DIRECTORS’ REPORT TO THE MEMBERS, Your directors are pleased to present the Thirtieth Annual Report of your Company with the audited accounts for the year ended March 31, 2016 Dividend Your directors recommend payment of dividend of Rs. 2.30 per equity share of face value of Rs. 2 each for the year ended March 31, 2016 as against a dividend of Rs. 2.00 per share of face value of Rs. 2 each for the previous year. The dividend payout ratio for the year inclusive of additional tax on dividend will be 41% as against 43% in the previous year. Changes in Share Capital During the year, the paid up equity share capital increased as a result of allotment of 2,97,160 equity shares of the face value of Rs. 2/- each upon exercise of stock options under ESOS-2011. As at March 31, 2016, the equity share capital stood at Rs. 72,73,63,480 divided into 36,36,81,740 equity shares of Rs. 2/- each. Disbursements Loan disbursements during the year were Rs. 3,856.58 crores as against Rs. 3,120.87 crores in the previous year. GRUH continued to focus mainly on the retail segment and disbursed Rs. 3,450.90 crores to 40,084 families. Cumulative disbursements as at March 31, 2016 were Rs. 19,071.70 crores. Golden Jubilee Rural Housing Finance Scheme GRUH disbursed Rs. 1,615.72 crores in respect of 22,208 loans during the year under the Golden Jubilee Rural Housing Finance Scheme of the Government of India. Cumulative disbursements under the scheme were Rs. 6,995.59 crores in respect of 1,46,321 dwelling units. Rural Housing Fund During the year, GRUH disbursed Rs. 2,135 crores in respect of 23,567 loans in the rural areas. Cumulative disbursement under the rural housing has been Rs. 8,692 crores in respect of 1,79,367 loans. Rural area as defined by the National Housing Bank (NHB) is a location where population is less than 50000 as per the 1991 census. Under the Rural Housing Fund scheme of NHB, GRUH branded a special loan product – Shubh Lakshmi aimed at financing women applicants and disbursed Rs. 381.56 crores in respect of 4,242 loans. Affordable Housing The Ministry of Housing and Urban Poverty Alleviation (MHUPA) - The Government of India under “Housing For All by 2022” mission announced the Pradhan Mantri Awas Yojana (PMAY) which has 4 components aimed at addressing the housing requirement of the Affordable Housing segment. One of the components viz. the Credit Linked Subsidy Scheme (CLSS), offers a 6.50% interest subvention subsidy to eligible beneficiaries for a maximum loan amount of Rs. 6 lacs for 15 year loan tenure. The maximum interest subsidy per beneficiary works out to Rs. 2.20 lacs. GRUH signed MOU with NHB to promote the CLSS scheme and disbursed loans to 804 beneficiaries. GRUH received interest subsidy aggregating Rs. 7.01 crores in respect of 372 beneficiaries and credited the same to the respective customers loan accounts. Besides, GRUH also actively participates in the Affordable housing schemes sponsored by various state government viz. Gujarat, Chhattisgarh and Rajasthan where capital subsidy is offered to beneficiaries of LIG and EWS income segments. Under these schemes, GRUH has disbursed Rs. 87.57 crores in respect of 2,743 loans Loan Assets As at March 31, 2016, the loan assets increased to Rs. 11,114.55 crores recording a growth of 25%. Loan assets in respect of the retail segment grew by 24% and stood at Rs. 10,680.61 crores. Non-Performing Loans As per the prudential norms of NHB, GRUH’s gross non-performing loans stood at Rs. 35.55 crores as at March 31, 2016, constituting 0.32% of the total outstanding loans of Rs. 11,114.55 crores. The gross non-performing loans as at March 31, 2015 were Rs. 25.05 crores constituting 0.28% of the total outstanding loans of Rs. 8,926.48 crores. GRUH is required to carry a provision of Rs. 43.56 crores on standard individual home loans of Rs. 10,220.53 crores and a provision of Rs. 7.72 crores on standard loans other than individual home loans of Rs. 858.47 crores as at March 31, 2016. GRUH also carries provision of Rs. 0.13 crore on Instalments Due from Borrowers of Rs. 29.08 crores and Rs. 0.03 crore on Loan Against Deposit of Rs. 2.53 crores. Accordingly, GRUH carries a total provision of Rs. 51.44 crores in respect of standard assets. GRUH is required to carry a provision of Rs. 8.54 crores towards nonperforming loans as per NHB norms. However, as a measure of precaution, GRUH carries a provision of Rs. 25.17 crores. GRUH therefore carries a total provision of Rs. 76.61 crores on its total assets including standard assets and non performing loans. Net Non Performing Loans were 0.09% on outstanding loans of Rs. 11,114.55 crores. During the year, GRUH has written off Rs. 5.43 crores in respect of individual loans where the recovery was difficult in the near future. However, GRUH continued the recovery efforts in respect of written off loans of earlier years and could effect recoveries of Rs. 0.18 crore during