Dewan Housing Finance Corporation Directors Report, Dewan Housing Reports by Directors

Directors Report	Year End : Mar '12 � Mar 11

Dear Shareholders, The Directors are pleased to present the Twenty-Eighth Annual Report on the business and operations of your Company together with the Audited Statement of Accounts for the year ended 31st March, 2012. FINANCIAL RESULTS The Financial performance of the Company for year ended 31st March, 2012 is summarized below:- (Rs. in Crore) 2011-2012 2010-2011 Gross Income 2,469.68 1,451.24 Less : Interest 1,799.23 973.13 Overheads 267.37 168.33 Depreciation 4.72 3.73 Profit before Tax & Exceptional Items 398.36 306.05 Add : Exceptional Items 0.00 35.43 Profit before Tax 398.36 341.48 Less : Provision for taxation 92.00 76.35 Profit after tax 306.36 265.13 Add : Balance b/d from the previous year 69.96 30.35 Surplus available for appropriations 376.32 295.48 Appropriations Transferred to Special Reserve under Section 36(1)(viii) of the Income Tax Act, 1961 100.00 40.00 Transferred to General Reserve 100.00 100.00 Transfer to Contingency Reserve - 35.00 Dividend on Preference Shares - 0.02 Dividend for Earlier Year 0.08 6.59 Proposed Equity Dividend 40.89 36.57 Tax on proposed Dividend 6.51 7.34 Balance carried over to Balance Sheet 128.84 69.96 Total 376.32 295.48 Previous year figures have been regrouped as per Revised Schedule VI of the Companies Act, 1956 introduced by Ministry of Corporate Affairs vide notification dated February 28, 2011. PERFORMANCE Your Company registered a remarkable growth in its operations. The operating profit before charging depreciation and tax amounted to Rs. 403.08 crore as against Rs. 309.78 crore in the preceding year; representing a rise of 30%. Profit After Ta x (PAT) before extra ordinary items went up by 33% to Rs. 306.36 crore from Rs. 229.70 crore in the previous year. The EPS improved to Rs. 28.97 as against Rs. 26.43 of the previous year. Besides Company''s core business of providing housing finance, it also carries on vertical businesses such as insurance and property services. These vertical businesses are operated through Company''s subsidiary /associate companies which have strong synergies with the Company and offer the customers wide range of financial products and services under DHFL brand. The Proposed merger of subsidiary First Blue Home Finance Limited and DHFL Holdings Private Limited with the Company would further consolidate the Company ''s position in the housing industry. Lending Operations The cumulative loan disbursements of the Company as at the end of financial year 2011-12 was Rs. 28,805 crore as compared to Rs. 19,739.76 crore in the previous year. The housing loans/other loan sanctioned during the year ended 31st March, 2012 were to the extent of Rs. 12,845.31 crore as against Rs. 8,949.48 crore sanctioned during the previous year. Disbursement The loan disbursed during the year ended 31st March, 2012 was to the extent of Rs. 9,065.24 crore as against Rs. 6,505.54 crore disbursed during the previous year. Sale/assignment of Loans: During the year, your Company securitized pool of housing and property loans and managed the joint syndicated loans where banks and others have participated aggregating to Rs. 1,637.78 crore. These assets have been de-recognised in the books of the Company. Your Company is responsible for collection and getting servicing of the securitized portfolio on behalf of the buyer investor. In terms of the securitization agreement, your Company pays to buyer/investor/participant on monthly basis the collection amount, subject to retention of agreed extra interest spread for the Company. Instrument through which loans have been sold / assigned have been rated by external credit rating agencies and carry a rating indicating the highest degree of safety regarding timely servicing of financial obligations. Loan Book: As at 31st March, 2012, the loan book stood at Rs. 19,355.38 crore as against Rs. 14,121.98 crore in the previous year an increase of 37.06%. DIVIDEND In view of the overall performance of the Company and the objective of rewarding shareholders, while retaining capital to maintain a healthy capital adequacy ratio to support future growth, the Board of Directors has recommended a dividend of Rs. 3.50 per share (35%) on 11,68,39,981 equity shares of Rs. 10 each for the financial year ended 31st March, 2012, subject to approval of the shareholders at the ensuing Annual General Meeting, as compared to dividend of Rs. 3.50 per share (35%) for the financial year ended 31st March, 2011. This dividend shall be subject to tax on dividend to be paid by the Company. The total outgo on account of dividend (including dividend distribution tax) will be Rs. 47.53 crore as against Rs. 42.76 crore in the previous year. Your Company has paid dividend of Rs. 8 lakh and Rs. 1 lakh as tax on distribution of dividend to new shareholders on account of Final Dividend for the year 2010-11 as required under the Listing Agreement as those shares were allotted prior to record date for the dividend payment and after the date of earlier year balance sheet. Equity shares that may be allotted on allotment of equity shares under Employee Stock Option Scheme as well as allotment, if any, of shares pursuant to approval of Scheme of Amalgamation before the date of the book closure for payment of dividend shall rank pari passu with the existing shares will be entitled to receive the dividend for the financial year 2011-12. UNCLAIMED DIVIDEND TRANSFERED TO INVESTORS EDUCATION AND PROTECTION FUND (IEPF) In terms of Section 205C of the Companies Act, 1956, the amount (dividends) that remained unclaimed and unpaid for more than 7 years from the date become first due for payment, shall be transferred to IEPF (Fund). In terms of the applicable statutory provisions of the Companies Act, 1956, no claim would lie against the Company or the said Fund after such transfer to IEPF. The Company has been intimating the shareholders to lodge their claim for payment due, if any, from time to time and such claims have been settled. Despite constant and sincere efforts to pay the unclaimed dividend to the respective shareholders, certain amount still remains unclaimed. The Company has been intimating the