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					                                                         C   O   N   T   E       N   T   S




                                  Board of Directors                         6
     Brief Profile of the Directors of the Corporation                       7
                              Chairman’s Statement                        11
                                   Directors’ Report                      17
  Report of the Directors on Corporate Governance                         29
    Auditors’ Certificate on Corporate Governance                         36
                      Review of the Chairman of the                       37
                       Audit Committee of Directors


                      R
                     eview of the Chairman of the
                                                                          37
              Compensation Committee of Directors


                      R eview of the Chairman of the
                                                                          37
        Investors’ Grievance Committee of Directors


       Management Discussion and Analysis Report                          38
                    A ccounts with Auditors’ Report                       45
Consolidated Group Accounts with Auditors’ Report                         79
                                    Social Initiatives                   102
                          Shareholders’ Information                      108
                                                                                       2
2




                                                                                                                                                                                                                                                                      Highlights
                                                                                                                                                         Operational Highlights
CEPS6 D:\Sales\Mohan\HDFC Main 2004\HDFC Highlights 2004.P65 — SBS (28-5-04)/NSS/1/6




                                                                                                                                                                                                                                                    (Rs. in crores)
                                                                                                                            1994-95     1995-96    1996-97    1997-98     1998-99     1999-00      2000-01     2001-02 2002-03          2003-04        Cumulative
                                                                                           Approvals                        1,494.55    2,071.46   2,521.70   3,251.27    4,071.76    5,305.15     6,879.77    9,041.25 11,731.57      15,215.56       67,082.95

                                                                                           Disbursements                    1,211.66    1,683.55   2,100.78   2,753.61    3,424.27    4,492.74     5,803.01    7,616.56   9,950.87     12,696.82       56,217.26
                                                                                           Cumulative Investment
                                                                                              made possible in
                                                                                              the housing sector           15,137.77 19,928.88 26,207.51 32,710.05 40,540.36 50,742.57 64,502.11 82,584.61 103,734.78                 134,165.90
                                                                                           1 Crore = 10 Million
                                                                                           1 Lac = 100,000




                                                                                                                                                              Financial Highlights
                                                                                                                                                                                                                                                    (Rs. in crores)
                                                                                                                             1994-95       1995-96     1996-97      1997-98       1998-99         1999-00      2000-01     2001-02        2002-03       2003-04
                                                                                           Gross Income                        780.33        982.18    1,265.33     1,444.68      1,752.73        2,015.56     2,382.35    2,700.15      2,975.62       3,077.85
                                                                                           Profit After Tax                    146.15        195.69      247.89       293.36        333.90          401.81       473.65      580.01        690.29         851.78
                                                                                           Shareholders’ Funds                 874.85      1,501.82    1,662.75     1,777.24      1,971.84        2,095.97     2,371.94    2,702.84      3,043.86       3,393.79
                                                                                           Share Capital - Equity              101.24        119.11      119.11       119.11        119.11          119.11       120.08      121.71      244.41@          246.61
                                                                                                            - Preference           —          50.00       50.00           —             —               —            —           —             —              —
                                                                                           Reserves and Surplus                773.61      1,332.71    1,493.64     1,658.13      1,852.73        1,976.86     2,251.86    2,581.13      2,799.45       3,147.18
                                                                                           Term Borrowings                   2,583.10      2,552.34    3,035.47     3,724.66      4,571.18        6,764.69     8,219.95   10,264.67     14,130.73      19,346.39
                                                                                           Deposits                          1,853.24      2,512.69    3,502.19     4,423.79      5,252.40        6,223.85     7,249.83    8,491.02      9,121.55       9,337.65
                                                                                           Loans Outstanding                 3,747.55      4,740.68    5,709.32     6,944.07      8,219.26       10,063.00    13,224.66   17,207.68     21,749.91      27,974.27
                                                                                           Dividend (%)                            32            37          45          75*            85           190**          125     250***          110@            135
                                                                                           Book Value per Share (Rs.)#             43            61          68           75            83              88           99        111            125            138
                                                                                           Earnings per Share (Rs.)#                7             8          10           12            14              17           20          24            28             35

                                                                                           * Includes one time special dividend of 20% to mark the completion of HDFC’s 20th Anniversary.
                                                                                           ** Includes one time special millennium (interim) dividend of 100%.
                                                                                           *** Includes a one time special Silver Jubilee dividend of 100%.
                                                                                           @ The Corporation allotted bonus shares in the ratio of 1:1 in December, 2002. Dividend is for the full year on the enhanced capital post the issue of bonus shares.
                                                                                           # Adjusted for bonus.
Board of Directors



                     Mr. Deepak S. Parekh ................................... Chairman


                     Mr. Keshub Mahindra ................................... Vice Chairman


                     Mr. S. B. Patel


                     Mr. B. S. Mehta


                     Mr. D. M. Sukthankar


                     Mr. D. N. Ghosh


                     Dr. S. A. Dave


                     Mr. S. Venkitaramanan


                     Dr. Ram S. Tarneja


                     Mr. N. M. Munjee


                     Mr. D. M. Satwalekar


                     Ms. Renu S. Karnad ...................................... Executive Director


                     Mr. K. M. Mistry ............................................. Managing Director




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Brief Profile of the Directors of the Corporation
                                                                  Mr. Deepak S. Parekh is the executive Chairman of the Corporation. He is a
                                                                  Fellow of the Institute of Chartered Accountants (England & Wales). Mr. Parekh
                                                                  joined the Corporation in a senior management position in 1978. He was
                                                                  inducted as a wholetime director of the Corporation in 1985 and was
                                                                  appointed as the Chairman in 1993. He is the chief executive officer of the
                                                                  Corporation.

                                                                  Mr. Keshub Mahindra is the vice chairman of the Corporation. He is a graduate
                                                                  of Wharton – University of Pennsylvania, U.S.A. He is a renowned industrialist
                                                                  and is the chairman of the Mahindra & Mahindra Group of companies. He has
                                                                  been a director of the Corporation since its inception. He is also the chairman
                                                                  of the Compensation Committee of Directors.

                                                                  Mr. S. B. Patel holds a Master’s degree in arts from the University of Cambridge.
                                                                  He heads a firm of consulting civil engineers with expertise in prefabrication,
                                                                  mass housing, tall buildings, factories, bridges and marine works. He was one
                                                                  of the three original authors of the idea of New Bombay. He has been a
                                                                  director of the Corporation since its inception and is a member of the
                                                                  Compensation Committee of Directors.

                                                                  Mr. B. S. Mehta is a graduate in commerce and a Fellow of the Institute of
                                                                  Chartered Accountants of India. Mr. Mehta is a renowned accountant in
                                                                  practice and is an expert on taxation, accountancy matters and mergers and
                                                                  acquisitions valuation. He is a director on the boards of several prominent
                                                                  companies in India and has been a director of the Corporation since 1988. He
                                                                  is also a member of the Compensation and Audit Committee of Directors.

                                                                  Mr. D. M. Sukthankar was an officer of the Indian Administrative Services and
                                                                  was Secretary, Ministry of Urban Development, Government of India and later
                                                                  Chief Secretary to the Government of Maharashtra. Mr. Sukthankar is recognised
                                                                  as an expert urban developer and is associated with housing sector for a
                                                                  number of years. He has been a director of the Corporation since 1989.

                                                                  Mr. D. N. Ghosh holds a Master’s degree in economics. He was former
                                                                  chairman of the State Bank of India. He is currently the chairman of ICRA
                                                                  Limited. He has been a director of the Corporation since 1989 and is a
                                                                  member of the Audit Committee of Directors.

                                                                  Dr. S. A. Dave is a Doctorate of economics and holds a Master’s degree in
                                                                  economics from the University of Rochester. Dr. Dave was former chairman of
                                                                  the Securities and Exchange Board of India and the Unit Trust of India.
                                                                  Dr. Dave is currently the chairman of the Centre for Monitoring Indian Economy.
                                                                  He has been a director of the Corporation since 1990. He is also the chairman
                                                                  of the Audit Committee of Directors.

                                                                  Mr. S. Venkitaramanan holds a Master’s degree in industrial administration from
                                                                  the University of Pittsburgh and a Master’s degree in physics from the University
                                                                  of Kerala. Mr. Venkitaramanan was former governor of the Reserve Bank of
                                                                  India. He is the chairman of Ashok Leyland Finance Limited and a director of
                                                                  many prominent companies. He has been a director of the Corporation
                                                                  since 1994.

                                                                                                                                              7
    Dr. Ram S. Tarneja holds a Doctorate in human resources from Cornell
    University. He also has an M. A. from the University of Delhi and University of
    Virginia and a B. A. Honors from Delhi. He was the former managing director of
    Bennett, Coleman & Company Limited. He has been a director of the
    Corporation since 1994. He is also the chairman of the Investors’ Grievance
    Committee of Directors.

    Mr. N. M. Munjee holds a Master’s degree in economics from the London
    School of Economics. He is a director on the boards of several prominent
    companies in India. He was earlier the executive director of the Corporation
    and had been working with the Corporation from 1978 to 1998.

    Mr. D. M. Satwalekar holds a Bachelors degree in technology from the Indian
    Institute of Technology, Mumbai and a Master’s degree in business
    administration from the American University, U.S.A. He is currently the managing
    director and chief executive officer of HDFC Standard Life Insurance Company
    Limited. He was earlier the managing director of the Corporation and had been
    working with the Corporation from 1979 to 2000. He is also a member of the
    Investors’ Grievance Committee of Directors.

    Ms. Renu S. Karnad the Executive Director of the Corporation, is a graduate in
    law and holds a Master’s degree in economics from Delhi University. She has
    been employed with the Corporation since 1978 and was appointed as the
    Executive Director of the Corporation in 2000. She is responsible for
    overseeing all aspects of lending operations of HDFC.

    Mr. K. M. Mistry the Managing Director of the Corporation, is a Fellow of the
    Institute of Chartered Accountants of India and is a member of the Michigan
    Association of Certified Public Accountants. He has been employed with the
    Corporation since 1981 and was the executive director of the Corporation
    since 1993. He was appointed as the deputy managing director in 1999 and
    the Managing Director in 2000. He is also a member of the Investors’ Grievance
    Committee of Directors.




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                                                                  Senior Executives

                                                                  SENIOR GENERAL MANAGER                  DEPUTY GENERAL MANAGERS
                                                                  Mr. K. G. Krishnamurthy                 Mr. Dilip Apte
                                                                                                          Mr. P. S. Barman
                                                                  GENERAL MANAGERS                        Mr. B. M. Bhasin
                                                                  Mr. R. Anand                            Mr. Girish Bhatia
                                                                  Mr. R. Arivazhagan                      Ms. Mala Bhojwani
                                                                                                          Mr. S. K. Chaudhari
                                                                  Mr. Conrad D’Souza
                                                                                                          Mr. Thomas Cherian
                                                                  Ms. Madhumita Ganguli
                                                                                                          Mr. Nikhil Dwivedi
                                                                  Mr. Mathew Joseph                       Mr. Prosenjit Gupta
                                                                  Mr. Irfan Koreishi                      Mr. C. V. Ignatius
                                                                  Mr. Suresh Menon                        Mr. S. R. Iyer
                                                                  Mr. P. K. Mukherjee                     Mr. K. Suresh Kumar
                                                                                                          Ms. Manju K. Malkani
                                                                  Mr. S. N. Nagendra
                                                                                                          Mr. M. B. Mishra
                                                                  Mr. M. Ramabhadran                      Ms. Sonal Modi
                                                                  Mr. S. Ramanath                         Mr. Naresh Nadkarni
                                                                  Mr. V. S. Rangan                        Mr. N. Radhakrishnan
                                                                  Mr. B. V. Sundararajan                  Ms. Premalatha Ramanathan
                                                                                                          Mr. V. Ramkumar
REGISTERED OFFICE                                                 COMPANY SECRETARY                       Mr. Prabhat Rao
Ramon House,                                                      Mr. Susir Kumar M.                      Mr. Subodh Salunke
H. T. Parekh Marg,                                                                                        Mr. R. Sankaranarayanan
169, Backbay Reclamation,                                                                                 Mr. Rajeev Sardana
Churchgate, Mumbai 400 020.                                                                               Mr. Jayesh N. Shah
Tel. Nos. : 22-2283 6255, 2282 0282                                                                       Mr. H. S. Shamasundara
Facsimile : 22-2204 6758, 2204 6834
                                                                  DEBENTURE TRUSTEES                      Mr. Dilip Shetty
E-mail : info@hdfc.com
Website : www.hdfc.com                                            Central Bank of India                   Mr. S. K. Vasant
                                                                  Debenture Trustee Section
SHARE DEPARTMENT                                                  Central Bank – MMO Bldg.,
Tel Rasayan Bhavan, Ground Floor,                                 6th Floor, 55, M. G. Road
Tilak Road Extn.                                                  Fort, Mumbai 400 023.
                                                                                                          SOLICITORS AND ADVOCATES
Opp. BEST Workshop Gate No. 4,
                                                                  IL&FS Trust Co. Ltd.                    Amarchand & Mangaldas & Suresh
Dadar T.T., Mumbai 400 014.
                                                                                                             A. Shroff & Company
Tel. Nos. : 22-2414 6267/68                                       IL&FS Financial Centre
Facsimile : 22-2414 7301                                          Bandra-Kurla Complex                    Wadia Ghandy & Company
E-mail : securities@hdfc.com                                      Bandra (E)
                                                                  Mumbai 400 051
                                                                                                          PRINCIPAL BANKERS
AUDITORS
S. B. Billimoria & Company                                        Law Debenture                           Central Bank of India
Chartered Accountants                                             Law Debenture Trust (Asia) Limited      HDFC Bank Ltd.
                                                                  Room 1904,                              State Bank of India
BRANCH AUDITORS                                                   19/F Two International Finance Centre   Bank of India
Pannell Kerr Forster                                              8, Finance Street, Central              Standard Chartered Bank
Chartered Accountants                                             Hong Kong                               Canara Bank

                                                                                                                                           9
Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




Chairman’s Statement

                                                                  Complexities abound in societies that strive to change,
                                                                  keeping in balance demands of singular family
                                                                  components and the efficiency of the environments in
                                                                  which they are entrenched. There is a marked difference
                                                                  in what is reality and what is practical to accomplish and
                                                                  yet again as I have debated at various times, I raise the
                                                                  issue of what needs to change in creating a sense of
                                                                  order in a rapidly shifting culture. As we grapple with
                                                                  ideas that beg innovation and overhauling, I am
                                                                  reminded of the words of Italian statesman, Niccolo
                                                                  Machiavelli: “There is nothing more difficult to take in
                                                                  hand, more perilous to conduct, or more uncertain in its
                                                                  success than to take the lead in the introduction of a
                                                                  new order of things”. Written in the 13th century, these
                                                                  words hold more value today than in preceding years.
                                                                  What then is the ground reality as we witness now?

                                                                  Promoting Home Ownership:                into an important asset class spurred
                                                                  Managing Human Settlements               by the very rapid development of
                                                                                                           the primary market for mortgages.
                                                                  After over two decades of housing
                                                                  finance availability for households,     While these developments augur
                                                                  pioneered by HDFC in the late            well for the continuing growth of
                                                                  seventies, we are at last witnessing a   this market, much needs to be done
                                                                  vibrant growth of home ownership         broadly to use the housing sector as
                                                                  in India. The market for housing         a poverty alleviator, an employment
                                                                  finance has grown enormously to          generator, a social stabiliser, a wealth
                                                                  over Rs. 55,000 crores today. The        creator and most importantly an
                                                                  success of HDFC’s experience of          attractive creator of human
                                                                  over 20 years coaxed commercial          settlements. Homes are not just
                                                                  banks and the insurance companies        houses, they are environments
                                                                  to participate in this market            which project the aspirations of
                                                                  vigorously and today the financial       individual families; clusters of homes
                                                                  sector as a whole has a significant      form neighbourhoods and clusters
                                                                  presence in the market for               of neighbourhoods form towns and
                                                                  mortgages. A fledgling secondary         cities. We have, in post independent
                                                                  market for mortgages has also            India, singularly failed to take care of
                                                                  begun and promises to develop            our cities and towns, to nurture

                                                                                                                                              11
     them, to ensure that they have their      The Objective of
     own dynamic service structures            a New Housing Policy
     including high quality governance
                                               I have said before and will scarcely
     and efficient utilities to serve
                                               tire of saying repeatedly that a
     growing populations. When will we
                                               strong robust society requires a
     begin to tackle some of these
                                               property owning democracy. Unless
     issues? I have chosen to
                                               people have a stake in their society,
     concentrate some of my remarks
                                               it is never likely to be stable. Home
     this year in this statement, on the
                                               ownership is the physical
     future of Indian cities. After all they
                                               embodiment of a stake in a society.
     will determine the welfare of nearly
                                               Housing finance was a crucial
     half of India’s population by 2015.
                                               constraint to home ownership right
     We may continue to build and
                                               upto the seventies when the only
     finance more and more housing but
                                               possibility of owning a home arose
     what will this mean for planning, for
                                               at the end of one’s life with the
     service delivery, for infrastructure,
                                               retirement benefits received. Today
     for the quality of the lives of the
                                               the story is very different. Home
     people we attempt to house?
                                               loans are available at every street
                                               corner with providers vying with
     The emergence of new players in           each other to offer the consumer a
     the mortgage and housing finance          better deal. The major constraint to
     business such as commercial banks         home ownership has been removed
     has created a dynamic scenario in         through a private sector initiative
     retail lending, with more options         taken by a bold visionary over a
     available on shelves. This dynamism       generation ago. We must now ask
     however needs to be handled               what the government (central and
     with care, with a focus on                states) have done to promote home
     long-term gain rather than                ownership? Very little it would
     short-term benefits. “Change              appear. Foreclosure laws, high stamp
     involves both the organisation and        duties on transfer of property, highly
     the environment”, as stated by            distorted land policies (the basic
     Dr. Michael Geoghegan and Dr. Paul        ingredient for good housing), high
     Pangaro who devoted years to              taxes on building materials, wealth
     research, development and strategic       tax, scathing rent control laws and
     planning at Du Pont. We at HDFC           the list can go on. Does this
     recognise the need to create new          constitute a signal for the promotion
     products and services alongside           of home ownership in a country
     cost-effective methods in which to        where 60% of the population in its
     deliver them.                             commercial capital continue to live

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Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




                                                                  in slums? We need seriously to           regional players in different markets.
                                                                  re-evaluate our approach to housing      Will we be able to survive this
                                                                  policy. It is possible for private       competition if we refuse to
                                                                  delivery of excellent housing units to   transform our physical spaces to
                                                                  the lower segment of the income          respond to new realities and
                                                                  distribution section with affordable     expectations that have become
                                                                  housing finance, as has been             commonplace? Even if we choose
                                                                  demonstrated in Thailand and             to do so (which is still not clear)
                                                                  elsewhere. With our present              how will we do it? The simplest of
                                                                  policies, explicit and implicit,         problems are difficult to fix owing
                                                                  economic theory would predict            to the complexity that we have built
                                                                  expensive housing for the few and        into our governance mechanisms.
                                                                  inadequate and informal housing for      Where do we start? Even the
                                                                  the many. Precisely the situation we     profession of town planners has
                                                                  have. Clearly a reversal is needed.      disintegrated at a time when we
                                                                  How soon can we expect it?               need a new generation of urban
                                                                                                           planners to strategically rethink, the
                                                                  The Nature of Human Settlements:
                                                                                                           purpose of our cities and to realign
                                                                  Cities
                                                                                                           them with new vision. After all,
                                                                  India today cannot showcase              infrastructure investments are a
                                                                  one city that has gone through a         derived demand arising from this
                                                                  transformation that makes it             new purpose. If we have no vision
                                                                  resemble any major city in Asia.         what are we to invest in? Perhaps
                                                                  Why? Cities around India have been       this explains the moribund state of
                                                                  through major transformation in the      our investment climate precisely at a
                                                                  past decade in order to remain           time when the financial system is
                                                                  magnets for business and growth.         flushed with funds. Where are these
                                                                  Dubai, Kuala Lumpur, Shanghai,           investment opportunities? And why
                                                                  Beijing, Hong Kong, Taipei, Singapore    don’t they arise when our cities are
                                                                  are prime examples. Future               crying for reinvention, innovation
                                                                  locational decisions by firms will       and investment?
                                                                  increasingly depend on cities rather
                                                                                                           At present, we have a housing
                                                                  than countries. What do cities have
                                                                                                           shortage of 19.4 million units in the
                                                                  to offer in terms of comparative
                                                                                                           urban and rural areas. Outstanding
                                                                  advantages in their labour markets,
                                                                                                           mortgage loans to GDP in India are
                                                                  logistics, location, connectivity and
                                                                                                           only at 2% compared to 20-40% in
                                                                  entertainment?
                                                                                                           Southeast Asia and 51% in the US.
                                                                  Cities in the Pan Asian region will      Mortgages form just about 10% of
                                                                  compete for the business of              the advances of the banking sector.

