option Scheme – 2007 (ESOS – 07), the Corporation had on September 12, 2007, granted 54,56,835 stock options at an exercise price of Rs. 2,149 per option representing 54,56,835 equity shares of Rs. 10/- each to the employees and directors of the Corporation. The said price was determined in accordance with the pricing formula approved by the shareholders i.e. at the latest available closing price on the stock exchange having higher trading volume.

In terms of ESOS - 07, the options would vest over a period of 1-3 years from the date of grant, but not later than September 11, 2010, depending upon option grantee completing continuous service of three years with the Corporation. Accordingly, during the year 96,541 options (Previous Year 51,99,240 options) were vested [including 76,569 options (Previous Year 34,244 options) vested and lapsed]. The options can be exercised over a period of five years from the date of respective vesting.

Under Employees Stock Option Scheme – 2005 (ESOS – 05), the Corporation had on October 25, 2005, granted 74,73,621 stock options at an exercise price of Rs. 912.90 per option representing 74,73,621 equity shares of Rs. 10/- each to the employees and directors of the Corporation. The said price was determined in accordance with the pricing formula approved by the shareholders i.e. at the latest available closing price on the stock exchange having higher trading volume.

In terms of the ESOS-05, the options would vest over a period of 2-3 years from the date of grant, but not later than October 24, 2008, depending upon option grantee completing continuous service of three years with the Corporation. Accordingly, during the year Nil options (Previous Year 1,68,691 options) were vested [including 16,388 options (Previous Year 6,631 options) vested and lapsed]. The options can be exercised over a period of five years from the date of respective vesting.

Method used for accounting for share based payment plan:

The Corporation has used intrinsic value method to account for the compensation cost of stock options to employees of the Corporation. Intrinsic value is the amount by which the quoted market price of the underlying share exceeds the exercise price of the option. Since the options under ESOS-08, ESOS-07 and ESOS-05 were granted at the market price, the intrinsic value of the option is Nil. Consequently the accounting value of the option (compensation cost) is also Nil.

31 (i) The additional Tax on Proposed Dividend, Rs. Nil ( Previous Year Rs. 140,68,88,809) has been calculated @16.995% on the Proposed Dividend after netting off an amount of Rs. Nil (Previous Year Rs. 4,33,99,451), being the dividend tax paid by the Subsidiary companies of the Corporation on the dividends paid to the Corporation as per Section 115(O)(1A) of the Income Tax Act, 1961.

(ii) Additional Tax on dividend 2008-09 credit taken, Rs. 15,16,32,924 (Previous Year Rs. 14,05,33,209), pertains to the dividend tax paid by the subsidiary companies of the Corporation on the dividend paid to the Corporation as per Section 115(O)(1A) of the Income Tax Act, 1961.

(iii) In respect of equity shares issued pursuant to Employee Stock Option Schemes and conversion of FCCBs, the Corporation paid dividend of Rs. 31,93,320 for the year 2008-09 (Rs. 43,04,625 for the year 2007-08) and tax on dividend of Rs. 5,42,705 (Previous Year Rs. 7,31,571) as approved by the shareholders at the Annual General Meeting held on July 22, 2009.

32 Figures for the previous year have been regrouped wherever necessary.

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