shareholders to lodge their claim for dividend from time to time and such information is being mentioned in the Annual Reports every year. Unclaimed dividend amounting to Rs. 4.97 lakh that has not been claimed by shareholders for the financial year 2003-04 has been transferred to Investor Education and Protection Fund (IEPF) during the month of September, 2011, as per the provisions of the Companies Act, 1956. As per section 205(B) of the Companies Act, 1956, no claim would lie against the Company or the said fund after the transfer. The unpaid and unclaimed amounts lying with company for the last seven (7) financial years has been uploaded on the Company''s website. Shareholders who have not claimed the said dividend may write to Registrars and Share Transfer agents. SHARE CAPITAL During the year, the Company continued with its focus on measures to improve its net worth. (a) Qualified Institutional Placement: Pursuant to a special resolution passed under section 192A of the Companies (Passing of the resolution by postal ballot) Rules, 2011 by the shareholders of the Company on 19th January 2012, your Company issued 1,19,09,873 (One Crore Nineteen Lakh Nine Thousand Eight Hundred Seventy Three) equity shares of face value of Rs. 10/- each at a price of Rs. 255.50 per equity (including a premium of Rs. 245.50 per equity share) aggregating to Rs. 304,29,72,552 (Rupees Three Hundred Four Crore, Twenty Nine Lakh, Seventy Two Thousand, Five Hundred and Fifty Tw o Only) to Qualified Institutional Buyers (QIBs) in terms of Chapter VIII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (SEBI ICDR Regulations), as amended. The QIP was opened for subscription to QIBs on Wednesday, 22nd February, 2012 and closed on Friday, 24th February, 2012. The allotment of equity shares to QIBs was made on 29th February, 2012. The BSE and the NSE had given trading permission for the equity shares issued to QIBs on 2nd March, 2012. (b) Employee Stock Option Schemes: During the year under review, the Company allotted in tranches 5,03,706 equity shares of Rs. 10/- each upon exercise of stock options to the eligible employees of the Company under the Employee Stock Option Scheme � 2008 and 2009. In view of above allotments the paid-up equity share capital of the Company increased from 10,44,26,402 equity shares of Rs. 10/- each as on 31st March, 2011 to 11,68,39,981 equity shares of Rs. 10/- each as on 31st March, 2012. (c) Equity Shares to be allotted pursuant to the sanctioned Scheme of Amalgamation On sanction of the Scheme of Amalgamation of First Blue Home Finance Ltd and DHFL Holdings Private Ltd. with your Company (the Scheme) by the respective High Courts, the Company will be required to allot an aggregate of 1,08,86,375 fully paid up equity shares of Rs. 10/- each, to certain shareholders of First Blue Home Finance Ltd. Post allotment of the aforesaid shares, the paid- up equity share capital of the Company will increase to 12,77,26,356 equity shares. The Company has paid the listing fees payable to the BSE and the NSE for the financial year 2011-12 in time. RESOURCE MOBILISATION Financial Year 2011-12 turned out to be a year of reckoning for most countries. India witnessed rapid slowdown in growth, coupled with near double-digit inflation. Due to inflationary pressures, Reserve Bank of India had to tighten the monetary policy by increasing the key interest rates. Subordinated Debt: During the year, your Company raised Rs. 75 crore through the issue of long-term Unsecured Redeemable Non-Convertible Subordinated Debentures. The subordinated debt was assigned an ''BWR AAA'' rating by Brickworks and rating by CARE ''AA ''. As at 31st March, 2012, your Company''s outstanding subordinated debt stood at Rs. 655 crore. The debt is subordinated to present and future senior indebtedness of your Company and has been assigned the rating by CARE and Brickworks. Based on the balance term to maturity, as at 31st March, 2012, Rs. 582.00 crore of the book value of subordinated debt is considered as Tier II under the guidelines issued by the National Housing Bank (NHB) for the purpose of capital adequacy computation. Non-Convertible Debentures (NCD): During the year, your Company issued NCDs amounting to Rs. 730.20 crore on a private placement basis. The Company''s NCD issues have been listed on the Wholesale Debt Market (WDM) segment of the NSE. The Company''s NCDs have been assigned the rating of ''AA '' by CARE and ''BWR AAA'' by Brickworks. As at 31st March, 2012, NCDs outstanding stood at Rs. 1,850.20 crore. Innovative Perpetual Debt Instrument During the year under review your Company has issued Innovative Perpetual Debt Instruments (IPDI) qualifying for Tier II capital in to increase its capital adequacy ratio and fund its growing business operations. Your Company has raised the IPDI of principal amount of Rs. 125.20 crore, which qualify as Tier II capital of the Company, in conformity with NHB guidelines. The IPDI was assigned an ''AA-'' rating by both CARE and Brickworks. Commercial Paper: The Commercial Paper (CP) program of your Company has been rated by Credit Rating and Information Services of India Limited (CRISIL) and is assigned the rating of P1 (P One Plus) having validity period of twelve months. During the year your Company issued CPs to the extent of Rs. 1,454.40 crore in tranches and placed them with investors'' at the most competitive rates of interest. As at 31st March, 2012, commercial papers outstanding stood at Rs. 401.40 crore. Loans from Banks: As part of its liability management, your Company endeavors to diversify its resource base in order to achieve an appropriate maturity structure and minimize the weighted average cost of borrowed funds. During the year under review, fresh term loans of Rs. 4,045 crore were availed from the commercial banks and financial institutions, taking the total term loan outstanding to Rs. 13,855.39 crore Refinance from National Housing Bank (NHB): During the year, your Company has drawn refinance amounting to Rs. 228.00 crore under NHB''s Refinance Scheme to Housing Finance Companies. Deposits: During the Year, the Company has achieved consistent Growth. The Outstanding Deposit as on the 31st March 2012, stood at Rs. 938.81 crore compared to Rs. 