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Notes to Accounts of Housing Development Finance Corporation Ltd.

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.

 
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