                                                                                                                                            13
     The structure of our GDP has shifted     The focus on infrastructure
     very rapidly to our cities, especially
                                              In terms of priority, the infrastructure
     so as the service industries have
                                              sector needs special attention since
     become vital to igniting growth.
                                              it is the basic underlying framework
     Perhaps 60% of our GDP is now
                                              of all facilities. Within this, the real
     produced by our cities. Can we
                                              estate sector and housing in
     afford to neglect them? This brings
                                              particular, is an integral part of
     me to the question of how
                                              economic development. This arises
     practically can these issues be
                                              from the spillover and multiplier
     addressed. Who is the standard
                                              effects that the housing sector has. It
     bearer for the 21st century
                                              not only stimulates demand in
     sophistication and will a stable
                                              related sectors, but since it is largely
     government serve as the engine for
                                              non-tradable, a large part of the
     transformation? The central
                                              generated income is absorbed and
     government needs to declare two
                                              retained in the economy. Thus, new
     national economic clusters around
                                              development in housing will require
     New Delhi and Mumbai and three
                                              a simultaneous focus on adequate
     regional clusters around Hyderabad,
                                              lighting, water supply, waste
     Bangalore and Chennai. All five cities
                                              disposal and urban traffic solutions.
     have huge potential as business and
                                              Electricity and power reforms have
     economic centres, have developed
                                              been initiated, but it is the
     substantial cluster economies and
                                              implementation of suggested
     have huge potential to boost
                                              reforms that will decide how
     national economic growth. All five
                                              successful they will be. Therefore, a
     need to create 50-year visions for
                                              winning strategy will be one where
     their future keeping an eye on
                                              there is concurrent development in
     global comparative advantage.
                                              construction and public
     Their transformation needs to be
                                              infrastructure.
     strategised with respect to plug
     and play infrastructure and world-       This exercise would create the
     class logistics and connectivity.        expertise needed for city
     Public investments would be made         transformation; institutions would
     with central help and state              need to be created; expertise
     facilitation in a manner which           assembled; stake holders consulted;
     leverages private investments. The       detailed plans drawn up and city
     latter will always follow the former     resources mobilised. The learning
     and the former would depend on           from such a mass exercise would
     clear strategic intent based on long     be institutionalised which would
     range vision.                            help transform smaller human


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Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




                                                                  settlements in a similar manner. We      Another area that needs attention is
                                                                  must begin a process that has the        on increasing Foreign Direct
                                                                  potential to transform how we do         Investments. We may have got all
                                                                  things as far as cities are concerned.   the theories and justifications in
                                                                  The task is gigantic, we need to         place but what we need to
                                                                  make a very rapid beginning.             understand is that, in spite of the
                                                                                                           best policies, growth in FDI will not
                                                                  The Special Economic Zones are a         be possible unless we tackle the
                                                                  special type of cluster with very        problems of delays caused by
                                                                  specific advantages. Experiments         overlapping jurisdictions, unending
                                                                  with their development would also        paperwork and the lack of decision-
                                                                  help to demonstrate the nature of        making ability. The lack of clarity in
                                                                  private sector management of             the FDI process is the main reason
                                                                  common resources and may also            for the exit of foreign investors
                                                                  lead to the notion of privately run      mid-way. In my view, transparency
                                                                  municipalities as corporate entities     in processes is the only answer
                                                                  serving their constituencies. India      and efforts should be made
                                                                  needs to experiment with several         in this direction if we are to
                                                                  examples of different ways to            become an attractive FDI
                                                                  ensure better service delivery to        destination. This will not only act as
                                                                  specific constituencies. The present     a gap filler between savings and
                                                                  form of service delivery is woefully     investment, but also as a means for
                                                                  short of desired standards.              bringing in better technology and
                                                                                                           management.
                                                                  Which city in India is currently
                                                                                                           Conclusion
                                                                  researching its future? Which city
                                                                  has a database which even                While we continue to build more
                                                                  allows it to understand itself? In       houses and finance them, we must
                                                                  how many cities do we know               urgently put the process into some
                                                                  GDP growth, its components and           context. We need a coherent,
                                                                  the trend line of its components.        simple statement of objectives so far
                                                                  Without this data we are blind to        as a housing policy is concerned
                                                                  our own disadvantages. Much              which translates this objective into a
                                                                  work needs to be done for                consistent set of policy components
                                                                  building and understanding of            which promote those objectives.
                                                                  Indian cities and driving the            Today we seem to be far from this
                                                                  institutional forms that will help       simple position. Most of the housing
                                                                  them prevent the fate that has           that is financed by the housing
                                                                  befallen so many worldwide.              finance system today is in urban

                                                                                                                                            15
     areas. Cities are a crucial locational   and principles, success is a
     component for the growth of              foregone conclusion. What will
     housing markets. We must place           matter is how we define success for
     cities into a coherent urban profile     ourselves and how we direct the
     which helps to improve their             organisation on the path that we
     planning, governance and utility         have set out to tread.
     services. Institutional reform is
                                              HDFC stands strong in the midst of
     urgently required if this is to occur.
                                              the churning of political mindsets,
     The question before us is: how do
                                              vagaries of markets, unpredictable
     we begin this process? I have
                                              turnstiles in government policy. We
     outlined a possible starting point
                                              stand committed to promote
     but much work needs to be done.
                                              relevant ideas that initiate a sense of
     Desmond Morris humorously wrote:
                                              quality and pride in our metros and
     “The city is not a concrete jungle, it
                                              a congenial environment for the
     is a human zoo”. Hopefully the
                                              challenging and the challenged.
     inmates of India’s ‘modern’ cities
                                              I reiterate the beliefs of Tom Robbins
     can look forward to better things or
                                              who said that “True stability results
     can they?
                                              when presumed order and
     For us at HDFC principle-centred         presumed disorder are balanced. A
     leadership has enabled us to build a     truly stable system expects the
     strong foundation, characterised by      unexpected, is prepared to be
     fairness, compassion, efficiency and     disrupted, waits to be transformed”.
     effectiveness. Trust and honesty is      We at HDFC are ready...
     what we have grounded our beliefs
     in the pursuit of excellence. As we
     move into a new era fraught with
     opportunities and challenges,
     I believe that with the right vision




16
Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




Directors’ Report
TO THE MEMBERS                                                                                                 Mortgage-Backed Securities (MBS)
Your directors are pleased to present the Twenty-seventh Annual Report of your                                 During the year HDFC successfully
Corporation with the audited accounts for the year ended March 31, 2004.                                       completed its sixth MBS issue of
                                                                                                               Rs. 234.54 crores. The issue received
                                                                                                               the highest rating “AAA(ind)(SO)”
                                                                                                               indicating the highest degree of safety.
   Financial Results                                                         For the                 For the
                                                                        year ended             year ended
                                                                                                               To date, loans aggregating to Rs. 811.21
                                                                    March 31, 2004         March 31, 2003      crores have been sold by the
                                                                     (Rs. in crores)         (Rs. in crores)   Corporation through the issue of MBS.
                                                                                                               HDFC continues to service the loans
   Profit before Tax                                                     1,026.98                 851.03
                                                                                                               sold under the MBS issues.
   Provision for Tax                                                       175.20                 160.74       Repayments
   Profit after Tax                                                        851.78                 690.29       During the year under review,
                                                                                                               Rs. 5,922 crores were received by
                                                                                                               way of scheduled repayment of
   Appropriations have been made as under:                                                                     principal through monthly instalments as
   Transfer to Special Reserve No. II                                      230.00                 224.00       well as redemptions ahead of schedule,
                                                                                                               as compared to Rs. 4,961 crores
   Transfer to General Reserve                                             242.19                 158.99       received last year.
   Transfer to Shelter Assistance Reserve                                     4.00                    4.00     Resource Mobilisation
                                                                                                               Bank Loans
   Proposed Dividend (at Rs. 13.50 per share)                              332.93                 268.85
                                                                                                               During the year, the Corporation raised
   Additional Tax on Dividend                                               42.66                   34.45      loans amounting to Rs. 7,153 crores
                                                                           851.78                 690.29       from commercial banks, of which
                                                                                                               Rs. 4,173 crores was under the priority
                                                                                                               sector category of commercial banks.
Dividend                                                          crores in the previous year representing
Your directors recommend payment of                               a growth of 28%.                               Approvals & Disbursements (Cumulative)
                                                                                                                                                 (Rs. in crores)
dividend for the year ended March 31,                             Cumulative loan approvals and
2004 of Rs. 13.50 per share as against                            disbursements as at March 31, 2004                                                                                              67,083
                                                                                                                80000
Rs. 11 per share for the previous year.                           were Rs. 67,083 crores and Rs. 56,217
                                                                                                                70000
                                                                                                                                                                                                           56,217

The dividend payout ratio for the                                 crores respectively.
                                                                                                                                                                                51,867




current year inclusive of the additional                                                                        60000

                                                                  Individual loan business continued to be
                                                                                                                                                                                         43,520




tax on dividend will be 44.1% as
                                                                                                                                                              40,136




                                                                                                                50000
compared to 43.9% in the previous                                 strong despite increased competition. In
                                                                                                                                                                       33,570
                                                                                                                                            31,095




year.                                                             value terms, individual loan approvals and    40000
                                                                                                                                                     25,953
                                                                                                                        24,215




                                                                  disbursements registered a growth of
                                                                                                                                 20,150




                                                                                                                30000
Lending Operations                                                32% and 30% respectively over the
                                                                                                                20000
Loan approvals during the year were                               previous year. Individual loan growth was
Rs. 15,216 crores as compared to                                  driven by lower rates of interest, steady     10000

Rs. 11,732 crores in the previous year                            property prices, growth in the urban              0
                                                                                                                        2000                2001              2002              2003              2004
representing a growth of 30%. Loan                                middle class, continued fiscal incentives
disbursements during the year were                                and an increase in HDFC’s distribution                                  Approvals                        Disbursements

Rs. 12,697 crores as against Rs. 9,951                            network.

                                                                                                                                                                                                           17
As part of HDFC’s liability management                                                                                                                            100 million has been lent directly by IFC
strategy, the Corporation prepaid,                                   Funds Employed                                                                               as a multilateral tranche and was drawn-
                                                                             (Rs. in crores)
repriced or re-negotiated its high cost                                                                                                                           down by HDFC in June 2003. Loan A
bank loans. This helped the Corporation                                                                                                                           has a maturity of 8 years. Loan B of USD




                                                                                                                                                 19,346
                                            20000
to reduce its overall cost of borrowing.                                                                                                                          100 million is a syndicated tranche and
                                            18000
                                                                                                                                                                  has a maturity of 5.5 years. In December
Refinance from National Housing Bank




                                                                                                                      14,130
                                            16000
                                                                                                                                                                  2003, HDFC concluded the syndicated
(NHB)                                       14000                                                                                                                 Loan B facility with the signing of the
HDFC has drawn refinance amounting to                                                                                                                             Participation Agreements between IFC




                                                                                                     10,265
                                            12000




                                                                                                                                                          9,338
                                                                                                                               9,122
Rs. 350 crores during the year under                                                                                                                              and seventeen overseas banks.




                                                                                                8,491
                                                                                8,220
                                            10000
NHB’s Refinance Scheme to Housing

                                                                             7,250
                                                             6,765
                                                            6,224
                                             8000
Finance Companies, 2003. NHB has an                                                                                                                               In October 2003, HDFC drew down a
internal rating mechanism for housing
                                             6000
                                                                                                                                                                  loan of USD 50 million from




                                                                                                                                         3,394
                                                                                                              3,044
                                                                                        2,703                                                                     Deutsche Investitions – Und
                                                                     2,372
                                                    2,096




                                             4000
finance companies (HFCs) and the
Corporation has been assigned the
                                             2000                                                                                                                 Entwicklungsgesellschaft MbH (DEG), a
highest rating for its refinance schemes        0
                                                      2000             2001              2002                   2003                       2004
                                                                                                                                                                  member of the Kreditanstalt für
by NHB.                                                                                                                                                           Wiederaufbau (KfW) Group of Germany.
                                                 Net Worth                     Term Borrowings                                         Deposits                   The loan was for an average tenor of
During the year, HDFC prepaid an                                                                                                                                  6.5 years.
amount of Rs. 268.42 crores availed
under earlier refinance schemes.            a private placement basis. HDFC raised                                                                                Deposits
Non-Convertible Debentures (NCD)            these funds at rates which are                                                                                        In line with declining interest rates in the
                                            comparable with the lowest prevalent in                                                                               economy, the Corporation reduced
In September 2003, Securities and
                                            the market. During the year, the                                                                                      interest rates on deposits twice during
Exchange Board of India (SEBI) issued a
                                            Corporation bought back high cost                                                                                     the year. However as a result of higher
circular regarding conditions to be
                                            debentures amounting to Rs. 827                                                                                       rates of interest offered by competing
complied with in respect of issuance,
                                            crores. The premium payable on                                                                                        savings products there has been no
listing and trading of privately placed
                                            redemption of the debentures has been                                                                                 significant growth in the deposit level
debt securities by listed companies. The
                                            charged to the Securities Premium                                                                                     over the previous year. As at March 31,
circular required companies to inter alia
                                            Account.                                                                                                              2004, outstanding deposits stood at
make full disclosures in the manner
prescribed in Schedule II of the            In March 2004, the Corporation raised a                                                                               Rs. 9,338 crores. The depositor base
Companies Act, 1956, Chapter VI of the      5-year NCD of Rs. 1,000 crores. This                                                                                  now stands at over 1.2 million
SEBI (Disclosure and Investor Protection)   was the single largest NCD issue on a                                                                                 depositors.
Guidelines, 2000 and the Listing            private placement basis by a company                                                                                  Public deposits constitute approximately
Agreement with the exchanges. Your          in India.                                                                                                             80% of the total deposits of the
Corporation has complied with these         The Corporation’s NCDs have the                                                                                       Corporation.
requirements and has filed an umbrella      highest rating of ‘A AA’ by both CRISIL
offer document for fresh issuance of                                                                                                                              CRISIL and ICRA have for the ninth
                                            and ICRA.
NCDs amounting to Rs. 2,000 crores.                                                                                                                               consecutive year, affirmed their ‘A AA’
The Corporation’s NCD issues have           Multilateral Loans                                                                                                    rating for HDFC’s deposits. This rating
been listed on the Wholesale Debt                                                                                                                                 represents ‘highest safety’ as regards
                                            In June 2003, HDFC had signed a loan
Market segment of the National Stock                                                                                                                              timely repayment of principal and
                                            agreement of USD 200 million with
Exchange of India Limited (NSE).                                                                                                                                  interest.
                                            International Finance Corporation (IFC),
During the year, the Corporation raised     Washington. The loan from IFC                                                                                         The support of the agents and their
NCDs amounting to Rs. 2,702 crores on       comprises two tranche. Loan A of USD                                                                                  commitment to HDFC has been

  18
Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




instrumental in HDFC’s deposit products                           the Corporation has entered into swaps            housing and social infrastructure loans in
continuing to be a preferred investment                           to convert some of its fixed rate                 the earthquake affected areas.
for households and trusts, despite                                liabilities into floating rate liabilities. The
higher rates of return being offered by                           swaps are generally benchmarked off               Non-Performing Loans
alternate saving instruments.                                     the government securities yields or the           Gross non-performing loans defined as
                                                                  USD LIBOR. As at March 31, 2004,                  loans where the instalments are
Unclaimed Deposits                                                outstanding swap contracts were for               outstanding for more than six months as
As of March 31, 2004 public deposits                              amounts aggregating to Rs. 2,295                  at March 31, 2004 amounted to
amounting to Rs. 109.73 crores had not                            crores.                                           Rs. 257.22 crores. This is equivalent to
been claimed by 32,187 depositors.                                KfW Lines/Grant                                   0.89% of the portfolio (0.92% in the
Since then, 14,803 depositors have                                                                                  previous year) comprising loans as well
claimed or renewed deposits of                                    During the year, HDFC continued to                as preference shares and debentures
Rs. 52.85 crores. Depositors were                                 draw upon the funds available under               issued by corporates and corporate
intimated regarding the maturity of                               the third line of Euro 15 million from            deposits placed for financing their real
deposits with a request to either renew                           KfW for the purpose of low-income                 estate projects. While there has been an
or claim their deposits.                                          housing and micro-enterprise loans. In            increase in non-performing loans in the
                                                                  the economically weaker section (EWS)             industry despite authorities having
As per the provisions of Section 205C                             housing component of Euro 9 million,              directed lenders to exercise caution
of the Companies Act, 1956, deposits                              the cumulative loan approvals stood at            regarding housing and other retail loans,
remaining unclaimed for a period of                               Rs. 30.31 crores as at March 31, 2004.            HDFC’s recovery performance
seven years from the date they became                             The balance amount of Euro 6 million is           continued to be good.
due for payment have to be transferred                            for the micro-enterprise finance facility
to the Investor Education and Protection                          (MFF), under which the cumulative loan            In November 2003, the Government of
Fund (IEPF) established by the Central                            approvals stood at Rs. 21.83 crores.              India, Ministry of Finance notified that
Government. Accordingly, during the                               During the year, HDFC has approved 16             the provisions of the Securitisation and
year, an amount of Rs. 6.09 lacs has                              new projects in respect of both the               Reconstruction of Financial Assets and
been transferred to the IEPF. No                                  components. The cumulative loan                   Enforcement of Security Interest Act,
additional amounts are transferable to                            disbursements in the third line stood at          2002 be extended to include
the IEPF.                                                         Rs. 34.34 crores.                                 registered Housing Finance Companies
                                                                                                                    (HFCs) with a Tier I capital of Rs. 10
Risk Management                                                   The fourth line from KfW, designed to             crores or above as at March 31, 2003.
HDFC protects itself from foreign                                 finance rebuilding measures in the                It is envisaged that this Act would
exchange fluctuations in respect of                               aftermath of the Gujarat earthquake is            facilitate HFCs to undertake securitisation
foreign currency borrowings availed by                            now nearing full utilisation. The grant           of financial assets and exercise powers
the Corporation through dollar                                    component of Euro 10.23 million is for            of recovery without intervention of the
denominated rupee loans and various                               reconstructing destroyed houses and               Court or a Recovery Officer.
risk management arrangements. As at                               social infrastructure targeting poor
                                                                  communities. As at March 31, 2004,                As a prudent measure, the provision for
March 31, 2004, out of HDFC’s
                                                                  HDFC has released a cumulative grant of           contingencies is being strengthened by
borrowings in foreign currency
                                                                  Rs. 36.60 crores to 13 local non-                 a transfer of Rs. 61 crores, of which
amounting to USD 813 million, the
                                                                  government organisations (NGOs)                   Rs. 11 crores is through a charge to the
foreign currency exposure on loans net
                                                                  operating in rural areas. These NGOs              Profit and Loss Account and Rs. 50
of risk management arrangements is USD
                                                                  have in all constructed over 8,000                crores through a transfer from Special
182 million.
                                                                  houses across 5 districts. The loan               Reserve No. I account. After taking into
In order to ensure matching of floating                           component of Euro 15 million has been             account these transfers the balance in
rate liabilities with floating rate assets,                       deployed for refinancing individual               the provision for contingencies account

                                                                                                                                                          19
Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




                 Loan Quality &                                                    your directors decided not to pursue                   years commencing from March 31,
           Provision for Contingencies                                             the buy-back proposal.                                 2005, with a minimum of 20% of the
                                        (%)
                                                                                                                                          additional provisioning being required
     1.5                                                                           Regulatory Guidelines/Amendments
                                                                                                                                          to be made each year.
                   1.38




                                                              1.38
                                 1.34




                                                1.30




                                                                            1.19   HDFC has complied with the Housing
                                                                                                                                          Distribution Network
     1.2
                                                                                   Finance Companies (NHB) Directions,
                                                                                   2001 prescribed by NHB regarding                       In order to enhance customer service,
                                                       0.92
                                         0.91
            0.90




                                                                     0.89




                                                                                   accounting standards, prudential norms                 HDFC continued its strategy of widening
                          0.81




     0.9

                                                                                   for asset classification, income                       its distribution network with 31 new
     0.6                                                                           recognition, provisioning, capital                     offices, taking the total distribution
                                                                                   adequacy, concentration of credit and                  network to 173 offices in India. In
                                                                                   credit rating.                                         addition, HDFC covers over 90 locations
     0.3
                                                                                                                                          through its outreach programmes.
                                                                                   HDFC’s capital for the purpose of
                                                                                                                                          Outreach programmes are conducted in
                                                                                   determining the capital adequacy
     0.0
             2000         2001            2002         2003           2004                                                                locations where HDFC does not have a
                                                                                   comprises entirely of Tier I capital.
           Gross NPLs as a % of Portfolio                                                                                                 permanent presence. To further
           Provision for Contingencies as a % of Portfolio                         HDFC’s capital adequacy is 13.3% as
                                                                                                                                          augment its reach, HDFC also has
  Portfolio includes loans and investments in preference                           against the minimum requirement of
  shares, debentures and corporate deposits for financing                                                                                 extension counters at several
  real estate projects.                                                            12%.
                                                                                                                                          companies.
                                                                                   With effect from March 31, 2005, NHB
as at March 31, 2004 stood at                                                      has stipulated that an asset will be                   The Corporation also markets its loan
Rs. 343.15 crores, which is equivalent                                             classified as non-performing if the                    products through Direct Selling Agents
to 1.19% of the portfolio.                                                         interest or instalment is overdue for a                (DSAs). Loans originated from DSAs
                                                                                   period of 90 days. NHB has permitted                   accounted for 22% of individual loans
The Corporation has no ‘net’ non-                                                                                                         approved in value terms, during the
                                                                                   HFCs to phase out the additional
performing loans (previous year – nil) as                                                                                                 year. DSAs only source loans for the
                                                                                   provisioning over a period of three
the provisions for contingencies exceed
the non-performing loans.
                                                                                                                                            Composition of Loans Outstanding
                                                                                                Loans Outstanding
Buy-back of Equity Shares                                                                             (Rs. in crores)
                                                                                                                                                           (%)
                                                                                                                                                     (Net of securitised loans)
The Board of Directors of the                                                                                                                         (As at March 31, 2004)