557.29 crore in the previous year. Consistent Increase in the Investor has also been witnessed taking the Customer Accounts to 63,867 Nos. Deposit Growth can be sustained only when the existing customers are retained effectively. It becomes even more critical for investor customer as investment opportunities are ample. We have taken a structured approach in sustenance of fixed deposit growth by focusing on the renewal of maturing fixed deposit database with the help of Direct Channel. Based on an analysis of the maturing database, a detailed strategy has been formulated and accordingly an unique two-fold program was developed which involved sending an unique Direct Mailer that seeded the thought of reinvestment amongst the depositors which was followed by a focused tele-calling activity thus reinforcing the need to reinvest amongst the customers. The opportunities that arose through these concentrated efforts were disseminated to the business teams for further fulfillment. As on 31st March 2012, 975 depositors had not claimed the deposits amounting to Rs. 5.10 crore. Depositors have been intimated regarding the maturity of their Deposits, with a request to either renew or claim their matured deposits. Fixed Deposits accepted by your Company have been secured appropriately to extent of Floating Charge created by way of Deed of Trust, as per guidelines issued by NHB. CREDIT RATING Your Company has received an A1 credit rating from CRISIL, which was reaffirmed in May, 2012, for its Rs. 1,500 crore short-term debt program indicating a very strong degree of safety regarding timely payment of financial obligations. In April 2012, CARE reaffirmed credit ratings for our fixed deposits (CARE AA up to Rs. 1,000 crore), our non-convertible debentures (CARE AA up to Rs. 2,605 crore in aggregate for three instruments) and subordinated debt (CARE AA up to Rs. 980 crore) and our Innovative Perpetual Debentures (CARE AA- upto Rs. 300 crore). Your Company has also obtained credit ratings for its long term bank borrowings (CARE AA upto amount of Rs. 15,814 crore). A credit rating of CARE AA indicates that instruments with that rating are considered by CARE to have a high degree of safety regarding timely servicing of financial obligations among rated instruments while a credit rating of CARE AA reflects the comparative standing within the CARE AA category. In January, 2012, BWR reaffirmed credit ratings for our fixed deposits (BWR FAAA up to Rs. 1,000 crore), our non-convertible debentures (BWR AAA up to Rs. 1,000 crore) and our subordinate debt (BWR AAA for two instruments of Rs. 250 crore each) for an additional subordinated debt instrument (BWR AAA up to Rs. 400 crore) and our innovative perpetual debentures (BWR AA- upto Rs. 300 crore). A BWR FAAA rating indicates the highest safety in terms of timely servicing of interest and principal for our fixed deposits and a BWR AAA credit rating indicates the highest degree of safety regarding timely servicing of financial obligations, as compared to other rated instruments. CAPITAL ADEQUACY As required under NHB Directions your Company is presently required to maintain a minimum capital adequacy of 12% on a stand-alone basis. In addition, the NHB Directions also require that your Company transfers minimum 20% of its annual profits to a reserve fund. The following table sets out our stand- alone capital adequacy ratios as at March 31 2010, 2011 and 2012. Particulars As on 31st March 2012 2011 2010 Capital Adequacy 18.24% 19.39% 17.26% Ratio (Stand-alone) (Approximately) Your Company''s stand-alone capital adequacy ratio was at 18.24% approximately as on 31st March, 2012, which we believe provides an adequate cushion to withstand business risks and is above the minimum requirement of 12% stipulated by the NHB. NON-PERFORMING ASSETS AND PROVISIONS FOR CONTINGENCY Your Company adhered to the prudential guidelines for Non performing Assets (NPAs), issued by the National Housing Bank (NHB) under its Directions of 2010, as amended from time to time. As per the prudential norms, the income on such NPAs is not to be recognised. As per the prudential norms prescribed by the NHB, the Company has made provision for contingencies on standard as well as non-performing housing loans and property loans. The Company has also made additional provision to meet unforeseen contingencies. The National Housing Bank (NHB) vide its circular dated 5th August, 2011 read with circular dated 19th January, 2012 has introduced additional contingency provisioning requirements. The Company has met this requirement by utilising excess reserve created in earlier year and by making further provision during the year. As a matter of prudent risk management and based on experience, the Company has created on its own in the past, additional reserve on its standard assets towards contingencies beyond the NHB requirements. The Company has fully utilised these additional contingency reserve for meeting the additional requirements of NHB and has also provided for the balance. The Securitizations and Reconstructions of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI) has proved to be a useful recovery tool and the Company has been able to successfully initiate recovery action under this Act in the case of willful defaulters. The Company has acquired certain assets under SARFAESI which are retained for the purpose of sale under the rules and regulations of SARFAESI involving Rs. 14.03 crore. BRANCH EXPANSION & BUSINESS TIE- UP Your Company has a strong marketing and distribution network. The Company has its registered office in Mumbai and has 122 branches, 72 service centres, 24 camp locations, 8 regional processing units and 4 central processing units in India, spread across the length and breadth of India. Additionally, your Company has international representative offices located in London and Dubai to cater to the needs of non-resident Indians. Your Company has entered into strategic housing loan distribution and syndication arrangements with public and private sector banks, including Punjab & Sind Bank to cater to the northern India, United Bank of India for eastern India, Central Bank of India for central India and Yes Bank Limited for across India. This gives us wider reach and