the year in respect of such written off loans. GRUH also took possession of properties of the defaulting borrowers under the SARFAESI Act and has sold few of such acquired properties. Borrowings NHB Refinance GRUH availed refinance aggregating to Rs. 1,671.94 crores during the year, under various refinance schemes of which an amount of Rs. 700.49 crores was availed under the Golden Jubilee Rural Housing Refinance Scheme (GJRHRS), Rs. 381.23 crores under the Rural Housing Fund (RHF) and Rs. 188.73 crores under the Urban Housing Fund (UHF) indicating GRUH’s focus on the Rural segment and Affordable Housing segment. The refinance outstanding as at March 31, 2016 was Rs. 3,958.94 crores. Bank Term Loans GRUH received fresh sanctions from banks amounting to Rs. 2,765 crores of which GRUH availed loans aggregating to Rs. 2,521 crores. The outstanding bank term loans as at March 31, 2016 were Rs. 3,931 crores. Subordinated Debt As at March 31, 2016, GRUH’s outstanding subordinated debt stood at Rs. 35 crores. The debt is subordinated to present and future senior indebtedness of the company and has been assigned rating of “ICRA AAA” with Stable outlook, indicating highest degree of safety regarding timely servicing of financial obligations and “CRISIL AA+” with Positive outlook, indicating high degree of safety regarding timely servicing of financial obligations. Based on the balance term to maturity, as at March 31, 2016, Rs. 35 crores of the book value of subordinated debt is considered as Tier – II capital under the guidelines issued by NHB for the purpose of computation of Capital Adequacy Ratio. Non-Convertible Debentures (NCDs) During the year, GRUH raised NCDs amounting to Rs. 197 crores on a private placement basis. The outstanding NCDs as at March 31, 2016 stood at Rs. 847 crores. NCDs are rated “ICRA AAA” with Stable outlook, indicating highest degree of safety regarding timely servicing of financial obligations and “CRISIL AA+” with Positive outlook, indicating high degree of safety regarding timely servicing of financial obligations. Commercial Paper GRUH’s commercial paper is rated “ICRA A1+” and “CRISIL A1+”, indicating very strong degree of safety regarding timely payment of financial obligations. As at March 31, 2016, outstanding commercial paper was Nil. Deposits GRUH mobilised deposits of Rs. 441.80 crores and experienced a renewal ratio of 60.77% during the year. The outstanding balance of deposits as at March 31, 2016 was Rs. 1,462.30 crores. GRUH’s Deposit programme is rated “MAAA” (with stable outlook) by ICRA, indicating highest credit quality rating and “FAAA” (with stable outlook) by CRISIL, indicating very strong degree of safety regarding timely payment of interest and principal. There has been no default in repayment of deposits or payment of interest during the year. All the deposits accepted by the Company are in compliance with the requirements of NHB guidelines and Chapter V of the Companies Act, 2013 Investments GRUH continues to maintain its Statutory Liquidity Ratio (SLR) as stipulated by NHB. Accordingly, GRUH carried investments in approved securities aggregating to Rs. 207.82 crores as at March 31, 2016 to meet the requirement of the SLR. GRUH has classified its investments as long-term and valued them at cost. Adequate provision towards loss, if any, to be experienced on redemption of investments on maturity has been made. Unclaimed Deposits and Unclaimed NCDs As at March 31, 2016, deposits amounting to Rs. 5.38 crores had not been claimed by 886 depositors. The total amount of unclaimed deposits as at March 31, 2016 was Rs. 5.96 crores, which included Rs. 0.58 crore towards unclaimed interest on 1,240 deposits. Depositors were intimated regarding the maturity of deposits with a request to either renew or claim their deposits and subsequent reminders have been sent. As per the provisions of the Companies Act, deposits, NCDs and/or interest thereon, remaining unclaimed and unpaid for a period of seven years from the date they became due for payment are required to be credited to Investor Education and Protection Fund (IEPF) established by the Government of India. Accordingly, an amount of Rs. 12.93 lacs in respect of unclaimed deposits and interest thereon was transferred to the IEPF during the year. In terms of the provisions of the Companies Act, no claim would lie against the Company after the said transfer. As at March 31, 2016, there was no NCDs amount or interest thereon, remaining unclaimed and unpaid. Unclaimed Dividends As at March 31, 2016, dividend amounting to Rs. 1.33 crores has not been claimed by shareholders. GRUH has been intimating the shareholders to lodge their claim for dividend from time to time. As per the provisions of the Companies Act, dividends remaining unclaimed for a period of seven years from the date of transfer to the unpaid dividend are required to be credited to the IEPF. Accordingly, unclaimed