Corporation at its meeting held on
October 17, 2002 considered a
proposal to buy-back up to 5% of the                                                30000
                                                                                                                                 27,974
                                                                                                                                                   69
paid-up equity share capital of the
Corporation. At the Extraordinary                                                   25000
                                                                                                                        21,750
General Meeting (EGM) held on                                                                                                                                                     30
                                                                                    20000
December 2, 2002, you had approved                                                                            17,208
an alteration in the Articles of                                                    15000                                                                            1
                                                                                                     13,225
Association incorporating a clause to
                                                                                            10,063
enable the Corporation to buy-back its                                              10000
own shares. However, as the requisite                                                                                                                     Individuals - 69%

approvals from the authorities, especially                                           5000
                                                                                                                                                          Corporates - 30%
the provision regarding post buy-back
debt equity norms have not been                                                         0
                                                                                            2000     2001     2002      2003     2004
                                                                                                                                                          Others - 1%

relaxed within the envisaged time-frame,

                                                                                                                                                                                       21
Corporation. HDFC continues to retain                                                                                  to 10% of the equity capital of EHFC.
control over the credit, legal and                                        Profits                                      The other shareholders of EHFC are EAB,
                                                                    (Rs. in crores)
technical appraisal hence there is no                                                                                  IFC, DEG and Bank of Alexandria, Egypt.
compromise on the quality of the loan.                                                                                 This is HIL’s third overseas equity
                                                                                                                       investment in a housing finance
Last year, the Corporation entered into        1200
                                                                                                                       company, the other two being Delta




                                                                                                               1,027
an agreement with HDFC Bank whereby
                                                                                                                       Brac Housing Finance Corporation
HDFC Bank would source housing loans           1000
                                                                                                                       Limited, Bangladesh and NDB Housing




                                                                                                         852
                                                                                                   851
for HDFC. HDFC Bank commenced
                                                                                                                       Bank Limited, Sri Lanka. Both these
operations for sourcing housing loans           800




                                                                                             690
                                                                                     691
                                                                                                                       companies are doing well and are
for HDFC in July 2003. This arrangement



                                                                               580
                                                                                                                       dividend-paying companies.
                                                                        556
has helped enhance the HDFC group’s             600
                                                                  474
                                                            461



presence in the rapidly growing
                                                      402




                                                400
                                                                                                                       During the year, HDFC was invited to
residential mortgage market. No loans                                                                                  Pakistan for a housing finance workshop
have been sold to the bank under the            200                                                                    organised by IFC. HDFC has also been
arrangement as of date. Of the total                                                                                   invited by housing finance companies in
loans sourced by HDFC Bank, 40% have              0                                                                    Vietnam and Romania for consultancy
                                                      2000        2001         2002          2003        2004
been disbursed during the year.                                                                                        assignments.
                                                            Profit after tax               Profit before tax
HDFC participated in various property
                                                                                                                       Shelter Assistance Reserve
exhibitions and fairs, entered into special
tie-up arrangements with select               Limited (HDFC-CHUBB). HDFC also                                          The Shelter Assistance Reserve,
developers and offered special festive        continues to provide services in select                                  constituted as a development fund
bonanzas as part of various promotional       locations to investors of HDFC Mutual                                    continued to extend financial support
measures to reach out effectively             Fund through its wide network of                                         to a wide range of social causes. During
to customers.                                 offices and deposit agents.                                              the year, a total of Rs. 3.96 crores was
To cater to non-resident Indians, HDFC                                                                                 utilised from the reserve by way of
                                              International Housing Finance Initiatives                                grants in respect of over 120 NGOs.
has an international office in Dubai and
                                              In May 2003, HDFC signed a Technical
service associates in Bahrain, Kuwait,                                                                                 Through the reserve, HDFC has
                                              Services Contract with Egyptian
Oman, Qatar and Al Khobar, Jeddah                                                                                      contributed towards meeting the
                                              American Bank (EAB) to provide
and Riyadh in Saudi Arabia. The Dubai                                                                                  special educational and training needs
                                              technical assistance (TA) for setting up
office also visits Sharjah and Abu Dhabi                                                                               of spastic and mentally challenged
                                              Egypt’s first private sector led mortgage
in the UAE on outreach programmes.                                                                                     children in the metros of Chennai and
                                              finance company, Egyptian Housing
Cross Selling and Distribution of             Finance Company (EHFC).                                                  Mumbai. Grants have been made
Financial Products and Services                                                                                        towards the corpus of Save The
                                              The TA encompasses all aspects of                                        Children, India, the National Council of
HDFC’s subsidiary companies have strong       lending (credit, legal, technical,                                       Applied Economic Research (NCAER)
synergies with HDFC and hence efforts are     recovery), accounting, management                                        and the Bombay Community Public Trust
channeled into cross selling so as to offer   information systems, marketing, IT-                                      (BCPT). HDFC also funded
customers a wide range of financial           systems and training. HDFC will also                                     entrepreneurial activities of poor
products and services under the ‘HDFC’        depute a Technical Advisor to EHFC for                                   disabled patients treated with artificial
brand.                                        a period of two years.                                                   limbs (Jaipur Foot) so as to enable their
HDFC is a Composite Corporate Agent           In addition to the TA, HDFC Investments                                  economic rehabilitation. The reserve
for HDFC Standard Life Insurance              Limited (HIL), a wholly owned subsidiary                                 also provided grant support towards
Company Limited (HDFC-SL) and HDFC            of the Corporation has signed a                                          free computer education programmes
Chubb General Insurance Company               Shareholders’ Agreement to subscribe                                     in 14 municipal schools in Mumbai

  22
Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




through Sparsh, a local NGO, targeting                            These results were determined through      to any of its subsidiary or associate
economically underprivileged children.                            a poll of institutional investors and      company or companies in which its
                                                                  equity analysts.                           directors are interested, other than in
Training and Human Resource
                                                                                                             the ordinary course of business.
Management                                                        Subsidiary Companies
                                                                                                             Review of Subsidiary and Associate
With a view to enhancing the                                      In terms of the approval granted by the    Companies
Corporation’s competitive strengths,                              Government of India the provisions
HDFC undertook several initiatives during                         contained under Section 212(1) of the      HDFC Bank Limited (HDFC Bank)
the year to further upgrade the                                   Companies Act, 1956 shall not apply in     HDFC and HDFC Bank have always
knowledge and skills of its frontline staff,                      respect of the Corporation’s nine          maintained an arm’s length relationship
with the objective of enhancing value                             subsidiaries. Accordingly, a copy of the   in accordance with the regulatory
creation for its customers.                                       balance sheet, profit and loss account,    framework. Both organisations, however,
During the year, staff members from the                           report of the Board of Directors and       have capitalised on the strong synergies
recoveries department participated in a                           Report of the Auditors of the subsidiary   through a system of referrals, cross-
skill-development programme on                                    companies of the Corporation - HDFC        selling of products and undertaking joint
Neuro-Linguistic Programming (NLP). To                            Developers Limited, HDFC Investments       marketing activities in order to effectively
further improve operational efficiency,                           Limited, HDFC Holdings Limited, HDFC       provide a wide range of products and
staff members from lending, recoveries,                           Asset Management Company Limited,          services under the HDFC brand name.
deposits and information technology                               HDFC Trustee Company Limited, HDFC
                                                                  Realty Limited, HDFC Standard Life         During the year, retail banking was the
were trained on the Six Sigma process.
                                                                  Insurance Company Limited, HDFC            fastest growing business segment of
Call centre agents in lending and
                                                                  Chubb General Insurance Company            HDFC Bank. The growth in the retail loan
recoveries functions underwent training
                                                                  Limited and GRUH Finance Limited have      portfolio was driven primarily by the
in lead management, managing in-
                                                                  not been attached to the accounts of       geographical expansion and an
bound calls and follow-up of delayed
                                                                  the Corporation for the year ended         extension of the product range. There
payments.
                                                                  March 31, 2004.                            was a significant expansion in the
HDFC continued to offer in-house                                                                             distribution network with the number of
training programmes to staff members in                           The annual report of the Corporation,      branches (including extension counters)
executive development, leadership and                             the annual accounts and the related        increasing from 231 (in 122 cities) to
managerial skills. Team building and                              documents of the Corporation’s             312 (in 163 cities) and the size of the
service management programmes were                                subsidiary companies are posted on the     bank’s ATM network expanding from
conducted at several branches. The                                website of the Corporation,                732 to 910. The bank’s credit card
HDFC Intranet is increasingly being used                          www.hdfc.com. Shareholders who wish        business is a little over 2 years old and
as a learning source and tool for                                 to have a copy of the annual accounts      the total number of cards issued have
functional knowledge.                                             and detailed information on any            crossed the half a million mark. HDFC
                                                                  subsidiary company can download the        Bank further consolidated its position as
Accolades and Recognitions                                        same from the website or may write to      one of the leading Depository
HDFC won the National Award for                                   the Corporation for the same. Further      Participants in terms of number of retail
Excellence in Corporate Governance for                            the said documents shall be available      investor accounts, providing high quality
the year 2003 instituted by The Institute                         for inspection by the shareholders at      retail custody services in electronic
of Company Secretaries of India, New                              the registered office of the Corporation   form.
Delhi.                                                            and at the office of the respective
                                                                  subsidiary company.                        For the year ended March 31, 2004,
HDFC was also ranked the second Best                                                                         HDFC Bank has reported a profit after
Managed Company in India in Finance                               The Corporation has not made any           tax of Rs. 510 crores as against Rs. 388
Asia’s Best Companies Survey for 2003.                            loans or advances in the nature of loans   crores in the previous year. HDFC Bank

                                                                                                                                                   23
declared a dividend of 35% for the         HDFC Asset Management Company               insurance, group travel insurance,
year under review.                         Limited (HDFC-AMC)                          commercial insurance which includes
                                                                                       fire and marine and speciality insurance
HDFC together with its wholly owned        As at March 31, 2004, HDFC-AMC had
                                                                                       products like directors and officers
subsidiaries, HDFC Investments Limited     20 debt and equity oriented schemes.
                                                                                       liability.
and HDFC Holdings Limited holds            The assets under management
24.18% of the equity share capital of      amounted to Rs. 15,025 crores as            The year under review represented the
HDFC Bank.                                 compared to Rs. 6,482 crores in the         first full year of HDFC-CHUBB’s
                                           previous year. The number of investor       operations. Gross Written Premium
HDFC Standard Life Insurance               accounts also increased substantially to    figures for the year stood at Rs. 117.16
Company Limited (HDFC-SL)                  over 6.7 lacs as at March 31, 2004 as       crores. Auto insurance contributed to
                                           compared to 2.8 lacs in the previous        over 90% of the business booked
During its fourth year of operations,      year.                                       during the year. HDFC-CHUBB has also
HDFC-SL increased new business             In June 2003, the Corporation               succeeded in creating a niche for itself
premium income to Rs. 209.33 crores        disinvested Rs. 2 crores (cost) of equity   in liability insurance products targeted at
from Rs. 132.18 crores last year. The      of HDFC-AMC. The Corporation now            corporates and financial markets.
sum assured in respect of policies in      holds 50.10% of the paid-up share           The product portfolio of HDFC-CHUBB is
force increased to Rs. 11,962 crores       capital of HDFC-AMC and the balance is      being diversified further with
from Rs. 4,763 crores last year. Total     held by Standard Life Investments           introduction of other insurance
premium income as at March 31, 2004        Limited.                                    coverages. While auto insurance will
stood at Rs. 298 crores. The company
                                           During the year under review,               continue to play an important role in
has covered over 4,50,000 lives so far.
                                           HDFC-AMC raised the share capital by        future growth of HDFC-CHUBB, the
The directors of HDFC-SL have declared     issuing fresh equity and preference         company will diversify its business mix
the company’s fourth bonus for its         shares to its shareholders. In proportion   in favour of other products. HDFC-
participating “with profits” policy        to its shareholding, HDFC subscribed to     CHUBB will continue to leverage HDFC’s
holders.                                   equity and redeemable preference            significant distribution capability to drive
                                           shares of HDFC-AMC. In June 2003,           retail sales growth.
The company has a portfolio of 11 retail   HDFC-AMC completed the acquisition          During the year, HDFC invested Rs. 14.06
products and 7 group products              of Zurich Asset Management Company          crores in the equity of HDFC-CHUBB.
covering saving, investment, protection    (India) Private Limited.                    HDFC holds 74% of the capital of HDFC-
and retirement needs of the customers,
                                           As at March 31, 2004, HDFC-AMC had          CHUBB.
along with five optional rider benefits,
                                           Investor Service Centres in 29 cities.
thus providing complete customised                                                     HDFC Developers Limited
                                           HDFC continues to distribute products
solutions for the insurance needs of the                                               (HDFC Developers)
                                           and performs client services functions at
customers.
                                           select locations for the mutual fund on     HDFC Developers is a wholly owned
HDFC-SL has 52 offices in the country      a fee basis.                                subsidiary of HDFC and its main activities
with over 18,200 financial consultants     For the year ended March 31, 2004,          include project management and real
appointed by the company. HDFC-SL          HDFC-AMC reported a profit after            estate development for HDFC. During
also has 160 corporate agents for          tax of Rs. 28.54 crores and declared a      the year, HDFC entrusted HDFC
distribution of insurance products.        dividend of Rs. 4 per equity share.         Developers with the supervision of
                                                                                       construction of an office building for
During the year, HDFC invested             HDFC Chubb General Insurance
                                                                                       back office and document storage
Rs. 30.53 crores in the equity of          Company Limited (HDFC-CHUBB)                facilities at Goregaon, Mumbai and the
HDFC-SL. HDFC holds 74.82% of the          HDFC-CHUBB offers auto insurance,           construction of a residential building at
capital of HDFC-SL.                        home insurance, group accident              Khar, Mumbai. The company also

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completed designing the interiors of a                            For the year ended March 31, 2004,             CIBIL is a composite bureau catering to
2,000-seat call centre at Malad, Mumbai                           GRUH has reported a profit after tax of        both the commercial and consumer
for Intelenet Global Services Limited.                            Rs. 13.32 crores as compared to                segments. The bureau deals with
                                                                  Rs. 10.19 crores in the previous year –        positive and negative credit information.
HDFC Developers declared a dividend
                                                                  an increase of 31%. The company                CIBIL’s core systems for the Commercial
of Rs. 35 per equity share for the year
                                                                  declared a dividend of 18% as                  Bureau and the Consumer Bureau have
under review.
                                                                  compared to 15% in the previous year.          been licensed by its technical and
HDFC Realty Limited                                                                                              equity partners, Dun & Bradstreet and
(HDFC Realty)                                                     HDFC’s holding in GRUH currently stands
                                                                                                                 Trans Union respectively.
                                                                  at 61.85%.
HDFC Realty Limited is a wholly owned                                                                            87 credit grantors have accepted
subsidiary of HDFC. Through its                                   Intelenet Global Services Limited              membership of CIBIL and committed to
Customer Relationship Managers, HDFC                              (Intelenet)                                    give data. Members include the major
Realty has consistently increased its                                                                            banks, HFCs, NBFCs and FIs, representing
                                                                  Intelenet was set up by HDFC and Tata
focus to cater to HDFC’s customers.                                                                              more than 85% of the credit
                                                                  Consultancy Services (TCS), a division of
During the year, HDFC Realty tied up                              Tata Sons Limited, with equal equity           outstanding in the country. CIBIL recently
with developers to market their projects                                                                         launched the operations of its
                                                                  holdings. The company was set up to
within the HDFC group and also to                                                                                Consumer Credit Information Bureau.
                                                                  manage Business Process Outsourcing
various other corporates. This also                               (BPO) services for organisations based         The first Credit Information Report was
helped to generate additional loan                                                                               accessed on April 5, 2004. The
                                                                  in international markets. Intelenet
business for HDFC. The other activities                                                                          Commercial Credit Information Bureau is
                                                                  reported a total income of Rs. 117.21
of HDFC Realty include organising                                 crores for the year as compared to             expected to be launched in the
roadshows to assist Non-Resident                                                                                 second half of next financial year.
                                                                  Rs. 21.75 crores in the previous year.
Indians in West Asia. During the year,
                                                                  The company’s twenty key clientele             Particulars of Employees
roadshows of developers from Mumbai
and Pune were organised in Oman,                                  include reputed organisations from the         HDFC had 1,230 employees as of
Dubai and Abu Dhabi. These roadshows                              USA and UK. In addition to providing           March 31, 2004 (previous year 1,151).
generated good response from                                      call centre services, back office              Three employees employed throughout
customers.                                                        operations and e-mail management, the          the year and five employees employed
                                                                  company also provides financial,               for part of the year were in receipt of
During the year, the company reported                             accounting and technical helpdesk
a nominal cash profit. Given the strong                                                                          remuneration of Rs. 24 lacs or more per
                                                                  services to its clients. The company has       annum.
synergies that exist between HDFC and                             three centers of operations in Navi
HDFC Realty, it is contemplated that the                          Mumbai, Mumbai and Chennai. As at              In accordance with the provisions of
activities of HDFC Realty be                                      March 31, 2004, there were 2,959               Section 217 of the Companies Act,
strengthened and further capital infusion                         employees.                                     1956 and the rules framed thereunder,
may be considered as necessary.                                                                                  the names and other particulars of
                                                                  Credit Information Bureau (India)              employees are set out in the annex to
GRUH Finance Limited (GRUH)
                                                                  Limited (CIBIL)                                the Directors’ Report. In terms of the
GRUH is a housing finance company                                                                                provisions of Section 219(1)(b)(iv) of
                                                                  CIBIL is the first credit information bureau
with operations primarily in the states of                                                                       the Companies Act, 1956, the Directors’
                                                                  established in India. It is a joint venture
Gujarat and Maharashtra.                                                                                         Report is being sent to all the
                                                                  between HDFC, State Bank of India, Dun
During the year, GRUH disbursed loans                             & Bradstreet Information Services India        shareholders of the Corporation
amounting to Rs. 218.13 crores as                                 Pvt. Ltd. and Trans Union International        excluding the annex. Any shareholder
against Rs. 202.16 crores in the previous                         Inc. HDFC holds 40% of the equity              interested in obtaining a copy of the
year.                                                             share capital of CIBIL.                        said annex may write to the company

                                                                                                                                                      25
secretary at the registered office of the   Dividend amounting to Rs. 8.23 lacs that       Directors places on record its
Corporation.                                has not been claimed by the                    appreciation for the valuable services
                                            shareholders for the financial year 1995-      rendered by him during his tenure as
Employee Stock Option Scheme
                                            96 has been transferred to the IEPF on         Executive Director as also his
(ESOS)
                                            September 23, 2003 in accordance               contribution to HDFC over the last
During the year, the Corporation has not    with the current regulations. Dividend         twenty-one years.
granted any stock options. The stock        that has not been claimed for the
options granted to the employees            financial year 1996-97 will be                 In accordance with the Companies Act,
operate under two schemes, namely           transferred in August 2004. This amount        1956 and the Articles of Association of
ESOS-99 and ESOS-02. The options            currently stands at Rs. 17.11 lacs. No         HDFC, Mr. Keshub Mahindra, Mr. D. M.
were granted as per the pricing formula     claim would lie against the Corporation        Sukthankar, Mr. N. M. Munjee and
approved by you i.e. at the average of      or the said Fund after the said transfer.      Mr. D. M. Satwalekar retire by rotation at
the closing price of the shares as                                                         the ensuing annual general meeting.
quoted on The Stock Exchange,               Particulars regarding Conservation of          They are eligible for re-appointment.
Mumbai during the period of one             Energy, Technology absorption and
                                                                                           Necessary resolutions for the re-
month preceding the date of grant.          Foreign Exchange Earnings and
                                                                                           appointment of the aforesaid directors
During the year, 20,56,514 options have     Expenditure
                                                                                           have been included in the notice
been vested under ESOS-02. The
                                            The particulars regarding foreign exchange     convening the forthcoming annual
number of options exercised during the
                                            earnings and expenditure appear as Item        general meeting.
year aggregated to 11,04,351 under
ESOS-99 and 10,98,278 under ESOS-           No. 14 in the Notes to the Accounts.
                                                                                           None of the directors of the
02 and the money realised due to            Since HDFC does not own any
                                                                                           Corporation are disqualified for being
exercise of the options is Rs. 47.36        manufacturing facility the other Particulars
                                                                                           appointed as directors as specified in
crores. Consequently 22,02,629 shares       relating to conservation of energy and
                                                                                           Section 274 of the Companies Act,
of Rs. 10 each have been allotted to        technology absorption stipulated in the
                                                                                           1956.
the concerned employees.                    Companies (Disclosure of Particulars in the
                                            Report of the Board of Directors) Rules,       Auditors
During the year, 1,36,243, options have     1988 are not applicable.
lapsed. Options in force as on March                                                       Messrs S.B. Billimoria & Company,
31, 2004 stands at 4,83,109 under           Directors                                      Chartered Accountants and statutory
ESOS-99 and 29,85,666 under ESOS-                                                          auditors of HDFC, retire at the
02. During 2003-04 there has been no        Mr. M. Narasimham, director, resigned
                                                                                           forthcoming annual general meeting and
variation in the terms of the options       from the board with effect from August
                                                                                           are eligible for re-appointment.
granted earlier.                            20, 2003. Mr. M. Narasimham joined the
                                            board in 1990. The Board of Directors          Messrs Pannell Kerr Forster, Chartered
The diluted earnings per share pursuant     places on record its appreciation for          Accountants, were appointed as the
to issue of shares on exercise of           the services rendered by Mr. M.                branch auditors to audit the accounts at
options is Rs. 34.21.                       Narasimham during his tenure as a              HDFC’s branch office at Dubai. Their
Unclaimed Dividend                          director of the Corporation.                   term expires at the end of the
                                                                                           forthcoming annual general meeting and
As at March 31, 2004, dividend              Mr. R. V. S. Rao, the Executive Director
                                                                                           they are eligible for re-appointment.
amounting to Rs. 401 lacs has not been      of your Corporation ceased to be a
claimed by shareholders of the              director with effect from October 1,           Directors’ Responsibility Statement
Corporation. The Corporation has been       2003 on attainment of superannuation.
intimating the shareholders to lodge        Mr. R.V.S. Rao joined HDFC in 1983 and         In accordance with the provisions of
their claim for dividend from time to       was appointed as Executive Director of         Section 217(2AA) of the Companies
time.                                       the Corporation in 1999. The Board of          Act, 1956 and based on the

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Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




information provided by the                                       iv. The annual accounts of the              Your directors wish to express their
management, your directors state that:                                Corporation have been prepared on       gratitude and appreciation to the
                                                                      a going concern basis.                  employees of the Corporation for their
i.   In the preparation of annual                                                                             hard work, loyalty and professionalism
     accounts, the applicable accounting                          Management Discussion and Analysis          which has ensured excellent all-round
     standards have been followed.                                Report                                      performance despite the challenging
ii. Accounting policies selected were                                                                         environment. The employees continue
                                                                  In accordance with the listing
    applied consistently. Reasonable and                                                                      to remain the Corporation’s most
                                                                  agreements, the Management Discussion
    prudent judgements and estimates                                                                          valuable assets and their relentless
                                                                  and Analysis Report (MD & A) forms a
    were made so as to give a true and                                                                        efforts have enabled the Corporation to
                                                                  part of this report.
    fair view of the state of affairs of the                                                                  continue to be at the forefront of the
    Corporation as at the end of March                            Acknowledgements                            financial services sector.
    31, 2004 and of the profit of the
                                                                  Your directors would like to express its
    Corporation for the year ended on
                                                                  sincere appreciation to all the
    that date.
                                                                  Corporation’s valued customers –
iii. Proper and sufficient care has been                          shareholders, borrowers, depositors,
     taken for the maintenance of                                 agents, banks and financial institutions
     adequate accounting records in                               for their support and continued
     accordance with the provisions of                            patronage. The directors are grateful for
     the Companies Act, 1956 for                                  the co-operation of regulatory                            On behalf of the Board of Directors
     safeguarding the assets of the                               authorities including NHB, RBI, SEBI
     Corporation and for preventing and                           Department of Company Affairs,
     detecting frauds and other                                   Registrar of Companies and the Stock        MUMBAI                    DEEPAK S. PAREKH
     irregularities.                                              Exchanges and Depositories.                 May 7, 2004                             Chairman




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Report of the Directors on Corporate Governance
Regulators spanning the world’s financial markets continue to issue, revise and revisit corporate governance laws, codes and
guidelines. On a positive note, each crisis in investor confidence and each breach of corporate trust seek to raise the benchmark
for international best practices in corporate governance.