access to the Banks'' network, where both are set to gain. Our strong network coverage is designed to provide increased penetration to cater to the evolving needs of our existing customer base and tapping a growing potential customer base throughout India. INVESTMENTS The Investment Committee constituted by the Board of Directors is responsible for approving investments in line with limits as set out by the board. The decisions to buy and sell upto the approved limit delegated by the board are taken by the Chairman & Managing Director, who is assisted by two Senior Executives i.e. Sr. GM Account & Taxation and GM (Finance & Resources). The investment function is carried out primarily to support the core business of housing finance to ensure adequate levels of liquidity and to maintain investment in approved securities in respect of public deposits raised as per the norms of NHB. Considering the time lag between raising of resources and its deployment, the surplus funds are generally being parked with liquid fund schemes of mutual funds and short term deposits with banks. During the year, your Company earned Rs. 1.82 crore by way of Income from Mutual funds and Rs. 13.56 crore by way of interest on deposits placed with banks. At the end of the year, your Company maintained Rs. 358.41 crore by way of deposits with banks. As per NHB guidelines, HFCs are required to maintain Statutory Liquid Ratio (SLR) in respect of public deposits raised. Currently the SLR requirement is 12.50% of the public deposits. As at 31st March, 2012, your company has invested Rs. 48.48 crore in approved securities comprising of government securities, government guaranteed bonds and by way of Bank Deposits for Rs. 47.18 crore. It is maintained within the limits prescribed by NHB. INSURANCE OF PROPERTY Your Company has insured its various properties and facilities against the risk of fire, theft, etc., so that financials are not impacted in the unfortunate even of such incidents. The employees of the Company are covered under the mediclaim facility against hospitalization. DIRECTOR''S AND OFFICER LIABILITIES This policy covers the Director''s and officer of the Company against the risk of third party actions arising out of their actions /directions which may have resulted in financial loss to any third party. The Company has appropriately insured itself to mitigate against such risk from any third party. INSURANCE COVERAGE TO BORROWERS All the borrowers of the Company were insured against the risk of accidental death, property insurance and loss of employment (upto 3 EMI''s) by Future Generali General Insurance Co. Ltd. Your Company is a Group Administrator (Master Policy Holder) of ''Home Assure'' a life insurance mortgage reducing term assurance product from ICICI Prudential Life Insurance Co. Ltd, whereby the borrowers are insured for the outstanding loan amount in the event of occurrence of death during the loan tenure. In addition your Company also offered ''Home Safe Plus'' a general insurance product from ICICI Lombard General Insurance Co. Ltd to borrowers availed loan against property to insure against accidental death, property insurance, critical illness and loss of employment (up to 3 EMI''s). The primary objective is to insure our loan portfolio from default due to unforeseen events with our borrowers. Your Company has insured 96% of all the new customer acquisitions and 81% of the total loan portfolio acquired in FY 2010-11. The overall fee income growth in FY 2011-12 was 52% over last FY 2010-11. NHB GUIDELINES The Company has been following the various Circulars, Notifications and Guidelines issued by National Housing Bank (NHB) from time to time. The Circulars and the Notifications issued by NHB are also placed before the Audit Committee / Board at regular intervals along with the compliance of the same. During the year under review, NHB has conducted an inspection of the Company under Section 34 of the NHB Act, 1987 and Company has furnished the replies to the same. KYC & AML STANDARDS During the year under review, the National Housing Bank has issued revised comprehensive Know Your Customer (KYC) Guidelines and Anti Money Laundering Standards in the context of recommendations made by the Financial Action Task Force on Anti Money Laundering Standards and on Combating Financing of Terrorism Standards. During the year, the Board reviewed and noted the amendments to the Company''s KYC and Prevention of Money Laundering Policy as stipulated by NHB. Your Company has adhered to the compliance requirements in terms of the said policy for monitoring and reporting cash/ suspicious transactions. The Fair Practices Code framed by NHB seeks to promote good and fair practices by setting minimum standards in dealing with customers, increase transparency so that customers have a better understanding of what services they can reasonably, encourage market forces through competition to achieve higher operating standards, promote fair and cordial relationships between customers and the housing finance company and foster confidence in the housing finance system. During the year, your Company has adhered to the Fair Practices Code as approved by the Board of Directors. CODE OF CONDUCT: Your Company has adopted a revised Code of Conduct for its Board Members and Senior Management personnel. The code of conduct has also been posted on the official website of the Company. A copy of the code of conduct has been circulated to the directors and senior Management. The Declaration by the Chairman & Managing Director of the Company regarding compliance with the Code of Conduct for Board Members and Senior Management is annexed with the Corporate Governance report. RISK MANAGEMENT FRAMEWORK: Your Company has a Risk Management Framework, which provides the mechanism for risk assessment and mitigation. The ALCO Management Committee (AMC) comprises the Chairman & Managing Director, the Chief Executive Officer, Chief Operating Officer and other members of senior management. During the year, the AMC reviewed the risks associated with the business of your Company, its root causes and the efficacy of the measures taken to mitigate the same. The Board of Directors also reviewed the key risks associated with the business of your