dividend amount of Rs. 5.57 lacs in respect of the financial year 2007-08 was transferred to IEPF during the year. Unclaimed dividend amounting to Rs. 7.77 lacs in respect of the financial year 2008-09 is due for transfer to IEPF in August 2016. In terms of Section 125 of the Companies Act, 2013, no claim would lie against the Company after the said transfer. In terms of the IEPF (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012, the Company has made the relevant disclosures to the Ministry of Corporate Affairs (MCA) regarding unclaimed dividends and unclaimed matured deposits along with interest accrued thereon. GRUH has uploaded the prescribed information on www.iepf.gov.in and www.gruh.com. Risk Management Framework GRUH has a Risk Management framework approved by the board of directors. GRUH’s Risk Management framework provides the mechanism for risk assessment and mitigation. The Board has delegated responsibility of overseeing Risk Management framework to the Audit Committee. The Risk Management Committee (RMC) of GRUH comprises the Managing Director, the Executive Director and members of Senior Management. During the year, the RMC reviewed the risks associated with the business of GRUH, its root causes and the efficacy of the measures taken to mitigate the same. Thereafter, the Audit Committee and the board of directors also reviewed the key risks associated with the business of the Company, the procedures adopted to assess the risks, efficacy and mitigation measures. Regulatory Guidelines GRUH continues to comply with the guidelines issued by NHB regarding accounting standards, prudential norms for asset classification, income recognition, provisioning, capital adequacy, concentration of credit, credit rating, ‘Know Your Customer’ - (KYC) Guidelines and Anti Money Laundering (AML) Standards, fair practices code and real estate and capital market exposures. The details of compliances are outlined in the Management Discussion and Analysis Report. The task of overseeing the implementation of the Asset Liability Management (ALM) has been entrusted to the Audit Committee which oversees and reviews the ALM position vis-à-vis risk management. GRUH’s Capital Adequacy Ratio stood at 17.82% as against the minimum requirement of 12%. Tier – I capital was 16.13% against the minimum requirement of 6%. The Government of India has set up the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) under section 21 of the SARFAESI Act, 2002 to have a central database of all mortgages created by lending institutions. The object of this registry is to compile and maintain data relating to all transactions secured by mortgages. Accordingly, GRUH is registered with CERSAI and has been submitting data in respect of its loans. NHB vide its letter dated March 7, 2016 imposed penalty of Rs. 36.64 lacs for non-compliance regarding non-maintenance of requisite percentage of liquid assets during the period 01.04.2013 to 30.09.2014 on the component of “Interest accrued but not due on Deposits While GRUH paid the penalty as directed by NHB; GRUH has submitted its appeal to reconsider and review NHB’s decision. The issue is whether “Interest accrued but not due on Deposits” should be considered for maintenance of liquid assets. Based on the opinion of Auditors and past practices, GRUH did not consider the same. However, NHB has ignored GRUH’s interpretation and imposed the penalty. GRUH has appealed to NHB to review it in the light of GRUH’s compliance record heretofore. Human Resource Development At GRUH, human resource development is considered vital for effective implementation of business plans. Constant endeavours are being made to offer professional growth opportunities and recognitions, apart from imparting training to employees. During the current year, in-house training were provided to employees, inter alia in lending operations, recoveries, KYC, IT system & security and accounts. Employees were also nominated for training programmes conducted by NHB and other institutions. 264 employees underwent different training programmes. GRUH’s staff strength as at March 31, 2016 was 641. Particulars of Employees GRUH had 2 employees as at March 31, 2016 employed throughout the year who were in receipt of remuneration of Rs. 60 lacs or more per annum. In accordance with the provisions of Section 197 of the Companies Act, 2013, read with the Companies (Particulars of Employees) Rules, 1975, as amended, the name and other particulars of such employees are set out in the annex to the Directors’ Report. However, as per the provisions of Section 136 of the Companies Act, 2013, the Directors’ Report is being sent to all shareholders of the Company excluding the annex. The annex is available for inspection by the members at the registered office of the Company during business hours on working days up to the date of ensuing Annual General Meeting. Any shareholder interested