While the world over stock exchanges and regulators have been toughening listing rules, takeover codes, disclosure requirements
and encouraging the adoption of voluntary codes, the silent revolution is actually stemming from shareholders themselves. Recent
developments have shown that the era of the acquiescent shareholder is clearly over. Shareholders are becoming more energetic
in their pursuit to be better informed and are no longer satisfied by just ‘voting with their feet’ but are willing to take on the role of
being corporate crusaders. Corporate governance is akin to ‘trust collateral’ and the Board of Directors are the guardians of that
trust.

The debate on how to strengthen and promote good corporate governance continues to intensify. Good governance cannot
be achieved by crafting a rule for each circumstance nor can there be a self-encompassing checklist that guarantees good
governance.

The cornerstone of effective corporate governance is that boards represent the best interests of all stakeholders. Norms, rules
and procedures are not a substitute for core principles of transparency, accountability and integrity. Corporate governance is then
about culture, not structure; about actions and examples set by the Board of Directors and management, not about the rules
imposed on them.

Authorities are today faced with the challenge of defining the fine line that distinguishes the building of a lasting framework for
market integrity and transparency while desisting the tendency towards overregulation and overlegislation.

Corporate Governance at HDFC

HDFC has always maintained that efforts to institutionalise corporate governance practices cannot solely rest upon adherence to a
regulatory framework. An organisation’s business practices, reflected in the values, personal beliefs and actions of its employees
determine the quality of corporate governance. For HDFC, corporate governance is a continuous journey that seeks to provide an
enabling environment to harmonise the goals of maximising shareholder value and maintaining a strong customer focus.

The Board of Directors fully support and endorse corporate governance practices as per the provisions of the listing agreements.
The Corporation has complied with the said provisions and listed below is the Report of the Directors of HDFC on Corporate
Governance.

Board of Directors

Composition

The Board of Directors comprises thirteen members, of which ten are non-executive directors. The three executive directors
include the Chairman, the Managing Director and the Executive Director. Of the non-executive directors, nine are independent
directors* i.e. independent of management and free from any business or other relationship, which could materially interfere with
the exercise of their independent judgement. The directors bring to the board a wide range of experience and skills. Brief profiles
of the directors are set out elsewhere in the annual report.

 *   As per the listing agreements, ‘independent directors’ have been defined as directors who apart from receiving director’s remuneration and stock options
     do not have any other material pecuniary relationship or transactions with the company, its promoters, its management or its subsidiaries, which in the
     judgement of the board may affect independence of judgement of the director.


                                                                                                                                                       29
The composition of the board is in conformity with the listing agreements. Details of the Board of Directors in terms of their
directorships/memberships in committees of other public companies (excluding HDFC) are as under:

  Sr. No.     Directors                                                               No. of                              No. of Committees
                                                                                  Directorships                   Member                   Chairperson
    1         Mr. Deepak S. Parekh (Chairman)                                             14                          4                           5
    2         Mr. Keshub Mahindra (Vice Chairman)                                          8                          2                           4
    3         Mr. S. B. Patel                                                              1                          0                           0
    4         Mr. B. S. Mehta                                                             13                          3                           5
    5         Mr. D. M. Sukthankar                                                         5                          1                           1
    6         Mr. D. N. Ghosh                                                              4                          0                           3
    7         Dr. S. A. Dave                                                              11                          7                           2
    8         Mr. S. Venkitaramanan                                                        6                          3                           0
    9         Dr. Ram S. Tarneja                                                          13                          6                           3
    10        Mr. N. M. Munjee                                                            11                          8                           1
    11        Mr. D. M. Satwalekar                                                         7                          2                           2
    12        Ms. Renu S. Karnad (Executive Director)                                      8                          4                           1
    13        Mr. K. M. Mistry (Managing Director)                                        12                          7                           2
Sr. Nos. 1, 12 and 13 are whole- time directors. In the case of whole- time directors, the number of directorships include directorships in HDFC group companies
Sr. Nos. 2 to 10 are independent directors
Excluding the directorships mentioned above, Mr. Deepak S. Parekh and Mr. B. S. Mehta are alternate directors in 4 companies each and Dr. Ram S. Tarneja is
an alternate director in 1 company.

Tenure
Ten of the directors of the Corporation are liable to retire by rotation. Of the retiring directors, at least one-third retire every year
and if eligible, qualify for re-appointment.
Responsibilities
The Board of Directors represents the interests of the company’s shareholders, in optimising long-term value by providing the
management with guidance and strategic direction on the shareholders’ behalf. The board’s mandate is to oversee the
Corporation’s strategic direction, review corporate performance, authorise and monitor strategic investments, ensure regulatory
compliance and safeguard interests of shareholders.
Role of Independent Directors
One of the principle characteristics of efficient corporate governance is the ability of independent directors to approve the
overall strategy, oversee the performance of management and participate and take an independent stance on major decisions.
Independent directors form the cornerstone of good corporate governance. Their key role is to provide an unbiased,
independent, varied and experienced perspective to the board. The independent directors of the Corporation play an important
role in the deliberations of the board meetings and bring to the Corporation their wide experience in finance, housing,
management, accountancy, law, public policy, engineering and corporate strategy. The Corporation benefits immensely from their
expertise in achieving its strategic direction.
The Audit Committee and Compensation Committee comprise entirely of independent directors. Each of these committees
function within defined terms of reference and the minutes of the committee meetings are circulated and discussed at the board
meetings.
Board members ensure that their other responsibilities do not impinge on their responsibilities as a director of HDFC.

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Board Meetings

The meetings of the Board of Directors are normally held at the Corporation’s registered office in Mumbai. Meetings are generally
scheduled well in advance and the notice of each board meeting is given in writing to each director. The board meets at least
once a quarter to review the quarterly performance and the financial results.

The company secretary in consultation with the Chairman and Managing Director prepares a detailed agenda for the meetings.
The board papers comprising the agenda and other explanatory notes are circulated to the directors in advance. The members
of the board have complete access to all information of the Corporation. The members of the board are also free to recommend
inclusion of any matter in the agenda for discussion. Senior management is invited to attend the board meetings so as to provide
additional inputs to the items being discussed by the board.

During the year under review the board met five times. The meetings were held on May 7, 2003, July 18, 2003, October 13,
2003, January 16, 2004 and March 26, 2004. The attendance of each director at the last annual general meeting and board
meetings along with sitting fees paid is enlisted below:


                                                                                               Board Meetings                        Annual General
                      Directors                                                                                                         Meeting
                                                                             Number of Board                   Sitting Fees           Attendance
                                                                             Meetings Attended                 Paid^ (Rs.)
    Mr. Deepak S. Parekh (Chairman)                                                     5                           —                     Yes
    Mr. Keshub Mahindra (Vice Chairman)                                                 4                        30,000                   Yes
    Mr. S. B. Patel                                                                     4                        35,000                   No
    Mr. B. S. Mehta                                                                     5                        40,000                   Yes
    Mr. D. M. Sukthankar                                                                5                        40,000                   Yes
    Mr. D. N. Ghosh                                                                     5                        40,000                   Yes
    Mr. M. Narasimham*                                                                 —                            —                     No
    Dr. S. A. Dave                                                                      5                        40,000                   Yes
    Mr. S. Venkitaramanan                                                               4                        30,000                   Yes
    Dr. Ram S. Tarneja                                                                  3                        20,000                   Yes
    Mr. N. M. Munjee                                                                    4                        30,000                   Yes
    Mr. D. M. Satwalekar                                                                5                        40,000                   Yes
    Ms. Renu S. Karnad (Executive Director)                                             5                           —                     Yes
    Mr. R. V. S. Rao (Executive Director)**                                             2                           —                     Yes
    Mr. K. M. Mistry (Managing Director)                                                5                           —                     Yes

^ The sitting fees for board/committee meetings were increased from Rs. 5,000 to Rs. 10,000 per meeting with effect from October 13, 2003.
*     Mr. M. Narasimham, director, resigned from the board with effect from August 20, 2003.
** Mr. R. V. S. Rao, Executive Director, ceased to be a director with effect from October 1, 2003 on attainment of superannuation.



                                                                                                                                                      31
Board Committees
To enable better and more focused attention on the affairs of the Corporation, the board delegates particular matters to
committees of the board set up for the purpose. These committees prepare the groundwork for decision making and report at
the subsequent board meeting.
Audit Committee
The Audit Committee comprises solely of non-executive, independent directors. The members of the Audit Committee are
Dr. S. A. Dave (Chairman), Mr. B. S. Mehta and Mr. D. N. Ghosh. The Audit Committee is constituted in accordance with the
provisions of the listing agreements and the Companies Act, 1956. All the members of the committee are qualified and
experienced in the fields of finance, accounts and company law. The quorum for the meeting of the Audit Committee is two
members. The company secretary is the secretary to the committee.
The terms of reference of the Audit Committee is primarily to review the accuracy and fairness of the financial statements of the
Corporation, the effectiveness of the systems of internal control and ensure compliance with the regulatory guidelines. The Audit
Committee also reviews the unaudited quarterly financial statements and makes recommendations to the board to approve the
same. In addition, the Audit Committee examines areas of risks associated with the business of the Corporation and analyses the
measures initiated by the Corporation for mitigating these risks.
The committee is responsible for reviewing the performance of the Corporation’s auditors (both internal and external) and ensure
that an objective, professional and cost-effective relationship is being maintained. The committee also reviews the reports of the
internal and external auditors and the action taken by the management on various observations and queries of the auditors.
It is the Audit Committee’s prerogative to invite senior executives whom it considers appropriate to be present at the meetings.
Senior management and auditors are invited to participate in the meetings of the Audit Committee, wherever necessary.
The committee met four times during the year under review. The Audit Committee also met prior to the finalisation of the
accounts for the year ended March 31, 2004.

  Members                                                          Number of Meetings                    Sitting Fees Paid
                                                                       Attended                                 (Rs.)
  Dr. S. A. Dave (Chairman)                                                  4                               30,000
  Mr. B. S. Mehta                                                            4                               30,000
  Mr. D. N. Ghosh                                                            4                               30,000

Compensation Committee
The Compensation Committee comprises three non-executive, independent directors. The members of the committee are
Mr. Keshub Mahindra (Chairman), Mr. S. B. Patel and Mr. B. S. Mehta. The terms of reference of the committee are to review and
recommend compensation payable to the executive directors and to oversee the employees stock option schemes. The
committee also ensures that the compensation policy of the Corporation provides for performance-oriented incentives to senior
management.
The annual compensation of the executive directors is recommended by the Compensation Committee, approved by the board
and is within the limits set by the shareholders. The compensation of the non-executive directors is approved by the entire
board. The committee met three times during the year under review.
  Members                                                          Number of Meetings                    Sitting Fees Paid
                                                                       Attended                                 (Rs.)
  Mr. Keshub Mahindra (Chairman)                                             3                               25,000
  Mr. S. B. Patel                                                            3                               25,000
  Mr. B. S. Mehta                                                            3                               25,000

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Investors’ Grievance Committee
The members of the Investors’ Grievance Committee comprises Dr. Ram S. Tarneja (Chairman), Mr. D. M. Satwalekar and
Mr. K. M. Mistry. The committee oversees share transfers and monitors redressal of shareholder, depositor and investor complaints.
The committee also reviews the processes and service standards adopted by the in-house share department, the complaints
received by the Corporation and their resolution. The committee met three times during the year.
    Members                                                          Number of Meetings                    Sitting Fees Paid
                                                                         Attended                                 (Rs.)
    Dr. Ram S. Tarneja (Chairman)                                              3                                30,000
    Mr. D. M. Satwalekar                                                       2                                20,000
    Mr. K. M. Mistry                                                           3                                  —
In order to expedite the process of share transfers and other related activities, there exists a Securities Transfer Committee
comprising the company secretary and a few officials of the Corporation. Formalities relating to transfer of shares and other
securities are attended to at least once in a week. The details of transfers are reported to the Board of Directors.

During the year, the Corporation received 16 complaints from the stock exchanges, the Securities and Exchange Board of India
(SEBI) and other statutory bodies. All these complaints were resolved immediately. There are no pending complaints. Two cases
have been filed by shareholders against the Corporation for non-receipt of shares/refund. One case has been filed by a
shareholder against the Corporation alleging wrongful transfer of shares held by him. Presently, the Corporation is defending these
three cases as it is not in agreement with the shareholders’ claims.
Remuneration of Non-Executive Directors
The elements of the remuneration package of non-executive directors consists of annual commission, in addition to sitting fees.
For the year ended March 31, 2004, the non-executive directors will be paid an amount of Rs. 2 lacs each as commission.
Remuneration of Executive Directors
All the executive directors of the Corporation have been appointed on a contractual basis based on the approval of the
shareholders for varying tenors of upto five years. The elements of the remuneration package of executive directors comprises
salary and other allowances, commission and perquisites as approved by the shareholders at the annual general meetings. Annual
increments are linked to performance and are decided by the Compensation Committee. Service contracts, notice periods and
severance fees are as per the provisions contained in the agreement entered into by each of the executive directors with the
Corporation. During the year, the managerial remuneration payable to the executive directors in aggregate, amounted to
Rs. 4.45 crores. This is inclusive of commission payable in the aggregate, amounting to Rs. 1.94 crores for the year ended
March 31, 2004. (Managerial remuneration payable is in respect of three executive directors for the entire year and one executive
director for part of the year.) As per the provisions of Section 217(2A) of the Companies Act, 1956, details of the remuneration
paid to executive directors are furnished in the annex to the Directors’ Report.
Transactions with Non-Executive Directors
As at March 31, 2004, deposits held by non-executive directors amounted to Rs. 1.05 crores. The interest paid on these
deposits during the year amounted to Rs. 10.02 lacs. The rate of interest on these deposits is the same as applicable to public
deposits. The non-executive directors of the Corporation do not have any other pecuniary relationship with the Corporation.
Employee Stock Option Scheme
During the year no new options have been granted. The disclosure as required under Clause 12.1 of the SEBI (Employee Stock
Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 has been made in the Directors’ Report.

                                                                                                                                 33
Share Dealing Code
The Corporation has in place a share dealing code, which is applicable to all directors and employees of the Corporation. In
terms of the said code directors/employees are restricted from dealing in the shares of the Corporation during certain periods
known as “restricted period”. The said code is in line with the Model Code prescribed under SEBI (Prohibition of Insider Trading)
Regulations, 1992.
In terms of the said code, directors/employees of the Corporation regularly inform their dealings in the shares of the
Corporation and also disclose their shareholdings including any change thereof during the financial year and as at the end of
the financial year.
Annual General Meetings
The annual general meetings (AGM) for the last three years were held on July 17, 2001, July 25, 2002 and July 18, 2003
respectively. All the meetings were held at Birla Matushri Sabhagar, 19, Marine Lines, Mumbai 400 020. No special resolution was
passed at the last annual general meeting. No resolutions were passed using postal ballots.
At the last AGM, shareholders of the Corporation holding in aggregate 54.99% of the equity share capital had attended either in
person or by proxy.
Communication and Relationships with Shareholders
HDFC has over 92,000 shareholders. The main channel of communication to the shareholders is through the annual report which
includes inter alia, the Chairman’s Statement, Directors’ Report, the Report of the Board of Directors on Corporate Governance,
Management Discussion and Analysis Report and the audited financial results.
The AGM is the principal forum for face-to-face communication with shareholders, where the board is answerable to specific
queries of the shareholders. The board acknowledges its responsibility towards its shareholders and therefore encourages open
and active dialogue with all its shareholders – be it individuals, corporates or foreign investors.
Regular communication with shareholders ensures that the Corporation’s strategy is being clearly understood. Shareholders are
also intimated through the press and HDFC’s website, www.hdfc.com of the quarterly performance and financial results of the
Corporation. The quarterly results are also published in leading newspapers.
In terms of Clause 51 of the listing agreements, the Corporation is required to file its annual report, quarterly results and
shareholding pattern statement through the Electronic Data Information Filing and Retrieval system [EDIFAR] website of SEBI. The
company secretary of the Corporation has been appointed as the compliance officer to ensure the correctness and authenticity
of all information before its filing on the EDIFAR system.
The annual report also contains general shareholder information including inter alia, shareholding pattern, distribution of
shareholding, top shareholders, voting rights and the high and low monthly averages of the equity share price during the year on
The Stock Exchange, Mumbai and the National Stock Exchange, in accordance with the listing agreements.
The management statement on the integrity and fair presentation of the financial statements is provided as a part of the annual
report in the Management Discussion and Analysis Report.
HDFC communicates with its institutional shareholders through a combination of analysts’ briefings and individual discussions
between the fund managers and the management team. HDFC also participates at investor conferences from time to time. The
presentation made to analysts and fund managers is available on the Corporation’s website, www.hdfc.com.
Adoption of Non-mandatory Requirements under the Listing Agreement
The Corporation had adopted the non-mandatory requirement as regards provisions relating to the Compensation Committee
and it endeavours to adhere to norms relating to postal ballot as and when applicable. The quarterly results are extensively
published in the financial newspapers, posted on the Corporation’s website and sent to shareholders on request.

  34
Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




Accounting Standards
The Corporation confirms that it has complied with all the applicable Accounting Standards issued by the Institute of Chartered
Accountants of India [ICAI] from time to time.
Related Party Transactions
There were no materially significant related party transactions with the directors, the management, subsidiaries or relatives of the
directors that have a potential conflict with the interests of the Corporation at large. Details of related party transactions are
included in the Notes to the Accounts.
Going Concern
The directors are satisfied that the Corporation has adequate resources to continue its business for the foreseeable future and
consequently consider it appropriate to adopt the going concern basis in preparing financial statements.


                                                                                                         On behalf of the Board of Directors



MUMBAI                                                                                                               DEEPAK S. PAREKH
May 7, 2004                                                                                                                       Chairman




                                                                                                                                      35
Auditors’ Certificate

                        TO THE MEMBERS OF HOUSING DEVELOPMENT FINANCE
                        CORPORATION LIMITED

                        We have examined the compliance of          As required by the Guidance Note
                        conditions of corporate governance by       issued by the Institute of Chartered
                        HOUSING DEVELOPMENT FINANCE                 Accountants of India, we have to state
                        CORPORATION LIMITED for the year            that to the best of our information and
                        ended on 31st March, 2004 as                according to the explanations given to
                        stipulated in clause 49 of the Listing      us no investor grievance is pending for
                        Agreement of the said Corporation with      a period exceeding one month against
                        stock exchanges.                            the Corporation as per the records
                                                                    maintained by the Investors’ Grievance
                        The compliance of conditions of             Committee, other than cases filed by
                        corporate governance is the                 three shareholders which are pending in
                        responsibility of the Management. Our       court.
                        examination was limited to procedures
                        and implementation thereof, adopted
                                                                    We further state that such compliance is
                        by the Corporation for ensuring the
                                                                    neither an assurance as to the future
                        compliance of the conditions of the
                                                                    viability of the Corporation nor the
                        corporate governance. It is neither an
                                                                    efficiency or effectiveness with which
                        audit nor an expression of opinion on
                                                                    the Management has conducted the
                        the financial statements of the
                                                                    affairs of the Corporation.
                        Corporation.