Company, the procedures adopted to assess the risks and their mitigation mechanisms. BRANDING We believe that the ''DHFL'' brand is one of the most important intangible assets that we own. During this fiscal year, the Company remained resolutely committed to building its brands for the long term and continues to invest in their marketing, sales and distribution in all key markets, such as: - Brand Campaign: Brand commercial did the aerial carpet bombing during October � November 2011 with 8971 spots across 47 Regional General Entertainment Channels and Business & News Channels and created high brand salience at a blanket level across all markets. This was also supported by high visibility Print Innovations in key select markets. - Sustenance Campaign: A well designed Print Media plan sustaining for almost 16 weeks starting 17th August carried rational product based communication with creative variations comprising home loan messages of generic, occupational, clear product descriptive, festive based communication and fixed deposits in 27 regional dailies to reach out 129 plus DHFL operating locations through a cumulative of 400 plus insertions. - Corporate Campaign: The campaign focused at delivering the Brand Essence to the Corporate Audience which involved Key decision makers, Investor Pools etc. The campaign was activated between Nov � Dec 2011 involving high visibility media chosen basis the desired TG. TVC: Over 3000 spots were consumed across key business & news Channels like ET Now, CNBC, BBC World, Bloomberg among others. This was further supported through 39 highly targeted insertions in over 13 Business Magazines like Business World, The Economist, Business Today, Forbes, and Outlook etc. While the Online design covered most prominent online portals catering to the news & business affluent audience like Bloomberg, Money control, Reuters etc delivering 2,54,67,662 impressions. - Retail Activations: Retail level marketing programs gained a lot of prominence this year. Over 33 trade fairs were participated across the year. 40 Business Associate Meets conducted for alternate referral channel development. DHFL Express a unique activation program conducted across zones in Mumbai, Pune & Rest of Maharashtra, Delhi, Rajasthan, Kerala & Karnataka generating over 6000 enquiries. These events cumulatively supported in delivering disbursements of 603 files worth Rs. 36.5 crore. - Online: This year saw the DHFL website migrating to the Wordpress platform thereby easing out the content management aspect as well as enhancing the auto optimization for Search Engine Optimization (SEO) which is key in today''s digital marketing space. DHFL also went active on the Mobile space through the launch of its Mobile site, which today enjoys a 300% growth in traffic. The platform generated over 18000 enquiries. - Sports: Your Company is the associate team Sponsor for Mumbai Indians the most followed franchisee of the Indian Premier League (IPL) Twenty20. DHFL had over a million visits to our website www.dhfl.com on business and property related topics during the year. We continued to have leadership presence at premier housing finance industry and real estate property events. Awards & Recognition During this fiscal year, your Company has received the following Awards and Recognition, by the various bodies in recognition of Company''s operation and conduct of business, which has made us proud: - DHFL was awarded the Powerbrand status for the 2nd year consecutively. This is recognition by the Indian Consumer who has chosen DHFL as a Powerbrand, indicating a high degree of brand satisfaction across performance parameters. - DHFL was ranked 337th amongst the top Fortune India 500 companies for the year 2011-12. - Ranked as 47th amongst India''s'' 50 Biggest Financial Companies for the year by Business World Magazine. - DHFL won Marketer of Year � Realty Plus Excellence Awards of the Year � 2012. - DHFL won Greentech HR Excellence Award � 2012 for Best Strategy (Gold Award). - DHFL Wins Realty Plus Newsmaker of the Year-2011. - DHFL become Life time corporate member of with The Indian Institution of Valuers (India). Shri Kapil Wadhawan - Chairman & Managing Director received the Top Honour, as the undisputed, unanimous choice, for the POWERBRANDS HALL OF FAME CORPORATE ICON OF THE YEAR 2011 � 2012. The PowerBrands Hall of Fame seeks to honour leaders in the business fraternity who have carved a niche for themselves with their remarkable strategies that have channelized growth and been instrumental in taking their companies ahead. All these accolades are a reflection of DHFL''s consistency when it comes to delivering shareholder value and speaks volumes about it being customer- centric and service driven. CORPORATE SOCIAL RESPONSIBILITY (CSR) Considering these, the concept of Corporate Social Responsibility (CSR) is the demand of the current era. CSR has become a concept that frequently overlaps similar approaches, such as corporate sustainability, corporate sustainable development and corporate responsibility. To meet CSR, your Company along with the International Finance Corporation (IFC), a member of the World Bank Group, and DHFL Vysya Housing Finance Ltd., established Aadhar Housing Finance Private Limited (AHFPL) in May 2010 to meet the needs of the under-served lower income segment of society with focus and technical expertise. AHFPL primarily targets states with a relatively larger lower income segment such as Uttar Pradesh, Madhya Pradesh, Jharkhand, Orissa, Chhattisgarh and Bihar. The ticket size of loans to be originated will be limited to a maximum of Rs. 6 lakh. Your Company is a socially responsible organization and always keen to promote the interest of customers, employees, shareholders and communities as a whole. Your Company has upheld its CSR in the following ways: Our founder chairman''s vision and legacy continues to guide our company and our people. Social responsibility is a way of life at DHFL. It means investing in and enriching our communities. It means encouraging employee volunteerism. CSR was the main focus this year which received overwhelming participation and was a huge success. Blood Donation: To commemorate our heroes on this year''s Independence Day, DHFL organized