in obtaining a copy of the said annex may write to the company secretary at the registered office of the Company. Employees Stock Option Schemes Presently, the stock options granted to directors and employees operate under the schemes ESOS-2011 and ESOS-2015. There has been no material variations in the terms of the options granted under any of the schemes and all the schemes are in compliance with the SEBI (Share Based Employee Benefits) Regulations, 2014. The disclosures as required under Regulation 14 of the said regulations have been placed on the website of the Company. Sexual Harassment of Women at Workplace The Company is an equal opportunity employer and consciously strives to build a work culture that promotes dignity of all employees. As required under the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules framed thereunder, the Company has implemented a policy on Prevention of Sexual Harassment of Women at Workplace. An Internal Complaints Committee has been set up to receive complaints, investigate the matter and report to the management. During the year, the Company received one complaint on sexual harassment. The complaint has been investigated and appropriate action has been taken. There are no complaints pending for more than 90 days. Awards and Recognitions During the year, few of the awards received by GRUH included: • CNBC Gujarat Ratna Award 2015 for “Excellence in Financial Sector” in the state of Gujarat. • Servicing highest number of customers in the LIG segment of Gujarat Housing Board Scheme of Vadodara under the Chief Minister Awas Yojna scheme for Affordable Housing. • GRUH’s customers were handed over Letter of Subsidy under Credit Linked Subsidy Scheme of Pradhan Mantri Awas Yojna by the State Government of Uttar Pradesh and NHB. • Managing Director Mr. Sudhin Choksey was awarded the prestigious ICAI Award 2015 under the CA Business Leader – Financial sector category. Auditors Statutory Auditors At the 28TH Annual General Meeting held on May 28, 2014, the members had appointed M/s. Sorab S. Engineer & Co., Chartered Accountants, having registration number 110417W as the statutory auditors of the Company for a period of 3 years upto March 31, 2017, subject to them ratifying the said appointment at every AGM. The Company has received a confirmation from M/s. Sorab S. Engineer & Co., Chartered Accountants, to the effect that their appointment, if made, at the ensuing AGM would be in terms of Sections 139 and 141 of the Companies Act, 2013 and rules made there under. The board proposes to the members to ratify the said appointment of M/s. Sorab S. Engineer & Co., Chartered Accountants. There are no qualification, reservation or any adverse remarks or disclaimer in their Audit Report. Secretarial Audit Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, GRUH has re-appointed Mr. M.C. Gupta of M/s M.C. Gupta & Co., a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company for three years. The Report of the Secretarial Audit is annexed herewith as ‘Annexure A’. The Secretarial Auditor have made observation relating to non-filling of Form MGT-10 relating to reporting of changes in shareholding of promoters and top 10 shareholders of the Company, under Section 93 of the Companies Act, 2013. The Company understand that 2 % change in the shareholding in relation to the Company’s capital is to be considered and not of the individual shareholding. Directors and Key Managerial Personnel In accordance with Articles 134 and 135 of the Articles of Association of the Company and the provisions of the Companies Act, 2013, Mr. Keki M. Mistry and Ms. Renu S. Karnad, directors of the Company, are liable to retire by rotation at the ensuing AGM and are eligible for reappointment. Necessary resolutions for the re-appointment of the aforesaid directors have been included in the notice convening the ensuing AGM and details of the proposal for re-appointment are mentioned in the explanatory statement of the notice. Your directors commend their re-appointment. All the directors of the Company have confirmed that they are not disqualified from being appointed as directors in terms of Section 164 of the Companies Act, 2013. There was no change in the Key Managerial Personnel during the year. Details of managerial remuneration as required under Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given as per ‘Annexure B’ to this report. Directors’ Responsibility Statement In accordance with the provisions of Section 134(3)(c) of the Companies Act, 2013 and based on the information provided by the management, your directors state that: i. In the preparation of annual accounts, the applicable accounting standards have been followed; ii. Accounting policies selected were applied consistently. Reasonable and prudent judgements and estimates were made so as to give a true and fair view of the state of affairs of the Company as at the end of March 31, 2016 and of the profit of the Company for the year ended on that date; iii. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; iv. The annual accounts of the Company have been prepared on a going concern basis. v. Internal financial controls have been laid down to be followed by the Company and such internal financial controls were adequate and were operating effectively. vi. Systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively. Corporate Social Responsibility Initiatives In accordance with the provisions of Section 135 of the Companies Act, 2013 and the rules framed there under, the Company has a Corporate Social Responsibility Committee of Directors comprising Mr. S. M. Palia – Chairman, Mr. Rohit C. Mehta, Mr. Prafull Anubhai, Mr. S. G. Mankad and Mr. Sudhin Choksey and has inter alia also formulated a CSR Policy. The role of the CSR Committee is to review the CSR policy, indicate activities to be undertaken by the Company towards CSR activities and formulate a transparent monitoring mechanism to ensure implementation of projects and activities undertaken by the Company towards CSR activities. GRUH was required to spend Rs. 494.46 lacs towards CSR activities. GRUH has approved CSR proposals aggregating to Rs. 495.72 lacs during the year, which is more than the amount required to be spent. GRUH incurred CSR Expenditure of Rs. 226.07 lacs during the year. Cumulatively, GRUH has approved CSR proposals aggregating to Rs. 763.33 lacs and incurred CSR expenditure of Rs. 419.09 lacs. GRUH has approved CSR proposals in the field of Providing Education, Promoting health care, Sanitation, Education for differently abled children, Promoting vocational skills, Empowerment of women and gender equality. Proposals approved but amount not spent as on March 31, 2016 is Rs. 344.24 lacs which would be spent during the coming years. The Annual Report on CSR Activities, which forms part of the Director’s Report, is annexed as ‘Annexure C’ to this report. Extract of Annual Return [Form No. MGT-9] The details forming part of the extract of the Annual Return in Form MGT-9 is provided as ‘Annexure D’ to this report. Particulars Particulars of loans, guarantees or investments made Since the Company is a housing finance company, provisions of Section 186 of the Companies Act 2013 relating to loans made, guarantees given or securities provided are not applicable to the Comapny. As regards investments made by the Company, the details of the same are provided under Note 12 and Note 15 forming part of the annual accounts of the Company for the year ended March 31, 2016. Particulars of Contracts or arrangements entered into with related parties: In accordance with the provisions of Section 188 of the Companies Act, 2013 and rules made there under, the transactions entered into with related parties are in the ordinary course of business and on an arm’s length pricing basis, the details of which are included in the notes forming part of the financial statements. There are no material contracts or arrangement or transactions during the year. Accordingly, information in Form AOC-2, is not annexed. Material Changes, details of Subsidiaries, Litigations There has been no material changes and commitment, affecting the financial position of the company which has occurred between the end of the financial year to which the financial statements relate and the date of the report. The Company does not have any subsidiary. There has been no change in the nature of business of the Company. No significant or material Orders have been passed by the regulators or Courts or Tribunals impacting the going concern status of the Company and / or the Company’s operations in future. Particulars regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Expenditure Particulars relating to conservation of energy and technology absorption stipulated in the Companies (Accounts) Rules, 2014 are not applicable. GRUH does not have any foreign exchange earnings. The Company had paid dividend of Rs. 0.25 crore in Foreign Currency. Management Discussion and Analysis Report and Report of the Directors on Corporate Governance In accordance with the SEBI (LODR) Regulations, 2015, the Management Discussion and Analysis Report and the Report of the Directors on Corporate Governance forms part of this report. Acknowledgements Your directors take this opportunity to place on record their appreciation to all employees for their hard work, spirited efforts, dedication and loyalty to GRUH. The employees have worked based on principles of honesty, integrity and fair play and this has helped GRUH in maintaining its growth. The directors also wish to place on record their appreciation to shareholders, depositors, referral associates, NHB, financial institutions and banks for their continued support. On behalf of the Board of Directors Mumbai Keki M. Mistry Chairman DIN : 00008886 DATE : April 19, 2016 PLACE: Mumbai |