                        In our opinion and to the best of our
                        information and according to the
                        explanations given to us, we certify that                   For S. B. Billimoria & Co.
                        the Corporation has complied with the                             Chartered Accountants
                        conditions of corporate governance as
                        stipulated in the above mentioned
                        Listing Agreement.                          MUMBAI                     Nalin M. Shah
                                                                    June 15, 2004                       Partner




 36
Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




  Review of the Chairman of the Audit Committee of Directors
  The Audit Committee of Directors, comprise entirely of non-executive, independent directors qualified in the field of finance,
  accounts and company law. The Committee met four times during the financial year under review. The Committee reviewed
  the financial results of the Corporation for the quarters ended on June 30, 2003, September 30, 2003 and December 31,
  2003 as also the financial statements for the year 2003-04. The Committee also reviewed the compliance of the said
  statements with accounting standards, the provisions of the listing agreement with the stock exchanges and other requirements.
  The internal audit programs were approved by the Audit Committee. The Audit Committee at each of its meeting reviewed the
  observations made by the internal and statutory auditors of the Corporation in relation to all areas of operations of the
  Corporation as well as adequacy of systems and procedures of internal control. In addition, the Committee has been
  overseeing the implementation of audit procedures and techniques, reviewing financial reporting systems, management
  discussions and analysis report, records relating to related party transactions, compliance of regulatory guidelines, examined
  areas of risks associated with the business of the Corporation and analysed the measures initiated by the Corporation for
  mitigating these risks.
  The Committee has also reviewed the actions taken by the management on various observations and queries of the auditors as
  also the Corporation’s system of reporting/disclosing financial information, in accordance with the provisions of the Companies
  Act, 1956 and the listing agreement with the stock exchanges.


                                                                                                                      Dr. S. A. Dave
                                                                                                                              Chairman
                                                                                                           Audit Committee of Directors



  Review of the Chairman of the Compensation Committee of Directors
  The purpose of the Compensation Committee of Directors is to ensure that a proper system of compensation is in place to
  provide performance-oriented incentives to the Corporation’s wholetime directors and senior management. It also considers
  and approves salaries and other terms of compensation package for the wholetime directors.
  The Compensation Committee of Directors, met three times during the financial year under review. The Committee reviewed
  the performance of all the wholetime directors of the Corporation and approved the compensation payable to them and
  recommended the payment of commission to each of them for the board’s approval.
  The Compensation Committee during the year under review approved the vesting of 50% of the options granted on October
  17, 2002.

                                                                                                                  Keshub Mahindra
                                                                                                                            Chairman
                                                                                                  Compensation Committee of Directors

 Review of the Chairman of the Investors’ Grievance Committee of Directors
 The Investors’ Grievance Committee of Directors, comprise of three directors, majority of them being non-executive. The
 Committee met three times during the financial year under review. The Committee reviewed the activities being carried out by
 the in-house investor service centre of the Corporation and their adherence to service standards. The Committee also
 reviewed the steps taken by the Corporation to redress the grievances of the investors and the legal cases pending before
 courts against the Corporation. The Committee also reviewed the initiatives taken by the share department towards better
 investor services.
 The Committee deliberated in detail on the services being provided by the Corporation to the deposit holders and debenture
 holders and the backend accounting system for the same. The Committee expresses its satisfaction over the procedures and
 processes followed by the Corporation for servicing shareholders, deposit holders and debenture holders.


                                                                                                                 Dr. Ram S. Tarneja
                                                                                                                               Chairman
                                                                                             Investors’ Grievance Committee of Directors


                                                                                                                                    37
Management Discussion and Analysis Report
Macroeconomic Overview                        Enforcement of Security Interest Act,          During the year HDFC’s loan book
                                              2002 (SARFAESI Act) have now been              increased to Rs. 27,974 crores from
The Indian economy witnessed
considerable economic acceleration in         extended to HFCs and the adoption of           Rs. 21,750 crores in the previous year. In
                                              these provisions is expected to facilitate     addition to this, the loans securitised by
FY2003-04. The key growth drivers were
                                              easier recovery of non-performing loans.       the Corporation and outstanding as on
retail lending, strong growth rates in the
infrastructure index, a high growth rate in                                                  March 31, 2004 amounted to
                                              Interest Rates
                                                                                             Rs. 504 crores.
agriculture, buoyant tax collections,
                                              Debt market conditions continued to be
stable external sector and a favourable                                                      The net increase in the loan book
                                              favourable with ample liquidity in the
international economic environment.                                                          (excluding the loans that have been
                                              system, leading to the yields on
Preliminary estimates from the Central                                                       securitised) is Rs. 6,224 crores that has
                                              benchmark government securities
Statistical Organisation estimate GDP                                                        been determined after taking into
                                              touching historic lows.
growth for FY2003-04 at 8.1% boosted                                                         account loan repayments of Rs. 5,922
by the over 10% GDP growth rate seen          Interest rates on lending products were        crores (Previous Year Rs. 4,961 crores),
in the last two quarters.                     revised downwards twice during the             and loans written off during the year
                                              year – in July and October. Loans to           amounting to Rs. 5.23 crores (Previous
The capital markets were also buoyant
                                              individuals on a variable rate basis are       Year Rs. 2.04 crores). The loan book, net
during the year. This is mainly attributed
                                              benchmarked off HDFC’s Retail Prime            of loans securitised has increased by
to the disinvestments of public sector
                                              Lending Rate (RPLR).                           29% during the year.
units and public issues offered during the
year amounting to over Rs. 20,000             HDFC revised its rates of interest on retail   The outstanding investments in
crores. Data on public finances was           deposits twice during the year in              preference shares, debentures and
positive, especially the fiscal deficit       September and December. The                    corporate deposits for financing housing
which was reined in at 4.8% of GDP. It is     aggregate reduction in rates of interest       and real estate projects amounted to
expected that the momentum in the             on these deposits was 50 basis points.         Rs. 886 crores as compared to Rs. 918
industry and services sector will continue                                                   crores in the previous year.
                                              In order to reduce its cost of
in the next year.
                                              borrowings, HDFC re-priced rates of
                                                                                             Thus the portfolio as at March 31, 2004
Market Scenario                               interest on its domestic term loans and
                                                                                             (inclusive of the aforesaid investment in
Buoyant market demand ensured that            prepaid some of its high cost loans.
                                                                                             preference shares, debentures and
the strong growth rate in the housing         Approvals and Disbursements                    corporate deposits) amounts to
finance industry continued during the                                                        Rs. 28,860 crores compared to
year. The growth is mainly due to greater     Total approvals during the year stood at
                                                                                             Rs. 22,668 crores in the previous year,
affordability on account of lower interest    Rs. 15,216 crores as against Rs. 11,732
                                                                                             an increase of 27%. The individual loan
rates, higher disposable incomes, stable      crores in the previous year, representing
                                                                                             portfolio consisted of 80% variable rate
property prices, continued fiscal             a growth of 30%. Loan disbursements
                                                                                             loans.
incentives and increased urbanisation. In     during the year were Rs. 12,697 crores
addition, low credit off take and ample       against Rs. 9,951 crores in the previous       Marketing Efforts
liquidity in the system have been major       year representing a growth of 28%.
                                                                                             At HDFC, all marketing efforts revolve
contributory factors to the present           The growth in individual loan business         around the customer. HDFC has over the
boom in retail lending in India, of which     continued to be strong during the year.        years built up expertise in appraisal skills,
housing finance constitutes a major           Individual loan approvals and                  has a vast database and experienced
segment. Lower interest rates, stable         disbursements registered a growth of           personnel. Apart from providing housing
property prices, fiscal incentives and        32% and 30% respectively over the              finance, quality service is rendered to
rising income levels continue to make         previous year. The average individual          customers through additional services
housing loans attractive for borrowers.       loan size was Rs. 4,50,000.                    such as loan counselling, property
The government’s continued support            Loan Portfolio                                 identification, technical and legal advice
towards housing and housing finance is                                                       and other property related solutions.
                                              The loan approval process of HDFC is
evident from the Finance Minister’s
budget speech of 2003, wherein                decentralised, with varying approval           HDFC continued its strategy of widening
                                              limits. Approval of lending proposals          its distribution network by opening 31
housing was identified as one of the
                                              beyond certain limits is referred to the       new offices across the country, taking
‘Panch Priorities’ (five priorities).
                                              committee of management (COM).                 the total distribution network to 173
The provisions of the Securitisation and      Larger proposals, as appropriate, are          offices in India. In addition to these
Reconstruction of Financial Assets and        referred to the Board of Directors.            offices, HDFC’s network is also

  38
Tw e n t y - s e v e n t h A n n u a l R e p o r t 2 0 0 3 - 0 4




supplemented by outreach                                           arrangement as of date. Of the total         Housing Finance Companies (HFCs) are
programmes, which are conducted in                                 loans sourced by HDFC Bank, 40% have         required to maintain a statutory liquidity
over 90 locations and extension                                    been disbursed during the year               ratio (SLR) in respect of public deposits
counters in various leading companies.                             amounting to Rs. 141 crores.                 raised. Currently the SLR requirement is
HDFC also has a presence in various                                                                             12.5% of public deposits. As at March
offices of its associate companies,                                Investments                                  31, 2004, HDFC has invested Rs. 548.71
thereby facilitating easier cross-selling of                       The Investment Committee constituted         crores in bonds issued by NHB and bank
products and services.                                             by the Board of Directors is responsible     deposits and Rs. 539.36 crores in
HDFC also markets its loans through                                for approving investment proposals in        approved securities comprising
Direct Selling Agents. Loans originated                            line with the limits as set out by the       government securities and government
from DSAs accounted for 22% of                                     Board of Directors. The executive            guaranteed bonds.
individual loans approved during the                               directors are members of the
                                                                   Committee.                                   As at March 31, 2004, the treasury
year in value terms. HDFC’s website,                                                                            portfolio (excluding investments in
www.hdfc.com has also proved to be a                               The investment function supports the         equity shares) had an average balance
good marketing tool, especially for non-                           core business of housing finance. The        period to maturity of 22 months. The
resident Indian (NRI) customers.                                   investment mandate includes ensuring         average yield on the non-equity
A successful marketing initiative launched                         adequate levels of liquidity to support      portfolio for the year was 8.88% per
during the year was the Diwali Festival                            core business requirements, maintaining a    annum.
Bonanza. This special offer was well                               high degree of safety and optimising the
received and HDFC recorded the                                     level of returns, consistent with            HDFC has classified its investments into
highest number of applications during this                         acceptable levels of risk.                   current and long-term investments. The
period. During the year, HDFC also                                                                              current investments have been entirely
                                                                   As at March 31, 2004, the investment         ‘marked to market’. In respect of
organised and participated in property                             portfolio marginally decreased to stand
fairs and exhibitions in different parts of                                                                     long-term investments, provisions have
                                                                   at Rs. 2,973 crores as against Rs. 2,978     been made to reflect any permanent
the country. Property fairs and                                    crores last year. While the level of
exhibitions have been successful                                                                                diminution in the value of investments.
                                                                   investments in equity shares of subsidiary   After considering the opening balance
marketing tools, giving HDFC an                                    and associate companies increased
opportunity to give home seekers a                                                                              of Rs. 23.79 crores in the diminution in
                                                                   during the year, the level of preference     the value of investments, and the write
complete solution, right from identifying                          shares and bonds and debentures
a home to financing it.                                                                                         back of provisions on account of
                                                                   declined due to redemptions.                 investments sold, a net amount of
HDFC has also been distributing insurance                                                                       Rs. 10.07 crores has been charged to
products under a referral fee                                                                                   the provision for contingencies account.
programme with HDFC Standard Life
Insurance Company Limited (HDFC-SL)                                                Number of Offices
                                                                                                                The market value of quoted investments
and HDFC Chubb General Insurance                                                                                was higher by Rs. 2,619 crores (previous
Company Limited (HDFC Chubb). HDFC                                                                              year Rs. 1,387 crores) as compared to
also continues to provide services in                                                                           the book value. This includes
select locations to investors of HDFC                                                                           appreciation in the market value of
Mutual Fund through its wide network of                               200
                                                                                                                investments held by HDFC’s wholly
offices and deposit agents.                                                                              173
                                                                                                                owned subsidiaries, HDFC Investments
Arrangement with HDFC Bank Limited                                    160
                                                                                                  142
                                                                                                                Limited and HDFC Holdings Limited.
(HDFC Bank)
                                                                                           118                  Subsidiaries and Associates
Last year, HDFC entered into an                                       120

agreement with HDFC Bank whereby                                                     87
                                                                                                                While housing remains the core business
HDFC Bank would source housing loans                                  80                                        for HDFC, over the past several years,
for HDFC. HDFC Bank commenced                                                67
                                                                                                                HDFC has continued to make
operations for sourcing housing loans for                                                                       investments in its subsidiary and
HDFC in July 2003. This arrangement has                               40                                        associate companies. These investments
helped enhance the HDFC group’s                                                                                 are made in companies where there are
presence in the rapidly growing                                        0                                        strong synergies with HDFC. HDFC will
residential mortgage market. No loans                                       2000    2001   2002   2003   2004
                                                                                                                continue to explore avenues for such
have been sold to the bank under the                                                                            investments with the objective of

                                                                                                                                                     39
The shareholding of HDFC in its subsidiary and associate companies promoted by              The provision for contingencies has been
HDFC as at March 31, 2004 is as follows:                                                    strengthened during the year by a
                                                                                            transfer of Rs. 61 crores, of which Rs. 11
                                                                                            crores is through a charge to the Profit
   Company                                                   Shareholding (%)
                                                                                            and Loss Account and Rs. 50 crores
   HDFC Developers Limited                                                100.0             through a transfer from Special Reserve
                                                                                            Account No. 1.
   HDFC Investments Limited                                               100.0
                                                                                            During the year HDFC has utilised
   HDFC Holdings Limited                                                  100.0             Rs. 30.23 crores (net) out of the balance
   HDFC Trustee Company Limited                                           100.0             in provision for contingencies on
                                                                                            account of provision in diminution of
   HDFC Realty Limited                                                    100.0             value of investments, loan write-offs,
                                                                                            revaluation of foreign currency loans and
   HDFC Standard Life Insurance Company Limited                            74.8
                                                                                            the amount provided for credit
   HDFC Chubb General Insurance Company Limited                            74.0             enhancement on the securitisation
                                                                                            transactions. After taking into account
   GRUH Finance Limited                                                    61.9             the transfer as well as the net utilisation,
   HDFC Asset Management Company Limited                                   50.1             the balance in provision for
                                                                                            contingencies as at March 31, 2004
   Intelenet Global Services Limited                                       50.0             stood at Rs. 343.15 crores.
   Credit Information Bureau (India) Limited                               40.0             Fixed Assets
   HDFC Bank Limited *                                                     24.2             Net fixed assets as at March 31, 2004
                                                                                            amounted to Rs. 437.63 crores
(*Includes shareholding of HDFC Investments Limited and HDFC Holdings Limited)              (previous year Rs. 417.76 crores). Of this
                                                                                            Rs. 212.91 crores were leased assets.
                                                                                            The total additions to fixed assets during
providing a wide range of financial            estate projects), where payments were        the year amounted to Rs. 49.66 crores.
services and products under the HDFC           in arrears for over six months amounted
brand name.                                    to Rs. 257.22 crores as at March 31,         Borrowings
                                               2004, constituting 0.89% of the              Borrowings as at March 31, 2004
During the year, the Corporation made          portfolio. The principal outstanding in
investments in equity capital of its                                                        amounted to Rs. 28,684 crores as
                                               respect of individual loans where the
subsidiary and associate companies             instalments were in arrears for over six
HDFC Asset Management Company                  months constituted 1.11% of the                     Breakdown of Borrowings (%)
Limited (Rs. 43.95 crores), HDFC               individual portfolio and the                                (As at March 31, 2004)
Standard Life Insurance Company Limited        corresponding figure was 0.47% in
(Rs. 30.53 crores), HDFC Chubb General         respect of the non-individual portfolio.
Insurance Company Limited (Rs. 14.06           HDFC has written-off loans aggregating to
                                                                                                                          33

crores), Intelenet Global Services Limited     Rs. 5.23 crores during the year. The total
(Rs. 7.50 crores), Credit Information          loans written-off since inception
Bureau (India) Limited (Rs. 2.50 crores)       aggregated to Rs. 17.98 crores.                                                        11
and GRUH Finance Limited (Rs. 0.39                                                                 23

crores).                                       Provision for Contingencies

HDFC also invested in 10% cumulative           As per the prudential norms prescribed
                                               by NHB, HDFC is required to carry a
                                                                                                                           33
redeemable preference shares of HDFC
Asset Management Company Limited               provision of Rs. 45.31 crores as at
amounting to Rs. 25.05 crores.                 March 31, 2004 in respect of non-
                                               performing assets. As a matter of                         Deposits - 33%

Recoveries                                     prudence, however, over the years,                        International Borrowings - 11%
                                               HDFC has been transferring additional                     Domestic Term Loans - 33%
The principal loans outstanding (along         amounts to the provision for                              Bonds & Debentures - 23%
with preference shares, debentures and         contingencies account including transfers
corporate deposits for financing real          from Special Reserve Account No. 1.

  40
Tw e n t y - s e v e n t h A n n u a l R e p o r t 2 0 0 3 - 0 4




against Rs. 23,252 crores in the previous                          Loan B facility with the signing of the                   ii)  Exchange swap with banks and a
year – an increase of 23%. Borrowings                              Participation Agreements between IFC                           financial institution (in respect of the
constituted 89% of funds employed as                               and 17 overseas banks.                                         USAID borrowings)
at March 31, 2004. Deposits constituted                            As at March 31, 2004 the Corporation is                   iii) Dollar denominated rupee loans
33%, domestic term loans 33%, bonds                                protected from foreign exchange                                sanctioned to various corporates (in
and debentures and commercial paper                                fluctuations in respect of all its other                       respect of the part of the syndicated
23% and international borrowings 11%                               foreign currency borrowings due to:                            loans and part of the IFC loan)
of total borrowings.
                                                                   i) Exchange swap with the                                 iv) Risk management arrangements with
Foreign Currency Borrowings                                             Government of India (in respect of                        a bank and a financial institution (in
                                                                        the earlier KfW loans)                                    respect of the ADB II loan)
HDFC has in earlier years availed of
foreign currency borrowings under the                                                  Assets per Employee                                       Profit per Employee
Housing Guarantee Program of the                                                             (Rs. in Lacs)
                                                                                                                                                      (Rs. in Lacs)
United States Agency for International
Development (USAID) (USD 125 million),
from Commonwealth Development
Corporation (CDC) (Pounds Sterling 25                                  3000                                                         70                                         69
million), from ADB under the Housing                                                                                 2,608
Finance Facility Project – ADB II (USD 100                                                                                          60
                                                                                                                                                             56
                                                                                                                                                                       60

million), from the KfW (DM 25 million and                              2400                                  2,285
                                                                                                                                                    51
Euro 15.33 million) and two syndicated                                                     1,904
                                                                                                    2,085                           50     47
Yen loans of JPY 12 billion and JPY 12.05                              1800
                                                                                 1,752
billion.                                                                                                                            40


                                                                                                                                    30
HDFC has also issued Floating Rate Notes                               1200

(FRNs) (USD 100 million) redeemable in                                                                                              20
2007 at a premium of 15%. In                                            600
accordance with the provisions of the                                                                                               10

Companies Act, 1956, the premium
payable on redemption of FRNs is                                            0
                                                                                  2000     2001      2002     2003   2004
                                                                                                                                      0
                                                                                                                                          2000     2001     2002      2003    2004
charged to the Securities Premium
Account over the life of the instrument.