a blood donation drive in association with the Red Cross Society of India on the 12th August, 2011. The event was received with eager participation from the DHFL family. Joy of Giving: Employees came forward to celebrate the Joy of Giving by donating newspapers, magazines etc. DHFL supported Umang Foundation''s initiative of supporting stationary kits to 300 underprivileged children in the Joy of Giving week. Children''s Day and Toy Donation Drive: This Children''s Day, DHFL conducted a Toy Donation Drive in association with Mumbai Mobile Cr�ches (MMC). The participation was quite enthusiastic and we managed to collect 5 large cartons of toys. DHFL volunteers also visited the Sion centre of MMC spent some time with the children and handed over the toys. A printer, 2 desktops and stationary for the kids were donated on the occasion. DHFL Touches Lives Of Children Through Balakalakaar DHFL was the title sponsor of AIESEC Mumbai''s Balakalakaar. Balakalakaar 2011 saw a 1000 children from 10 BMC schools participate in a month long program involving a series of workshops. Based on their performance, 100 children were shortlisted to showcase their talents and receive scholarships at the DHFL Balakalakaar Grand Finale 2011 event held in December 2011. Eye Donation Campaign: Employees of DHFL vowed to pass the gift of sight and pledged to donate their eyes facilitated by Umang Donation, a NGO committed to social causes. WORKPLACE DIVERSITY 1. DHFL, as an equal opportunity employer, celebrated the International Women''s Day. All women employees were recognized with chocolates and a card. 2. Regional festivals like Navratri, Onam, Christmas etc are celebrated with great fervor thus promoting a cohesive environment. Your Company in association with Mumbai Mobile Cr�ches participated in Standard Chartered Mumbai Marathon - 2012 on 15th January, 2012. Your Company had taken initiatives to help support the cause of children of construction workers at the construction sites in Mumbai. In line of agreement with Concern India Foundation (CIF), based in Mumbai, your Company continues to support for promoting activities linked to upliftment of members belonging to weaker sections of society. Concern India Foundation is undertaking the activities linked to the following major issues: - Education - Community Development - Health - Environment DHFL Employee Welfare Trust Your Company also provides assistance for education to its employees who aspire to undertake education through its trust Late Shri Rajesh Kumar Wadhawan DHFL Employees Welfare Trust. SECRETARIAL AUDIT Secretarial Audit is being carried out at the specified period, by practicing company secretary. As a measure of good corporate governance the Company had also appointed M/s. Aabid & Co, practicing company secretaries to conduct Secretarial Audit of the Company. The Secretarial Audit Report for the Financial Year ended 31st March, 2012 is provided in this Annual Report. HUMAN RESOURCES During the year the Company managed to attract talent from leading banks, financial institutions and multinational organizations. Your Company is fully operational with its globally renowned HRIS Peoplesoft package for its HR systems and processes. Your Company believes that the ability to keep learning is a key sustainable advantage and hence strong emphasis is placed on constantly upgrading the skills of its employees. During the year, all new recruits underwent an induction training programme. In addition, employees who were promoted across various grades attended Executive Development and Managerial Skills programmes. During the year, a leadership programme was designed and conducted by the Indian Institute of Management, Ahmedabad, for a select group of employees identified on the basis of their performance and future potential. Amongst many others, internal training programmes were conducted in the areas of housing finance, corporate risk management; negotiate selling skills, credit risk management KYC and AML measures. Your Company also nominated staff members for a variety of external programmes including real estate and housing, education, treasury and risk management, information technology, taxation and International Financial Reporting Standards. Measures were taken to reach out to the employees through revised incentive schemes, several reward and recognition programs and employee engagement activities. A complete On-Boarding process including the Buddy program was put in place to ensure that new employees feel at ease in the initial period of joining. During the year, the Company monitored more closely the individual performances, month on month and the weak performers were put through a structured Performance Improvement Plan (PIP). The work force of the Company as on 31st March 2012 was 1,400. The total work force cost during the year has gone up by 44.70% from Rs. 59.86 crore to Rs. 87.81 crore. This was mainly due to increase in work force to meet the requirements on account of significant expansion in terms of geographical growth as well as business volumes and the salary revisions effected during the year. During the year, the Company received an award for The Best Strategy Gold Award by Greentech Foundation as part of their HR Excellence Award, 2012. The HR- Head received the HR Leader Gold Award, 2012 given by the same foundation. The change management and transformation process including the scaling up of HR operations to meet the company''s dynamic needs, have contributed in no small measure to the robust growth of the company. Your Company has entered into Deed of Trust with Life Insurance Corporation of India which covers the Company''s employees under the group gratuity schemes with the Life Insurance Corporation of India (''LIC''). The schemes are defined benefit schemes and are funded in line with the LIC''s actuarial valuation carried out at year end. PARTICULARS OF EMPLOYEES In accordance with the provisions of Section 217(2A) of the Companies Act, 1956 and the rules framed thereunder, the names and other particulars of employees are set out in the annexure to the Directors'' Report. In terms of the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956 the Director Report is being sent to all the shareholders of