In October 2003, HDFC drew down a                                                      Spread on Loans (%)                                      Cost Income Ratio (%)
loan of USD 50 million from Deutsche
Investitions – Und
Entwicklungsgesellschaft MbH (DEG), a
member of the KfW Group of Germany.
The loan was for an average tenor of 6.5                              2.5                                                          15.0
years.                                                                                                       2.15
                                                                                                                     2.20

                                                                                                   1.96                            14.5
                                                                      2.0
In June 2003, HDFC had signed a loan
                                                                                1.84

agreement of USD 200 million with
                                                                                                                                                    14.0               14.0
                                                                                          1.80                                     14.0
International Finance Corporation (IFC),                              1.5
                                                                                                                                          13.8
Washington. The loan from IFC comprises                                                                                            13.5
                                                                                                                                                             13.8

two tranche. Loan A of USD 100 million                                1.0
has been lent directly by IFC as a                                                                                                 13.0
                                                                                                                                                                              13.3

multilateral tranche, and was drawn-
down by HDFC in June 2003. Loan A has                                 0.5
a maturity of 8 years. Loan B of USD 100
                                                                                                                                   12.5

million is a syndicated tranche and has a
                                                                      0.0
maturity of 67 months. In December                                              2000      2001     2002      2003    2004          12.0
                                                                                                                                          2000     2001     2002      2003    2004
2003, HDFC concluded the syndicated

                                                                                                                                                                                 41
                                                                                                                     on the prevailing exchange rate) has
          Administrative Expenses to                                   Asset Profile (%)                             been written back to the provision
            Average Total Assets                                        (As at March 31, 2004)                       for contingencies account. In the
                      (%)                                                                                            previous year, Rs. 11.59 crores was
                                                                                                                     charged to the provision for
                                                                                                                     contingencies account upon
 0.6                                                                                                                 revaluation of the assets and
           0.49              0.49
                                                    0.49
                                                           90                                                        liabilities in foreign currencies.
 0.5
                      0.51           0.50
                                                                                                                 Deposits
 0.4                                                                                            7                As at March 31, 2004, the deposits
                                                                                            1                    outstanding amounted to Rs. 9,338
 0.3
                                                                                        2
                                                                                                                 crores. HDFC has an agent network of
                                                                                                                 over 50,000 and a depositor base of
 0.2                                                            Portfolio (Loans, including preference shares,
                                                                                                                 over 1.2 million.
                                                                debentures & corporate deposits for financing
                                                                housing and real estate projects) - 90%          Public deposits constitute approximately
 0.1                                                            Investments - 7%                                 80% of the total deposits of the
                                                                Fixed Assets - 1%                                Corporation.
 0.0                                                            Net Current Assets - 2%
          2000        2001   2002        2003       2004                                                         Both Credit Rating and Information
                                                                                                                 Services of India Limited (CRISIL) and ICRA
                                                                                                                 have affirmed the ‘A AA’ rating for HDFC’s
                 Income Comes From
                                                                Expenditure Goes Towards                         deposits and bonds for the ninth
                         (%)
                                                                           (%)                                   consecutive year. This rating represents
                                                                                                                 ‘highest safety as regards timely
                                                                      91                                         repayment of principal and interest’.
                                                                                                                 HDFC pays brokerage to agents who
             78                                                                                                  mobilise retail deposits. The brokerage is
                                                4
                                                                                                                 linked to the amount and the period of
                                                                                                                 deposit and is paid up-front for the full
                                    14                                                                           term of the deposit. In addition, agents
                                                                                                                 who achieve certain collection targets
                  3      1                                                                                       are paid an incentive every year.
                                                                                   1
                  Interest on Loans - 78%                                  8
                                                                                                                 In line with international accounting
                  Fees, Charges & Other Income - 4%                Interest & Other Charges - 91%
                                                                                                                 standards, HDFC has been amortising the
                  Other Operating Income - 14%
                                                                                                                 brokerage, proportionately over the
                                                                   Depreciation - 1%
                                                                                                                 term of the deposit. Incentive brokerage
                  Lease Rental Income 1%                           Staff, Establishment, Other Expenses          is being fully charged to the profit and
                  Dividends - 3%                                   and Provision for Contingencies - 8%
                                                                                                                 loss account in the year of payment.
                                                                Expenditure & Other Charges:
 Total Income: Rs. 3,078 crores (PY Rs. 2,976 crores)       Rs. 2,051 crores (P Y Rs. 2,125 crores)
                                                                                                                 Securitisation of Loans
                                                                                                                 During the year HDFC successfully
                                                                                                                 completed its sixth MBS issue of
v)     Forward cover in respect of part of                 respect of its borrowings amounted
                                                                                                                 Rs. 234.54 crores. The issue received
       the USD/Re position on the principal                to USD 182 million.
                                                                                                                 the highest rating “AAA(ind)(SO)”
       on the syndicated loan and FCNR
                                                           Assets and liabilities in foreign                     indicating the highest degree of safety.
       loans
                                                           currencies are revalued at the rates                  To date, loans aggregating to Rs. 811.21
vi) Principal only swaps in respect of                     of exchange prevailing at the year-                   crores have been sold by the
    FRN 2007 and part of the IFC loan                      end. The exchange gain, net of risk                   Corporation through the issue of MBS.
                                                           management arrangements, of                           HDFC continues to service the loans sold
       As at March 31, 2004, HDFC’s net                    Rs. 2.68 crores arising upon                          under the MBS issues. As at March 31,
       foreign currency exposure in                        revaluation at the year end (based                    2004, outstanding loans which have

     42
Tw e n t y - s e v e n t h A n n u a l R e p o r t 2 0 0 3 - 0 4




been securitised by HDFC stood at                                  include credit risk, liquidity risk and          chartered accountants and cover all the
Rs. 503.58 crores.                                                 interest rate risk. HDFC manages credit          offices and key areas of business. All
                                                                   risk through stringent credit norms.             significant audit observations and follow-
Domestic Term Loans
                                                                   Liquidity risk and interest rate risks arising   up actions thereon are reported to the
As a part of HDFC’s liability management                           out of maturity mismatch of assets and           Audit Committee. The Audit Committee
and in order to reduce the cost of                                 liabilities are managed through regular          comprises of three independent non-
funding, the Corporation prepaid or                                monitoring of the maturity profiles.             executive directors. The Committee met
re-priced a substantial portion of its high                                                                         four times during the financial year under
cost bank loans. This has helped the                               HDFC has from time to time entered into          review.
Corporation reduce its cost of                                     risk management arrangements in order
                                                                   to hedge its exposure to foreign                 Profit and Loss Account
borrowing.
                                                                   currency and interest rate risks.                Key elements of the profit and loss
During the year, HDFC raised loans from                                                                             account for the year ended March 31,
the commercial banks aggregating to                                On account of the increasing response            2004 are:
Rs. 6,543 crores (previous year                                    to HDFC’s Adjustable Rate Home Loan
Rs. 3,913 crores). Out of this, loans                              product as well as to reduce the overall         •   Profit before tax grew at 21% and
amounting to Rs. 4,173 crores qualify for                          cost of funding in view of the softer bias           profit after tax by 23%.
priority sector allocation. HDFC also                              on interest rates, HDFC entered into             •   Income tax provision for the year
raised Rs. 610 crores from the banking                             interest rate swaps and coupon only                  amounted to Rs. 175.20 crores
sector as FCNR (B) loans. HDFC also                                swaps. As at March 31, 2004, HDFC has                (inclusive of deferred tax liability of
availed refinance from NHB amounting to                            entered into such swaps whereby HDFC                 Rs. 12.20 crores) as compared to
Rs. 350 crores during the year.                                    converted its fixed rate rupee liabilities           Rs. 160.74 crores in the previous
                                                                   on NCDs of a notional amount of                      year. The effective tax rate is 17.1%
As at March 31, 2004, the total loans                              Rs. 1,600 crores for varying maturities
outstanding from banks, institutions and                                                                                as compared to 18.9% in the
                                                                   into floating rate liabilities linked to             previous year.
NHB amounted to Rs. 9,631 crores as                                certain predetermined benchmarks. As
compared to Rs. 7,473 crores as at                                 a result of the swaps, HDFC pays the             •   Pre-tax return on assets was 3.5%
March 31, 2003.                                                    fixed rate and receives the floating rate.           and the post-tax return on assets
                                                                   HDFC has also entered into cross                     was 2.9%.
Debentures and Bonds
                                                                   currency swaps and the outstanding               •   Return on equity increased to
During the year, HDFC issued non-                                  aggregate notional amount stood at                   26.5% in the current year from
convertible debentures (NCDs) at                                   Rs. 395 crores. These risk management                24.02% in the previous year.
different points of time aggregating in to                         arrangements have resulted in a
Rs. 2,702 crores on a private placement                                                                             •   HDFC’s cost to income ratio is
                                                                   substantial saving for HDFC.                         13.3% as at March 31, 2004. HDFC’s
basis, for subscription by banks, mutual
funds, financial institutions and provident                        Asset-Liability Management                           cost income ratio continues to be
funds. During the year long dated high                                                                                  among the lowest in the financial
cost NCDs amounting to Rs. 827 crores                              As at March 31, 2004, assets and                     sector in Asia.
were bought back. In accordance with                               liabilities with maturity up to 1 year
                                                                                                                    •   Administrative expenses as a
Section 78 of the Companies Act 1956,                              amounted to Rs. 9,611 crores and
                                                                                                                        percentage of average assets is
the premium payable on redemption of                               Rs. 11,448 crores respectively. Asset
                                                                                                                        0.49% as at March 31, 2004 as
debentures was charged to the                                      and liabilities with maturity of between 2
                                                                                                                        against 0.50% in the previous year.
Securities Premium Account.                                        years and 5 years amounted to
                                                                   Rs. 18,978 crores and Rs. 15,932 crores          •   For the year ended March 31,
In March 2004, the Corporation raised a                            respectively and assets and liabilities with         2004, a dividend of Rs. 13.50 per
5-year NCD of Rs. 1,000 crores. This was                           maturity beyond 5 years amounted to                  share is being recommended as
the single largest NCD issue on a private                          Rs. 5,247 crores and Rs. 6,456 crores                against Rs. 11 per share in the
placement basis by a company in India.                             respectively.                                        previous year. HDFC would be
                                                                                                                        paying an additional tax (including
All the Debenture issues have been                                 Internal Audit and Control                           surcharge) on the dividend
rated ‘A AA’ by CRISIL and ‘LAAA’ by
                                                                   The Corporation has instituted adequate              declared.
ICRA.
                                                                   internal control systems commensurate            •   The dividend payout ratio inclusive
Risk Management                                                                                                         of the additional tax on dividend will
                                                                   with the nature of its business and the
HDFC manages various risks associated                              size of its operations. Internal audit is            be 44.1% as compared to 43.9% in
with the mortgage business. These risks                            carried out by independent firms of                  the previous year.

                                                                                                                                                          43
Spread on Loans                              previous year and net profit per             backward and forward linkages to
                                             employee as at March 31, 2004 was            several ancillary sectors. Mortgages in
The average yield on loan assets during
                                             Rs. 69 lacs as compared to Rs. 60 lacs in    India contribute approximately 2% to
the year was 9.97% per annum as              the previous year.                           GDP as against 15% to 20% in many
compared to 11.84% per annum in the
                                                                                          South East Asian countries and almost
previous year. The average all-inclusive     Audited Consolidated Accounts                51% in U.S.A., reflecting a huge
cost of funds was 7.77% per annum as                                                      untapped potential in India.
compared to 9.69% per annum in the           In accordance with the accounting
previous year. The spread on loans over      standards prescribed by the Institute of     During the Tenth Five-Year Plan period
the cost of borrowings for the year          Chartered Accountants of India, the          (2002-2007) it is estimated that an
increased to 2.20% per annum as against      consolidated financial statements            aggregate outlay of Rs. 7,26,300 crores
2.15% per annum in the previous year.        comprise the individual financial            is required for the housing sector, of
                                             statements of the Corporation together       which the contribution envisaged from
Prudential Norms for Housing Finance         with its subsidiaries which are              public institutional sources is only
Companies (HFCs)                             consolidated on a line-by-line basis and     Rs. 4,15,000 crores. Therefore,
NHB has issued guidelines to HFCs on         its associates which are accounted on        substantial contribution from private
prudential norms for income recognition,     the equity method.                           sector players would be required to
provisioning, asset classification,                                                       tackle the growing housing shortage.
                                             Like most insurance companies in the
provisioning for bad and doubtful debts,                                                  As other sectors of the lending business
                                             initial phase, HDFC-SL and HDFC CHUBB
capital adequacy and concentration of                                                     continue to remain relatively lacklustre,
credit/investments. HDFC’s position with     have reported losses. This is partly due
                                             to the accounting norms applicable to        sustained growth in the housing finance
respect to the guidelines is as follows:                                                  industry has attracted several
                                             these companies wherein the expenses
•    HDFC’s capital for the purpose of       are charged in the year in which they are    competitors, whose portfolio of housing
     determining the capital adequacy        incurred while the corresponding             loans have grown considerably. Against
     comprises entirely of Tier I capital.   income is recognised over the entire life    this milieu, the RBI has been sounding
     HDFC’s capital adequacy ratio is        of the policies issued. This mismatch        caution on the maintenance of credit
     13.3% as against the minimum            between expenses and income has the          quality through effective asset-liability
     requirement of 12% (of which at         effect of magnifying the initial losses of   management and prudent loan to value
     least 6% has to be Tier I capital).     these companies.                             ratios. Going forward, profitability in the
                                                                                          housing finance business is going to be
•    HDFC is in compliance with the limits   The total income of the HDFC group for       the prime driver in terms of long-term
     prescribed by NHB in respect of         the year ended March 31, 2004 was            sustainability of the key players in the
     concentration of credit/investments.    Rs 3,252.33 crores as compared to            market. In this context, HDFC has
Human Resources                              Rs. 3,088.99 crores in the previous year.    retained its status as the market leader.
                                             Profit before tax was Rs. 1,140.89           The individual loan segment, which
Human resources are HDFC’s most              crores as compared to Rs. 910.02
                                                                                          constitutes the largest market potential,
valuable assets. The efficiency of HDFC’s    crores in the previous year. Profit after
staff is evident from the fact that, the                                                  will remain a focus area for HDFC.
                                             tax was Rs. 947.04 crores as compared        Offering customised solutions through an
number of offices increased from 41 in       to Rs. 738.09 crores in the previous year
                                                                                          array of financial products and services
1998 to 173 currently as against the         representing a growth of 28.3%.
number of employees which increased                                                       under the HDFC umbrella will continue to
                                             Consolidated return on equity was            be the business driver. On the funding
from 806 to 1,230 during the same            27.4%.
                                                                                          side, HDFC will continue to strive to
period.
                                             Outlook: Issues and Prospects                diversify its resource base and as in the
Total assets per employee as at March                                                     past, channelise efforts into minimising
31, 2004 stood at Rs. 26.08 crores as        The housing industry remains of strategic    costs so as to pass on the maximum
compared to Rs. 22.85 crores in the          importance to the economy, with              benefit to the customer.




    44
Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




Auditors’ Report
TO THE MEMBERS OF HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED

1. We have audited the attached                                   4. Further to our comments in the               (f) in our opinion and to the best
Balance Sheet of HOUSING                                          Annexure referred to in paragraph 3       of our information and according to the
DEVELOPMENT FINANCE CORPORATION                                   above:                                    explanations given to us, the said
LIMITED as at March 31, 2004, the Profit                                                                    accounts give the information required
and Loss Account and the Cash Flow                                     (a) we have obtained all the         by the Companies Act, 1956 in the
Statement of the Corporation for the                              information and explanations which to     manner so required and give a true and
year ended on that date, both annexed                             the best of our knowledge and belief      fair view in conformity with the
thereto. These financial statements are                           were necessary for the purposes of our    accounting principles generally
the responsibility of the Corporation’s                           audit;                                    accepted in India:
Management. Our responsibility is to
express an opinion on these financial                                                                                (i) in the case of the Balance
                                                                       (b) in our opinion, proper books     Sheet, of the state of affairs of the
statements based on our audit.
                                                                  of account as required by law have        Corporation as at March 31, 2004;
                                                                  been kept by the Corporation so far as
2. We conducted our audit in
                                                                  it appears from our examination of                (ii) in the case of the Profit
accordance with the auditing standards                            those books and proper returns            and Loss Account, of the profit of the
generally accepted in India. These
                                                                  adequate for the purposes of our audit    Corporation for the year ended on that
Standards require that we plan and
                                                                  have been received from the Dubai         date; and
perform the audit to obtain reasonable                            Branch not visited by us;
assurance about whether the financial
                                                                                                                    (iii) in case of the Cash Flow
statements are free of material
                                                                        (c) the report on the accounts of   Statement, of the cash flows of the
misstatements. An audit includes
                                                                  the Dubai Branch audited by the Branch    Corporation for the year ended on that
examining, on a test basis, evidence
                                                                  Auditors has been forwarded to us and     date.
supporting the amounts and disclosures
in the financial statements. An audit also                        has been dealt with by us in preparing
                                                                  this report;                              5. On the basis of the written
includes assessing the accounting
                                                                                                            representations from the directors, taken
principles used and significant estimates
                                                                                                            on record by the Board of Directors,
made by the Management, as well as                                      (d) the Balance Sheet and the
                                                                                                            none of the directors is disqualified as
evaluating the overall financial statement                        Profit and Loss Account dealt with by
                                                                                                            on March 31, 2004 from being
presentation. We believe that our audit                           this report are in agreement with the
                                                                                                            appointed as a director under Section
provides a reasonable basis for our                               books of account and the audited
                                                                                                            274 (1)(g) of the Companies Act, 1956.
opinion.                                                          Branch returns;

3. As required by the Companies                                         (e) in our opinion, the Balance
(Auditor’s Report) Order, 2003 issued                             Sheet, the Profit and Loss Account and
by the Central Government in terms of                                                                                     For S. B. BILLIMORIA & CO.
                                                                  the Cash Flow Statement dealt with by
                                                                                                                                  Chartered Accountants
Section 227(4A) of the Companies Act,                             this report are in compliance with the
1956, we give in the Annexure a                                   Accounting Standards referred to in                                   Nalin M. Shah
statement on the matters specified in                             Section 211(3C) of the Companies Act,     MUMBAI,                              Partner
paragraphs 4 and 5 of the said Order.                             1956;                                     May 7, 2004         (Membership No. 15860)




                                                                                                                                                  45
Annexure to the Auditors’ Report
(Referred to in paragraph 3 of our              in our opinion, prima facie not            that needed to be entered in the
report of even date)                            prejudicial to the interests of the        Register maintained under Section 301
                                                Corporation.                               of the Companies Act, 1956.
(i) The nature of the Corporation’s
business/activities during the year is such          (c) The recovery and payment of       (vii) In our opinion and according to
that clauses (ii), (viii), (x), (xiii), (xv),   principal amounts and interest have        the information and explanations given
(xviii), and (xx) of CARO, 2003 are not         been regular/as per stipulations during    to us, the Corporation has complied
applicable.                                     the year.                                  with the provisions of Sections 58 and
                                                                                           58AA of the Companies Act, 1956 and
(ii) In respect of its fixed assets:            (iv) In respect of loans, secured or       the Housing Finance Companies (NHB)
                                                unsecured, taken by the Corporation        Directions, 2001, with regard to the
     (a) The Corporation has maintained
                                                from companies, firms or other parties     deposits accepted from the public.
proper records showing full particulars,
                                                covered in the Register maintained
including quantitative details and
                                                under Section 301 of the Companies         (viii) In our opinion, the internal audit
situation of fixed assets.
                                                Act, 1956, according to the information    functions carried out during the year by
      (b) Some of the fixed assets were         and explanations given to us:              firms of Chartered Accountants
physically verified during the year by the                                                 appointed by the Management have
                                                     (a) During the year, loans
Management in accordance with a                                                            been commensurate with the size of
programme of verification, which in our         aggregating Rs. 1,18,91,924 from eight
                                                                                           the Corporation and the nature of its
                                                parties were taken. At the year-end, the
opinion provides for physical verification                                                 business.
                                                outstanding balances aggregated
of all the fixed assets at reasonable
intervals. There is also a system of            Rs. 2,37,84,937 to eighteen parties.
                                                                                           (ix) According to the information and
periodic physical verification of leased                                                   explanations given to us in respect of
                                                    (b) The rate of interest and other
assets by the Management, the                                                              statutory dues:
                                                terms and conditions of such loans are,
frequency of which is reasonable.
                                                in our opinion, prima facie not
According to the information and                                                                (a) The Corporation has generally
                                                prejudicial to the interests of the
explanations given to us no material                                                       been regular in depositing undisputed
                                                Corporation.
discrepancies were noticed on such                                                         Provident Fund, Investor Education and
verification.                                                                              Protection Fund, Income-tax, Sales-tax,
                                                    (c) The repayment of principal
                                                amounts and interest have been regular/    Wealth Tax, cess and other applicable
(iii) In respect of loans, secured or
                                                as per stipulations during the year.       statutory dues with the appropriate
unsecured, granted by the Corporation
                                                                                           authorities during the year.
to companies, firms or other parties
covered in the Register maintained              (v) In our opinion and according to
                                                the information and explanations given         (b) There are no undisputed
under Section 301 of the Companies
                                                to us, there are adequate internal         amounts outstanding as at March 31,
Act, 1956, according to the information
                                                control procedures commensurate with       2004 for a period of more than six
and explanations given to us:
                                                the size of the Corporation and the        months from the date they became
     (a) During the year, loans                 nature of its business for the purchase    payable.
aggregating Rs. 200,50,00,000 were              of fixed assets.
granted to nine parties. At the year-end,                                                       (c) Disputed Income-tax, Wealth
the outstanding balances aggregated to          (vi) To the best of our knowledge and      Tax, interest on lease tax and stamp
Rs. 74,45,00,000 to seven parties.              belief and according to the information    duty aggregating to Rs.10,55,24,534
                                                and explanations given to us, there        have not been deposited since the
    (b) The rate of interest and other          were no transactions [excluding items      matters are pending with the relevant
terms and conditions of such loans are,         reported under paragraph (iii) above]      forum as indicated hereunder:

  46
Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




Annexure to the Auditors’ Report                                        (Continued)


    Nature of Dues                       Amount (Rs.)             Forum where dispute is pending             the year for long term investment and
                                                                                                             vice versa, other than temporary
    Income-tax                             8,24,72,930            Commissioner of Income Tax (Appeals)
                                                                                                             deployment pending application.
    Wealth Tax                                12,15,576           Commissioner of Income Tax (Appeals)
                                                                                                             (xv) According to the information and
    Interest on lease tax                       2,20,794          Commissioner of Sales Tax (Appeals)
                                                                                                             explanations given to us and the
    Stamp Duty                             2,16,15,234            Office of the Sub-Registrar, Domlur,       records examined by us, securities have
                                                                  Bangalore                                  been created in respect of the
                                                                                                             debentures issued.
(x) Based on our audit procedures and                             transactions and contracts in respect of
according to the information and                                  its dealing in shares, securities,         (xvi)According to the information and
explanations given to us by the                                   debentures and other investments and       explanations given to us, no fraud by
Management, the Corporation has not                               timely entries have been made therein.     the Corporation and no material fraud
defaulted in the payment of dues to                               The aforesaid securities have been held    on the Corporation was noticed or
financial institutions, banks and                                 by the Corporation in its own name.        reported during the year, although there
debentureholders.                                                                                            have been few instances of loans
                                                                  (xiii) To the best of our knowledge and
                                                                                                             becoming doubtful of recovery
                                                                  belief and according to the information    consequent upon fraudulent
(xi) Based on our examination of
                                                                  and explanations given to us, term loans
documents and records and evaluation                                                                         misrepresentation by borrowers, the
                                                                  availed by the Corporation during the
of the related internal controls, we are                                                                     amounts whereof are not material in the
                                                                  year were, prima facie, applied by the     context of the size of the Corporation
of the opinion that the Corporation has
                                                                  Corporation for the purposes for which
maintained adequate documents and                                                                            and the nature of its business and
                                                                  the loans were obtained, other than
records where it has granted loans and                                                                       which have been provided for.
                                                                  temporary deployment pending
advances on the basis of security by
                                                                  application.
way of pledge of shares, debentures
and other securities.                                             (xiv)According to the cash flow
                                                                  statement and other records examined                     For S. B. BILLIMORIA & CO.
                                                                                                                                   Chartered Accountants
(xii) Based on our examination of the                             by us and the information and
records and evaluation of the related                             explanations given to us, on an overall
                                                                                                                                        Nalin M. Shah
internal controls, the Corporation has                            basis, funds raised on short term basis    MUMBAI,                             Partner
maintained proper records of                                      have, prima facie, not been used during    May 7, 2004        (Membership No. 15860)




                                                                                                                                                  47
Balance Sheet as at March 31, 2004
                                                    Schedule                                                             March 31, 2003
                                                                                Rupees                       Rupees              Rupees
SOURCES OF FUNDS
SHAREHOLDERS’ FUNDS
Share Capital                                          1              246,61,32,060                                     244,41,05,770
Reserves and Surplus                                   2             3147,17,57,625                                    2799,45,43,010
                                                                                              3393,78,89,685           3043,86,48,780
LOAN FUNDS                                             3                                     28684,03,87,133          23252,28,21,787
                                                                                             32077,82,76,818          26296,14,70,567


APPLICATION OF FUNDS
LOANS                                                  4                                     27974,27,23,017          21749,91,42,696
INVESTMENTS                                            5                                      2973,36,56,515           2977,86,11,977
DEFERRED TAX ASSET [Note 27]                                                                    54,58,29,546             66,78,29,546
CURRENT ASSETS, LOANS AND ADVANCES                     6             2396,44,44,070                                    2749,62,92,454
Less : CURRENT LIABILITIES AND PROVISIONS              7             1758,47,11,167                                    1665,79,86,804
NET CURRENT ASSETS                                                                              637,97,32,903          1083,83,05,650
FIXED ASSETS                                           8
Gross Block                                                              734,11,57,629                                  705,85,71,809
Less : Depreciation                                                      296,48,22,792                                  288,09,91,111
Net Block                                                                                       437,63,34,837           417,75,80,698
                                                                                             32077,82,76,818          26296,14,70,567


Notes forming part of the Accounts                     14
Significant Accounting Policies                        15
Schedules 1 to 15 annexed hereto form part of the Accounts.