the Company excluding the annex. Any shareholder interested in obtaining a copy of the said annex may write to the Company. EMPLOYEES STOCK OPTION SCHEME (ESOS) Employees Stock Option Scheme (ESOS) was approved and implemented by the Company and Options were granted from time to time to employees under ESOS 2008 and ESOS 2009 - Plan I & II in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (''''the SEBI Guidelines''''). INFORMATION TECHNOLOGY AND COMMUNICATIONS During the year 2011-12, apart from upgrading the existing software applications with enhanced/ added features to meet the current and emerging business needs, certain new application systems were implemented. Your Company has launched the customer portal in the financial year 2011-12 where the customers can view their loan account details on-line. This facility is primarily created to enable the customer to view the loan details at their convenience. This will also reduce the customer visit to the branches, which in turn will help to gradually reduce the manpower required at the branches to service the customer. Currently, we have enabled this facility for the post disbursement process, in the second phase we are planning to enable this facility to customers whose application has been logged into the system where they will be able to track the application status. We will initiate various activities with the help of marketing team to educate and make the customers aware of this facility so that we have more number of customer registrations in the customer portal. AMALGAMATION OF FIRST BLUE HOME FINANCE LTD AND DHFL HOLDINGS PRIVATE LTD. WITH YOUR COMPANY The Board of Directors of your Company at its meeting held on 28th September, 2011 had, approved amalgamation of First Blue Home Finance Limited and DHFL Holdings Private Limited with your Company in terms of a Scheme of Amalgamation (the Scheme) under Sections 391 to 394 of the Companies Act, 1956. The Board had approved the share swap ratio of 10:97, meaning thereby 10 (Ten) equity shares of Rs. 10/- each fully paid-up in your Company for every 97 (Ninety Seven) equity shares of Rs. 10/- each fully paid-up in First Blue Home Finance Ltd. Said swap ratio is based upon the report submitted by M/s. Ernst & Young and the fairness opinion of the same had been confirmed by Standard Chartered Bank, an independent merchant banker. The Appointed Date of the amalgamation was April 1, 2011. The aforesaid Scheme of Amalgamation of First Blue Home Finance Ltd and DHFL Holdings Private Ltd into and with your Company was approved by equity shareholders of your Company with requisite majority at the meeting held on 17th April, 2012. Subsequently, your Company filed the petition before the Hon''ble High Court at Bombay. SUBSIDIARY COMPANIES In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Profit and Loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. The Company will make available the Annual Accounts of the subsidiary companies and the related detailed information to any members of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open to inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies. The same will also be hosted on our website, www.dhfl.com. During the year under review your Company disinvested majority of its equity shareholdings in DHFL Vysya Housing Finance Ltd and DHFL Property Services Ltd to the existing promoters / promoter group of your Company. Disinvestment of equity shares in DHFL Vysya Housing Finance Ltd. was to compliance with NHB requirement. In view of the aforesaid disinvestment, the shareholding of your Company, in DHFL Vysya Housing Finance Ltd is below 10% of the total paid up equity capital of the DHFL Vysya Housing Finance Ltd and has ceased to be subsidiary of your Company and your Company does not hold any equity stake in DHFL Property Services Ltd. Accordingly, Aadhar Housing Finance Private Ltd, which was promoted by your Company also ceases to be subsidiary of your Company due to disinvestment of Company''s equity in DHFL Vysya Housing Finance Ltd. Due to aforesaid disinvestment, DHFL Vysya Housing Finance Ltd, DHFL Property Services Ltd and Aadhar Housing Finance Private Ltd. have ceased to be subsidiaries. However, the said companies shall continue to be Associate/Group Companies of your Company. Your Company has 3 subsidiaries, namely, First Blue Home Finance Ltd, First Blue Financial Consultants Ltd. and DHFL Holdings Private Ltd. CONSOLIDATION OF ACCOUNTS The audited Consolidated Accounts and Cash Flow Statement, comprising of DHFL and its subsidiary, First Blue Homes Finance Ltd. First Blue Financial Consultants Ltd and DHFL Holdings Private Ltd. are annexed to this Annual Report. The Auditors'' Report on the Consolidated Accounts is also attached. The Consolidated Accounts have been prepared in accordance with the Accounting Standards prescribed by the Institute of Chartered Accountants of India in this regard. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO The particulars regarding foreign exchange earnings and expenditure appear as Note No. 31.1 in the Notes forming part of the financial statement for the year ended 31st March, 2012. Since the Company is not engaged in any manufacturing activity, the other particulars relating to conservation of energy and technology absorption as stipulated in the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are not applicable. DIRECTORS In accordance with the provisions of the Companies Act, 1956 read with the Clause 158 of the Articles of Association of the Company, Shri Dheeraj Wadhawan and Dr. P. S. Pasricha, directors of your Company retire by rotation and being eligible; offer themselves for re- appointment at the ensuing Annual General Meeting. Necessary resolutions for the re- appointment of the aforesaid directors have been included in the notice convening the ensuing AGM. Brief resume of the Directors proposed to be appointed / re-appointed, nature of their expertise in specific functional areas and names of companies in which they hold directorship and membership / chairmanship of Board committees, as stipulated under Clause 49 of Listing Agreement with the Stock Exchanges, are provided in the Report on Corporate Governance forming part of the Annual Report. All the directors of the Company have confirmed that they are not disqualified for being appointed/ reappointed as directors in term of Section 274(1)(g) of the Companies Act, 1956. INTERNAL AUDIT Your Company has a well equipped internal audit department carrying out a regular independent evaluation of various activities undertaken by your Company through its branches, Zonal Offices and Corporate Office. The Internal Audit Department is headed by senior management personnel. The audit function maintains its independence and objectivity while carrying out assignments. It evaluates on a continuous basis, the adequacy and effectiveness of internal control mechanism, adherence to policies, procedures as well as regulatory and legal requirements. The function also proactively recommends improvement in operational processes and suggests streamlining of controls against various risks. The Audit Committee of the Board reviews the performance of the internal audit on continuous basis, gives direction to its functionaries and reviews effectiveness of internal control systems. In addition to internal audit, concurrent audit is conducted on monthly basis by engaging 22 independence practicing Chartered Accountant Firms in most of our branches covering major volume of our business. Focus of concurrent audit is mainly on transaction level adherence to policies, procedures and guidelines issued by management and compliance to regulatory and statutory guidelines. Systems and procedures are being upgraded to provide checks and alerts for avoiding/detecting fraud arising out of misrepresentation by borrower/s while availing the housing loans. AUDITORS M/s. B.M. Chaturvedi & Co., Mumbai, Chartered Accountant [Firm Registration No.114317W], retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. M/s. B.M. Chaturvedi & Co., have confirmed that if reappointed, it shall be within the limits of Section 224 (1B) of the Companies Act, 1956. The necessary eligibility certificate under Section 224(1B) of the Companies Act, 1956, was received from them. The Audit Committee and Board of Directors recommend the appointment of M/s. B.M. Chaturvedi & Co., Chartered Accountants, as the auditors of your Company. AUDITORS REPORT The notes to the accounts referred to in Auditors Report are self-explanatory and therefore do not call for any further comments. DIRECTORS'' RESPONSIBILITY STATEMENT Your Directors would like to inform that the audited accounts containing the Financial Statement for the year ended 31st March 2012 are in conformity with the requirements of the Companies Act, 1956 and they believe that the financial statements reflect fairly the form and substance of transactions carried out during the year and reasonably present the Company''s financial condition and results of operations. These Financial Statements are audited by the Statutory Auditors, M/s. B. M. Chaturvedi & Co., Chartered Accountants, Mumbai. In accordance with the provisions of section 217 (2AA) of the Companies Act, 1956 and based on the information provided by the management, your directors state that: (i) in the preparation of accounts, the applicable accounting standards have been followed; (ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2012 and of the profit of the Company for year ended on date; (iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities and (iv) they have prepared the annual accounts on a going concern basis. CORPORATE GOVERNANCE Your Company has complied with the provisions of Corporate Governance as under the amended Listing Agreements of the Stock Exchanges, with which the Company''s shares are listed. Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, the followings form part of this Annual Report : (i) Chairman & Managing Director''s declaration regarding compliance of Code of Conduct by Board Members and Senior Management personnel; (ii) Management Discussion & Analysis (iii) Report on the Corporate Governance; (iv) Auditors'' Certificate regarding compliance of conditions of Corporate Governance. FUTURE OUTLOOK Housing / real estate sector which is slowly coming out of the mid 2008 slump has received good support from Union Budget 2012- 2013. How the budget has encouraged housing sector finance is given below: - Existing scheme of interest subvention of 1 per cent on housing loan further liberalized. - Existing housing loan limit enhanced to Rs. 25 lakh under priority sector lending. - Limit of indirect finance under priority sector to housing loan enhance to Rs. 10 lakh from Rs. 5 lakh - Allowing External Commercial Borrowings (ECB) for low cost affordable housing projects across major cities and towns and - Setting up of a Credit Guarantee Trust Fund to ensure improved flow of institutional credit for housing loans. With the recent improvement in the demand for housing and real estate sectors, activities in the housing, real estate sectors and infrastructure sectors are expected to remain healthy in the coming quarters. This will lead to a rise in credit demand for housing. The liquidity conditions of your Company have remained comfortable during the year. Your Company has successfully raised funds from bank as well as non bank sources. Your Company does not expect any pressure on the liquidity front. This is because liquidity conditions in the banking system will continue to remain comfortable. A healthy demand for credit for home loan coupled with comfortable liquidity conditions will lead to a rise in disbursement. ACKNOWLEDGEMENTS Your Directors wish to place on record their gratitude to the National Housing Bank, the Company''s Customers, Bankers, Shareholders, Debenture holders, Depositors and others for their assistance and co-operation and who have helped the Company in its endeavour. The Board also places on record its deep appreciation for the excellent support received from the employees at all levels during the year. The Directors also like to thank the Bombay Stock Exchange, the National Stock Exchange, NSDL, CDSL and the Credit Rating Agencies for their co-operation. for and on behalf of the Board Kapil Wadhawan Chairman & Managing Director Dated : 10th May, 2012 Place : Mumbai

Source : Dion Global Solutions Limited

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