As per our report attached.                         Deepak S. Parekh                     Directors
                                                    Chairman                             S. B. Patel
                                                                                         B. S. Mehta
For S. B. Billimoria & Co.                                                               D. N. Ghosh
                                                    Keshub Mahindra
Chartered Accountants                                                                    S. A. Dave
                                                    Vice Chairman
                                                                                         D. M. Sukthankar
                                                                                         S. Venkitaramanan
                                                    K. M. Mistry                         R. S. Tarneja
Nalin M. Shah
                                                    Managing Director                    D. M. Satwalekar
Partner
                                                                                         N. M. Munjee
                                                    Renu S. Karnad                       Susir Kumar M.
MUMBAI, May 7, 2004.                                Executive Director                   Company Secretary

  48
Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




Profit and Loss Account for the year ended March 31, 2004
                                                                                       Schedule                                    Previous Year
                                                                                                                      Rupees             Rupees
INCOME
Operating Income                                                                          9             2942,88,87,137         2858,57,47,442
Fees and Other Charges                                                                                   125,87,73,832          108,74,40,329
Other Income                                                                                               9,08,05,479            8,30,14,378
                                                                                                        3077,84,66,448         2975,62,02,149


EXPENDITURE AND CHARGES
Interest and Other Charges                                                               10             1873,58,16,762         1969,80,23,948
Staff Expenses                                                                           11               58,15,85,302           49,89,06,892
Establishment Expenses                                                                   12               22,71,62,152           19,52,74,169
Other Expenses                                                                           13               61,82,70,344           50,67,26,002
Depreciation                                                                                              23,58,32,889           25,69,82,433
Provision for Contingencies [Notes 12 (i) and 19]                                                         11,00,00,000            9,00,00,000
                                                                                                        2050,86,67,449         2124,59,13,444


PROFIT BEFORE TAX                                                                                       1026,97,98,999          851,02,88,705
Less : Provision for Tax [Notes 21 and 27]                                                               175,20,00,000          160,73,50,000
PROFIT AFTER TAX AVAILABLE FOR APPROPRIATION                                                             851,77,98,999          690,29,38,705
APPROPRIATIONS:
Special Reserve No. II                                                                                   230,00,00,000          224,00,00,000
General Reserve                                                                                          242,18,97,314          158,99,07,618
Shelter Assistance Reserve                                                                                 4,00,00,000            4,00,00,000
Proposed Dividend (at Rs. 13.50 per share)                                                               332,93,31,134          268,85,59,412
Additional Tax on Dividend                                                                                42,65,70,551           34,44,71,675
                                                                                                         851,77,98,999          690,29,38,705
EARNINGS PER SHARE (Face Value Rs. 10) [Note 26] :
   — Basic                                                                                                            34.62             28.19
   — Diluted                                                                                                          34.21             27.96
Notes forming part of the Accounts                                                       14
Significant Accounting Policies                                                          15
Schedules 1 to 15 annexed hereto form part of the Accounts.


As per our report attached.                                       Deepak S. Parekh                Directors
                                                                  Chairman                        S. B. Patel
                                                                                                  B. S. Mehta
For S. B. Billimoria & Co.                                                                        D. N. Ghosh
                                                                  Keshub Mahindra
Chartered Accountants                                                                             S. A. Dave
                                                                  Vice Chairman
                                                                                                  D. M. Sukthankar
                                                                                                  S. Venkitaramanan
                                                                  K. M. Mistry                    R. S. Tarneja
Nalin M. Shah
                                                                  Managing Director               D. M. Satwalekar
Partner
                                                                                                  N. M. Munjee
                                                                  Renu S. Karnad                  Susir Kumar M.
MUMBAI, May 7, 2004.                                              Executive Director              Company Secretary

                                                                                                                                          49
Cash Flow Statement for the year ended March 31, 2004
                                                                                                                 Previous Year
                                                                                                 Rupees                Rupees
A. CASH FLOW FROM OPERATING ACTIVITIES
   Profit before tax                                                                   1026,97,98,999        851,02,88,705
   Adjustments for:
   Depreciation (Net of Lease Equalisation adjustment)                                    23,99,48,358        25,12,44,445
   Provision for Contingencies                                                            11,00,00,000         9,00,00,000
   Employee Stock Option Expense (Net of options exercised)                                 (50,94,710)         (40,49,839)
   Provision for Retirement Benefits                                                       3,09,78,141         1,64,71,172
   Profit on Sale of Investments                                                        (130,83,52,463)     (107,45,62,612)
   Profit on Sale of Fixed Assets                                                            (9,51,620)          (8,16,771)
   Operating Profit before Working Capital changes                                       933,63,26,705       778,85,75,100
   Adjustments for:
   Current Assets                                                                       297,84,66,997       (495,26,09,442)
   Current Liabilities                                                                  (51,24,39,213)       201,11,17,466
   Cash generated from operations                                                      1180,23,54,489        484,70,83,124
   Advance tax paid                                                                    (217,39,88,832)      (194,24,11,888)
   Net cash from operating activities                                                   962,83,65,657        290,46,71,236
B.    CASH FLOW FROM INVESTING ACTIVITIES
      Purchase of Fixed Assets                                                           (49,65,69,111)      (20,02,64,390)
      Sale of Fixed Assets                                                                 5,76,83,116         3,69,52,372
                                                                                         (43,88,85,995)      (16,33,12,018)
      Investments in Subsidiaries                                                       (114,16,25,870)     (119,87,85,069)
      Other Investments                                                               (15470,97,32,886)   (13854,04,07,779)
      Sale proceeds of Investments :
      — in subsidiary companies                                                          34,00,00,000                  —
      — in other companies                                                            15684,85,19,849     14025,61,70,347
      Net cash used in investing activities                                              89,82,75,098        35,36,65,481
C. CASH FLOW FROM FINANCING ACTIVITIES
   Share Capital - Equity                                                                  2,20,26,290           73,98,380
   Share Premium                                                                          46,73,77,716        12,82,60,495
   Borrowings (Net)                                                                     5429,18,77,968      4485,10,62,310
   Loans disbursed (Net)                                                               (6226,91,44,127)    (4544,27,43,146)
   Dividend paid                                                                        (268,85,59,412)     (304,28,48,525)
   Tax paid on Dividend                                                                  (34,44,71,675)                 —
   Redemption Premium on NCDs and FRNs                                                  (103,55,73,224)       (5,72,18,314)
   Shelter Assistance Reserve - utilisation                                               (3,95,74,576)       (2,93,70,104)
   Net cash from financing activities                                                  (1159,60,41,040)     (358,54,58,904)
   Net Decrease in cash and cash equivalents                                            (106,94,00,285)      (32,71,22,187)
      Cash and cash equivalents as at the beginning of the year                          871,46,91,684       904,18,13,871
      Cash and cash equivalents as at the end of the year                                764,52,91,399       871,46,91,684
                                                                                        (106,94,00,285)      (32,71,22,187)

As per our report attached.              Deepak S. Parekh         Directors
                                         Chairman                 S. B. Patel
                                                                  B. S. Mehta
For S. B. Billimoria & Co.                                        D. N. Ghosh
                                         Keshub Mahindra
Chartered Accountants                                             S. A. Dave
                                         Vice Chairman
                                                                  D. M. Sukthankar
                                                                  S. Venkitaramanan
                                         K. M. Mistry             R. S. Tarneja
Nalin M. Shah
                                         Managing Director        D. M. Satwalekar
Partner
                                                                  N. M. Munjee
                                         Renu S. Karnad           Susir Kumar M.
MUMBAI, May 7, 2004.                     Executive Director       Company Secretary

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                                                                  AUDITORS’ CERTIFICATE
We have verified the Cash Flow Statement of HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED derived from the
audited financial statements of the Corporation for the years ended March 31, 2004 and March 31, 2003 and found the same
to be drawn up in accordance therewith and also with the requirements of Clause 32 of the listing agreements with the stock
exchanges.

                                                                                                               For S. B. BILLIMORIA & CO.
                                                                                                                        Chartered Accountants

                                                                                                                             Nalin M. Shah
                                                                                                                                      Partner
MUMBAI, May 7, 2004.                                                                                                  (Membership No. 15860)




Schedules
Annexed to and forming part of the Accounts

Schedule 1
SHARE CAPITAL
                                                                                                              As at                     As at
                                                                                                    March 31, 2004            March 31, 2003
                                                                                                            Rupees                    Rupees

AUTHORISED
  26,00,00,000                         Equity Shares of Rs. 10 each                                260,00,00,000            260,00,00,000
                                                                                                   260,00,00,000            260,00,00,000


ISSUED AND SUBSCRIBED
   24,66,17,121       Equity Shares of Rs. 10 each                                                 246,61,71,210            244,41,44,920
                      (Previous Year 24,44,14,492 Equity Shares of Rs. 10 each)
                                                                                                   246,61,71,210            244,41,44,920


PAID-UP
  24,66,17,121                         Equity Shares of Rs. 10 each                                246,61,71,210            244,41,44,920
                                       (Includes 12,19,60,713 Equity Shares of Rs. 10 each,
                                       allotted as fully paid-up Bonus Shares out of Securities
                                       Premium Account and Capital Redemption Reserve)
                                       (Previous Year 24,44,14,492 Equity Shares of Rs. 10 each)

Less : Allotment money due                                                                                39,150                    39,150
                                                                                                   246,61,32,060            244,41,05,770



                                                                                                                                       51
Schedule 2
RESERVES AND SURPLUS [Notes 17 (ii), 20 and 21]
                                                                               As at               As at
                                                                     March 31, 2004      March 31, 2003
                                                          Rupees             Rupees              Rupees
SPECIAL RESERVE No. I
Opening Balance                                    194,35,24,700                        234,35,24,700
Less : Transfer to Provision for Contingencies      50,00,00,000                         40,00,00,000
                                                                    144,35,24,700       194,35,24,700
SPECIAL RESERVE No. II
Opening Balance                                    829,95,00,000                        605,95,00,000
Add : Transfer from Profit and Loss Account        230,00,00,000                        224,00,00,000
                                                                   1059,95,00,000       829,95,00,000
GENERAL RESERVE
Opening Balance                                    944,13,82,685                        765,14,75,067
Add : Transfer from Debenture Redemption Reserve              —                          20,00,00,000
                                                   944,13,82,685                        785,14,75,067
Add : Transfer from Profit and Loss Account        242,18,97,314                        158,99,07,618
                                                                   1186,32,79,999       944,13,82,685
SECURITIES PREMIUM
Opening Balance                                    818,39,05,598                        893,71,76,615
Add : Received during the year                      46,73,77,716                         12,82,60,495
                                                   865,12,83,314                        906,54,37,110
Less : Utilised during the year                    120,73,91,129                         88,15,31,512
                                                                    744,38,92,185       818,39,05,598
EMPLOYEE STOCK OPTION OUTSTANDING
Opening Balance                                      1,94,71,877                          2,35,21,716
Add : Net Charge for the year                        1,07,20,237                            48,29,651
                                                     3,01,92,114                          2,83,51,367
Less : Options exercised                             1,58,14,947                            88,79,490
                                                                      1,43,77,167         1,94,71,877
CAPITAL REDEMPTION RESERVE
Opening Balance                                              —                           50,00,00,000
Less : Utilised for Issue of Bonus Shares                    —                           50,00,00,000
                                                                                 —                   —
SHELTER ASSISTANCE RESERVE
Opening Balance                                     10,63,44,275                          9,57,14,379
Add : Transfer from Profit and Loss Account          4,00,00,000                          4,00,00,000
                                                    14,63,44,275                         13,57,14,379
Less : Utilised during the year                      3,95,74,576                          2,93,70,104
                                                                     10,67,69,699        10,63,44,275
CAPITAL RESERVE                                                          4,13,875            4,13,875
                                                                   3147,17,57,625      2799,45,43,010




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Schedule 3
LOAN FUNDS [Notes 1 to 7 and 25 (ii)]
                                                                                                 As at                As at
                                                                                       March 31, 2004       March 31, 2003
                                                                           Rupees              Rupees               Rupees
LOANS
Asian Development Bank                                             444,06,75,400                           462,03,89,595
DEG - Deutsche Investitions- Und
     Entwicklungsgesellschaft MbH                                  223,85,00,000                                      —
International Finance Corporation                                  902,46,25,000                                      —
Kreditanstalt für Wiederaufbau                                      84,69,26,998                                      —
Syndicated Loans - International                                   962,34,99,838                           948,04,97,501
Under the Housing Guaranty Program of the United
      States Agency for International Development                    4,80,00,000                            53,84,00,000
Commonwealth Development Corporation                                          —                             11,50,61,657
National Housing Bank                                              477,84,58,367                           541,39,71,988
Scheduled Banks and Financial Institution                         8762,67,03,001                          6121,83,75,151
Others (Finance Lease)                                                 17,70,132                               29,05,251
Army Group Insurance                                                          —                            200,00,00,000
Life Insurance Corporation of India                                           —                            320,00,00,000
                                                                                    11862,91,58,736
BONDS                                                                                 341,41,06,000        399,30,03,000
     (Redeemable at par between 2004 and 2024)
DEBENTURES
Non-convertible Debentures                                        4771,80,00,000                          3209,25,44,000
Floating Rate Notes - International                                484,01,25,000                           484,95,75,000
    (Redeemable in 2007)
                                                                                     5255,81,25,000
Under a Line from Kreditanstalt für
    Wiederaufbau (Unsecured)                                                           41,17,36,192         93,18,22,262
Loans from Scheduled Banks (Unsecured)                                                390,07,64,999        810,07,99,294
Commercial Paper (Unsecured)                                                         1455,00,00,000        475,00,00,000
DEPOSITS (Unsecured)                                              9320,91,53,102                          9110,90,94,370
Interest Accrued and Due                                            16,73,43,104                            10,63,82,718
                                                                                     9337,64,96,206
                                                                                    28684,03,87,133      23252,28,21,787




                                                                                                                     53
Schedule 4
LOANS [Note 8]
                                                                                                   As at                   As at
                                                                                         March 31, 2004          March 31, 2003
                                                                                                 Rupees                  Rupees

Individuals                                                                         19158,73,88,426         15458,94,67,856
Corporate Bodies                                                                     8489,02,44,269          6110,87,80,803
Others                                                                                326,50,90,322           180,08,94,037
                                                                                    27974,27,23,017         21749,91,42,696

Note :
Investments in Preference Shares, Debentures and Deposits amounting to Rs. 885,49,56,083 (Previous Year Rs. 918,07,68,997)
are towards financing Real Estate Projects. The Preference Shares and Debentures are reflected in Schedule 5 and the Deposits
are shown under Current Assets in Schedule 6.

Schedule 5
INVESTMENTS (At Cost)                                                                              As at                   As at
                                                                                         March 31, 2004          March 31, 2003
                                                                                                 Rupees                  Rupees

Equity Shares - Subsidiaries and Associate Companies                                   635,10,77,809           537,99,51,014
Equity Shares - Other Companies                                                        441,96,21,722           459,18,72,835
Preference Shares - for financing Real Estate Projects                                  41,00,00,000           116,00,00,000
Preference Shares - Subsidiary and Others                                              104,81,08,000           176,07,89,000
Debentures and Bonds - for financing Real Estate Projects                              440,30,30,644           515,41,28,558
Debentures and Bonds - Others                                                          264,07,41,500           451,55,23,073
Government Securities                                                                  349,35,69,000           229,93,26,500
Mutual Funds and Other Funds                                                           707,59,53,713           492,64,49,886
Properties                                                                              15,47,91,464            22,84,96,026
                                                                                      2999,68,93,852         3001,65,36,892
Less : Provision for Diminution in Value of Investments                                 26,32,37,337           23,79,24,915
                                                                                      2973,36,56,515         2977,86,11,977


                                                                                             Book Value             Market Value
                                                                                                Rupees                   Rupees

Aggregate of Quoted Investments                                                        991,40,31,557        2537,15,68,208
Previous Year                                                                         (883,78,10,193)       (1642,06,08,727)
Aggregate of Investments listed but not quoted                                         463,90,74,700
Previous Year                                                                         (342,88,29,324)
Aggregate of Unquoted Investments                                                    1502,57,58,794
Previous Year                                                                        (1728,34,76,434)
Properties                                                                              15,47,91,464
Previous Year                                                                           (22,84,96,026)
                                                                                      2973,36,56,515
Previous Year                                                                        (2977,86,11,977)



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Schedule 5 (Continued)
INVESTMENTS (At Cost)                                                                               Face Value              As at              As at
                                                                                        Number of    per Share    March 31, 2004     March 31, 2003
                                                                                           Shares      Rupees             Rupees             Rupees

Equity Shares - Subsidiaries and
    Associate Companies (fully paid)
Subsidiaries
GRUH Finance Ltd.* (1,50,000 shares acquired)                                        1,63,90,604          10      23,86,12,092       23,28,98,592
HDFC Asset Management Co. Ltd.                                                       1,26,05,661          10      53,97,62,370       12,02,00,000
    (5,85,661 (net) shares acquired)
HDFC Chubb General Insurance Co. Ltd.                                                8,88,00,000          10      88,80,00,000       74,74,00,000
    (1,40,60,000 shares acquired)
HDFC Developers Ltd.                                                                      50,000          10          5,00,000           5,00,000
HDFC Holdings Ltd.                                                                      8,00,070          10       2,40,00,700        2,40,00,700
HDFC Investments Ltd.                                                                3,26,70,500          10      81,02,30,000       81,02,30,000
HDFC Realty Ltd.                                                                       40,00,070          10       3,56,38,347        3,56,38,347
HDFC Standard Life Insurance Co. Ltd.                                               19,11,77,000          10     191,17,70,000      160,65,20,000
    (3,05,25,000 shares acquired)
HDFC Trustee Co. Ltd.                                                                  1,00,000           10        10,00,000           10,00,000
                                                                                                                 444,95,13,509      357,83,87,639
Associate Companies
Credit Information Bureau (India) Ltd. (70 shares acquired)                          1,00,00,000          10      10,00,00,000        7,49,99,475
GW Capital Pvt. Ltd.                                                                    7,83,000          10         78,30,000          78,30,000
HDFC Bank Ltd.*                                                                      3,88,60,000          10     150,66,40,000      150,66,40,000
HDFC Securities Ltd.                                                                   44,25,000          10         88,50,000          88,50,000
Indian Association for Savings and Credit                                               2,99,930          10         29,99,300          29,99,300
Intelenet Global Services Ltd. (75,00,040 shares acquired)                           2,75,00,000          10      27,50,00,000       19,99,99,600
Rockfort Estate Developers Ltd.                                                           24,500          10          2,45,000           2,45,000
                                                                                                                 190,15,64,300      180,15,63,375
                                                                                                                 635,10,77,809      537,99,51,014
* listed shares

Equity Shares - Other Companies
     (fully paid)
Unlisted :
AEC Cements and Constructions Ltd.                                                      2,80,000          10         28,00,000          28,00,000
Appollo Fibres Ltd.                                                                    43,16,172          10       4,31,61,720        4,31,61,720
Asset Reconstruction Co. (India) Ltd.                                                   5,30,000          10         53,00,000                 —
Automartindia Ltd.                                                                      3,70,000          10       1,00,50,000        1,00,50,000
Bhartiya Samruddhi Finance Ltd.                                                         5,00,000          10         50,00,000          50,00,000
Business Standard Ltd.                                                                  2,50,000          10       1,12,50,000        1,12,50,000
Chalet Hotels Ltd.                                                                   1,50,00,000          10      30,00,00,000       30,00,00,000
Colliers International (India) Property Services Pvt. Ltd.                              1,50,000          10         15,00,000          15,00,000
Computer Age Management Services Pvt. Ltd.                                             14,40,000          10       3,21,60,000        3,21,60,000
     (7,20,000 bonus shares received)
Construction Portal Pvt. Ltd.                                                                —            —                 —         3,00,00,000
Feedback First Urban Infrastructure Development Co. Ltd.                              15,00,000           10       1,50,00,000        1,50,00,000
Feedback Ventures Pvt. Ltd.                                                            6,68,300           10         66,83,000          66,83,000
                                                                  Carried forward                                 43,29,04,720       45,76,04,720

                                                                                                                                              55
Schedule 5 (Continued)
INVESTMENTS (At Cost)                                                       Face Value              As at              As at
                                                                Number of    per Share    March 31, 2004     March 31, 2003
                                                                   Shares      Rupees             Rupees             Rupees
                                           Brought forward                                43,29,04,720       45,76,04,720
Feminine Hygiene Products Pvt. Ltd.                              50,000           10          5,00,000           5,00,000
GVFL Ltd.                                                        75,000           10          9,00,000           9,00,000
ICRA Ltd.                                                            —            —                 —            7,00,000
IL&FS Education & Technology Services Ltd.                    24,00,000           10      12,00,00,000       12,00,00,000
     (formerly Schoolnet India Ltd.)
INCAB Industries Ltd.                                             76,188          10         23,24,884          23,24,884
Infrastructure Development Corporation (Karnataka) Ltd.         1,50,000          10         15,00,000          15,00,000
Infrastructure Development Finance Co. Ltd.                  3,00,00,000          10      30,00,00,000       30,00,00,000
Infrastructure Leasing & Financial Services Ltd.             1,40,49,500          10      94,70,35,429       94,70,35,429
IPFonline Ltd.                                                  1,55,560          10       4,04,45,600        4,04,45,600
Kesoram Textile Mills Ltd.                                        22,258           2                —                  —
Lafarge India Pvt. Ltd.                                      2,33,33,336          10      50,00,00,040       50,00,00,040
Maruti Countrywide Auto Financial Services Pvt. Ltd.         1,48,00,000          10      14,80,00,000       14,80,00,000
Monotona Tyres Ltd.                                             5,40,000          10         54,00,000          54,00,000
Microland Ltd.                                                 15,00,000           1       1,31,25,000        1,31,25,000
MIEL e-Security Pvt. Ltd.                                       1,11,112          10       4,11,11,440        4,11,11,440
Novacel Life Sciences Ltd.                                      7,50,000          10         75,00,000          75,00,000
Personal Hygiene & Healthcare Products Pvt. Ltd.                  50,000          10          5,00,000           5,00,000
Power Trading Corporation of India Ltd.                           38,500          10          6,16,000                 —
Prize Petroleum Co. Ltd.                                        9,99,900          10         99,99,000          99,99,000
Quantum Information Services Ltd.                               1,42,860           1       2,89,43,436        2,89,43,436
Softcell Technologies Ltd.                                      4,99,702          10       2,59,84,504        2,59,84,504
SolutionNET India Pvt. Ltd.                                     2,64,000          10         96,00,000          96,00,000
SICOM Ltd.                                                      6,07,200          10       4,85,76,000        4,85,76,000
Tamil Nadu Urban Infrastructure Financial Services Ltd.         1,50,000          10         15,00,000          15,00,000
Tamil Nadu Urban Infrastructure Trustee Co. Ltd.                  15,000          10          1,50,000           1,50,000
                                                                                         268,66,16,053      271,14,00,053
Listed :
Andhra Bank                                                   14,06,376           10       2,43,51,987        2,43,51,987
Apcotex Lattices Ltd.                                          1,32,750           10       1,51,51,753        1,51,51,753
APW President Systems Ltd.                                       49,400           10         16,05,500          16,05,500
Bajaj Auto Ltd.                                                  71,700           10       3,63,05,683        3,63,05,683
Bank of India                                                 11,01,278           10       3,80,45,074        3,80,45,074
Bharat Bijlee Ltd. (7,562 shares sold)                            9,748          100         44,23,228          78,54,542
Bharat Electronics Ltd.                                          18,000           10         99,55,204                 —
Bharat Heavy Electricals Ltd. (2,13,215 shares sold)           1,36,785           10       2,49,42,366        6,38,21,532
Bharat Petroleum Corporation Ltd.                                26,000           10         99,39,589                 —
Borax Morarji Ltd.                                               41,000           10         12,36,150          12,36,150
Can Fin Homes Ltd.                                            24,99,980           10       3,12,49,800        3,12,49,800
Chambal Fertilisers & Chemicals Ltd.                          13,30,831           10       2,02,25,023        2,02,25,023
Chennai Petroleum Corporation Ltd.                             3,75,000           10       3,00,00,000        3,00,00,000
Coromandel Fertilisers Ltd.                                    1,33,333           10                —                  —
     (received under Scheme of Arrangement)
Corporation Bank                                               1,42,338           10       1,12,21,928        1,12,21,928
                                          Carried forward                                 25,86,53,285       28,10,68,972

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Schedule 5 (Continued)
INVESTMENTS (At Cost)                                                                            Face Value              As at              As at
                                                                                     Number of    per Share    March 31, 2004     March 31, 2003
                                                                                        Shares      Rupees             Rupees             Rupees

                                          Brought forward                                                      25,86,53,285       28,10,68,972
Dredging Corporation of India Ltd.                                                      8,946          10         35,78,400                 —
E.I.D. - Parry (India) Ltd.                                                          4,00,000          10       2,55,14,100        2,55,14,100
Electrolux Kelvinator Ltd.                                                                 —           —                 —           10,00,000
GAIL (India) Ltd.                                                                    4,01,000          10       2,99,33,676        2,99,33,676
GIC Housing Finance Ltd.                                                                   —           —                 —         2,30,00,000
Gujarat Ambuja Cements Ltd.                                                            30,000          10         96,05,550          96,05,550
Gulf Oil Corporation Ltd.                                                              16,800          10         42,00,000          42,00,000
Hind Lever Chemicals Ltd.                                                            1,90,000          10       8,74,00,000        8,74,00,000
Hindustan Lever Ltd.                                                                 1,59,100           1       1,29,22,776        1,29,22,776
Hindustan Oil Exploration Co. Ltd.                                                  62,87,222          10      14,18,32,821       14,18,32,821
Hughes Software Systems Ltd.                                                           80,000           5       2,52,00,000        2,52,00,000
ICICI Bank Ltd. (1,15,585 (net) shares sold)                                         4,00,000          10       7,35,07,319        3,42,07,322
IDBI Bank Ltd. (1,34,742 rights shares acquired)                                     3,22,442          10         62,85,488          33,21,164
iGate Global Solutions Ltd. (formerly Mascot Systems Ltd.)                             15,700           4         75,36,000          75,36,000
Indian Oil Corporation Ltd.                                                            51,500          10       1,99,24,053                 —
Indraprastha Medical Corporation Ltd.                                                      —           —                 —           49,34,476
Industrial Development Bank of India                                                14,26,161          10       4,38,57,986        4,38,57,986
Infosys Technologies Ltd.                                                               5,000           5       3,53,95,000        3,53,95,000
Kochi Refineries Ltd.                                                                  69,800          10       1,00,09,320                 —
Larsen & Toubro Ltd.                                                                   85,006          10         51,00,360          51,00,360
Mahanagar Telephone Nigam Ltd. (64,800 shares acquired)                              4,02,500          10       6,62,31,016        5,62,36,912
Mahindra & Mahindra Ltd.                                                             3,34,200          10       7,22,12,265        7,22,12,265
Morepen Laboratories Ltd.                                                            3,00,000           2       3,90,00,000        3,90,00,000
Moser Baer India Ltd. (36,000 bonus shares received)                                   36,000          10         99,95,425                 —
Oil & Natural Gas Corporation Ltd.                                                   1,06,154          10       7,45,90,891        1,50,75,000
     (65,354 (net) shares acquired)
Oriental Bank of Commerce                                                            3,73,800          10       2,24,28,000        2,24,28,000
Polaris Software Lab Ltd.                                                              39,000           5         26,91,780          26,91,780
Prism Cement Ltd.                                                                    6,00,000          10         73,20,000          73,20,000
Punjab Tractors Ltd. (80,970 shares sold)                                              49,030          10         74,08,446        1,96,43,036
Ranbaxy Laboratories Ltd. (3,85,960 shares sold)                                       73,775          10       4,13,88,429       25,79,15,410
Recron Synthetics Ltd.                                                              43,78,600          10       4,37,86,000        4,37,86,000
Reliance Industries Ltd.                                                             1,70,907          10       3,52,25,330        3,52,25,330
SBI Home Finance Ltd. (2,70,815 shares sold)                                        18,08,585          10       1,80,85,850        2,07,94,000
Shree Rama Multi-Tech Ltd.                                                                 —           —                 —         1,50,00,000
Siemens Ltd.                                                                         2,00,000          10       6,83,72,145        6,83,72,145
SRF Ltd.                                                                             4,15,921          10       1,63,02,069        1,63,02,069
SRF Polymers Ltd. (41,592 shares sold)                                                     —           —                 —                  —
SSI Ltd.                                                                               30,000          10       1,12,50,000        1,12,50,000
State Bank of India                                                                  8,73,900          10      12,01,58,724       12,01,58,724
The Associated Cement Companies Ltd.                                                 4,30,000          10       4,37,62,747        4,37,62,747
The Dharamsi Morarji Chemical Co. Ltd.                                                 89,129          10         57,84,817          57,84,817
The Great Eastern Shipping Co. Ltd.                                                 24,11,253          10       9,37,83,610        9,37,83,610
The Tata Iron & Steel Co. Ltd. (1,34,750 shares acquired)                            2,61,596          10       6,27,20,191        1,28,65,680
                                                                  Carried forward                             166,29,53,869      175,56,37,728

                                                                                                                                           57
Schedule 5 (Continued)
INVESTMENTS (At Cost)                                                     Face Value              As at              As at
                                                              Number of    per Share    March 31, 2004     March 31, 2003
                                                                 Shares      Rupees             Rupees             Rupees
                                         Brought forward                               166,29,53,869      175,56,37,728
Tube Investments of India Ltd.                               2,50,000           10         58,03,875          58,03,875
UCO Bank                                                     3,24,300           10         38,91,600                 —
Union Bank of India                                          3,59,400           10         57,50,400          57,50,400
UTI Bank Ltd. (4,85,000 shares sold)                         4,85,000           10       1,00,32,225        2,00,64,450
Videsh Sanchar Nigam Ltd.                                          —            —                 —         4,98,92,829
Vijaya Bank                                                  1,32,300           10         31,75,200                 —
Western Ministil Ltd.                                              —            —                 —           19,25,000
Zee Telefilms Ltd.                                             50,000            1       4,13,98,500        4,13,98,500
                                                                                       173,30,05,669      188,04,72,782
                                                                                       441,96,21,722      459,18,72,835
Preference Shares - Cumulative Redeemable
    (fully paid) - for financing Real Estate Projects
    9% Ashok Leyland Finance Ltd.                                  —            —                 —        50,00,00,000
  9.5% Bharat Forge Ltd.                                    60,00,000           10       6,00,00,000        6,00,00,000
  9.1% EIH Ltd. (partly redeemed)                           50,00,000           70      35,00,00,000       50,00,00,000
 8.25% H & R Johnson (India) Ltd.                                  —            —                 —        10,00,00,000
                                                                                        41,00,00,000      116,00,00,000
Preference Shares - Cumulative Redeemable
    (fully paid) - Others
    - Subsidiary
   10% HDFC Asset Management Co. Ltd.                      2,50,50,000          10      25,05,00,000                   —
                                                                                        25,05,00,000                   —
   - Others
 9.5% Bharat Forge Ltd.                                      40,00,000          10       4,00,00,000        4,00,00,000
11.5% Bharat Forge Ltd.                                    1,00,00,000          10      10,00,00,000       10,00,00,000
 11% Borax Morarji Ltd.                                             —           —                 —         1,75,00,000
 9.5% Chemplast Sanmar Ltd.                                  20,50,000         100      20,50,00,000       20,50,00,000
 8.5% Cholamandalam Investment & Finance Co. Ltd.                   —           —                 —        10,00,00,000
12.5% DLF Power Ltd.                                                —           —                 —        10,00,00,000
 8.5% Gujarat Glass Ltd.                                            —           —                 —        24,50,00,000
10.5% IFCI Ltd.                                            1,65,28,900          10      16,52,89,000       16,52,89,000
 14% J. K. Synthetics Ltd. (6,810 shares redeemed)              18,190         100         18,19,000          25,00,000
   6% MCS Software Solutions Ltd.                               50,000       1,000       5,00,00,000        5,00,00,000
 13% Precision Automation & Robotics India Ltd.               2,25,000          50       2,25,00,000        2,25,00,000
        (Optionally Convertible)
   9% Radha Madhav Investments Ltd.                                —            —                 —        20,00,00,000
10.5% SICOM Ltd.                                                   —            —                 —         5,00,00,000
 14% South India Corporation (Agencies) Ltd.                       —            —                 —        10,00,00,000
 15% South India Corporation (Agencies) Ltd.                       —            —                 —         9,00,00,000
   6% The Arvind Mills Ltd.                                 20,00,000          100      20,00,00,000       20,00,00,000
11.5% The Dharamsi Morarji Chemical Co. Ltd.                       —            —                 —         6,00,00,000
12.5% The Western India Plywoods Ltd.                        1,30,000          100       1,30,00,000        1,30,00,000
                                                                                        79,76,08,000      176,07,89,000
                                                                                       104,81,08,000      176,07,89,000

  58
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Schedule 5 (Continued)
INVESTMENTS (At Cost)                                                                 Face Value
                                                                    Number of     per Debenture/               As at               As at
                                                                   Debentures/             Bond      March 31, 2004      March 31, 2003
                                                                       Bonds             Rupees              Rupees              Rupees
Debentures and Bonds - Redeemable
    — for financing Real Estate Projects (fully paid)
Held as long term investments
    — Subsidiary
  9.5% GRUH Finance Ltd.                                                 100      10,00,000         10,00,00,000        10,00,00,000
                                                                                                    10,00,00,000        10,00,00,000
    — Others
   18% Apollo Infrastructure Projects Finance Co. Ltd.            12,80,000                100      12,80,00,000        12,80,00,000
       (Optionally Convertible)
   13% Asianet Satellite Communications Ltd.                             —                —                   —          2,00,00,000
 10.5% Housing & Urban Development Corporation Ltd.                      —                —                   —          9,10,00,000
 8.55% Konkan Railway Corporation Ltd.                               10,000         1,00,000       100,00,00,000       100,00,00,000
 10.5% Konkan Railway Corporation Ltd.                             3,50,000            1,000        37,64,74,000        37,64,74,000
 13.2% Maharashtra State Police Housing
          & Welfare Corporation Ltd. (partly redeemed)                4,000           75,000        30,00,00,000        35,00,00,000
       MBS 2002 Series I Trust (Pass Through
          Certificate - Class B) (partly redeemed)                          1    1,94,67,528         1,94,67,528         9,67,26,939
       MBS 2002 Series II Trust (Pass Through
          Certificate - Class B) (partly redeemed)                          1     78,10,208           78,10,208          5,34,99,785
       MBS 2002 Series III Trust (Pass Through
          Certificate - Class B) (partly redeemed)                          1     18,75,468           18,75,468           20,76,898
       MBS 2003 Series I Trust (Pass Through
          Certificate - Class B)                                            1       8,08,312            8,08,312            8,08,312
       MBS 2004 Series I Trust (Pass Through
          Certificate - Class A2)                                         27      96,52,910         26,06,28,570                    —
       MBS 2004 Series I Trust (Pass Through
          Certificate - Class A3)                                        1          2,93,103            2,93,103                  —
  5.5% National Housing Bank                                        32,000            10,000        32,00,00,000                  —
  8.5% National Housing Bank                                         5,000          1,00,000        50,00,00,000        50,00,00,000
 9.15% National Housing Bank                                           540          1,00,000         5,40,00,000         5,40,00,000
11.25% National Housing Bank                                         3,000          1,00,000        30,00,00,000        30,00,00,000
 13.5% National Housing Bank                                            —                 —                   —            37,83,280
13.75% National Housing Bank                                             5          1,00,000            5,00,000            5,00,000
       National Housing Bank Trust (Pass
          Through Certificate - Class B)
          (partly redeemed)                                              285        1,16,398         3,31,73,455         7,72,59,344
   10% Steel Authority of India Ltd.                                      —               —                   —        100,00,00,000
 12.5% West Bengal Infrastructure Development
         Finance Corporation Ltd.                                     5,000         1,00,000        50,00,00,000        50,00,00,000
13.25% West Bengal Infrastructure Development
         Finance Corporation Ltd.                                     5,000         1,00,000        50,00,00,000        50,00,00,000
                                                                                                   430,30,30,644       505,41,28,558
                                                                                                   440,30,30,644       515,41,28,558

                                                                                                                                 59
Schedule 5 (Continued)
INVESTMENTS (At Cost)                                                            Face Value
                                                               Number of     per Debenture/               As at               As at
                                                              Debentures/             Bond      March 31, 2004      March 31, 2003
                                                                  Bonds             Rupees              Rupees              Rupees

Debentures and Bonds - Redeemable - Others
    (fully paid)
Held as long term investments
   11% Gujarat Industries Power Co. Ltd. (partly redeemed)          50         4,00,000         2,00,00,000         3,50,00,000
   11% Maharashtra Jeevan Pradhikaran                            1,500         1,00,000        15,00,00,000        15,00,00,000
 11.5% Maharashtra State Road Development
             Corporation Ltd. (partly redeemed)                 1,000            50,000         5,00,00,000        10,00,00,000
 8.75% National Bank for Agriculture and Rural Development     20,000            10,000        20,00,00,000        20,00,00,000
 10.5% National Highways Authority of India                        —                 —                   —         47,88,00,000
    9% Nuclear Power Corporation of India Ltd.                     —                 —                   —         20,00,00,000
  8.7% Rural Electrification Corporation Ltd.                  88,350            10,000        88,04,77,000        88,04,77,000
          Tata Industries Ltd. (Exchangeable Premium Bonds)        —                 —                   —         20,00,00,000
                                                                                              130,04,77,000       224,42,77,000
Held as current investments
  14% Ahmedabad Municipal Corporation                     1,00,000                   334        3,34,00,000         6,67,00,000
             (partly redeemed)
    0% Appollo Fibres Ltd.                                4,31,617                  100         4,31,61,700         4,31,61,700
14.75% Asian Telephone Services Ltd.                            —                    —                   —          6,20,31,250
  13% Asianet Satellite Communications Ltd.                     —                    —                   —         18,00,00,000
14.75% Bhagalaxmi Investments Pvt. Ltd.                         —                    —                   —          6,20,31,250
11.45% Bharti Mobile Ltd.                                       10          1,00,00,000        10,00,00,000        10,00,00,000
  21% Credential Finance Ltd.                                   10            10,00,000         1,00,00,000         1,00,00,000
  15% Escorts Ltd.                                              —                    —                   —          1,50,81,250
         Escotel Mobile Communications Ltd. (partly            200             8,32,050        16,64,10,000        18,51,30,000
             redeemed) (Floating Rate Debenture)
  12% Gujarat Electricity Board                                 50           10,00,000          5,00,00,000         5,00,00,000
    9% Hindustan Lever Ltd.                               1,59,100                   6             9,54,600                  —
  11% HMT Ltd.                                                  30           10,00,000          3,00,00,000         3,00,00,000
 14.5% Indian Petrochemicals Corporation Ltd.                  600              66,667          4,00,00,200         6,00,00,000
             (partly redeemed)
         Infrastructure Leasing & Financial Services Ltd. 4,00,000                 1,000       40,00,00,000        40,00,00,000
             (Floating Rate Debenture)
  8.5% Kalyani Steels Ltd.                                     100           10,00,000         10,00,00,000                  —
  13% Kalyani Steels Ltd.                                       —                   —                    —         10,00,00,000
  13% Lafarge India Pvt. Ltd.                                   —                   —                    —         25,00,00,000
 17.5% Maharashtra Krishna Valley Development Corporation       —                   —                    —          4,75,00,000
  13% Maharashtra State Road Development
             Corporation Ltd.                                1,500             1,00,000        15,00,00,000        15,00,00,000
  12% Maharashtra Vikrikar Rokhe Pradhikaran Pvt. Ltd.       1,000             1,00,000        10,00,00,000        10,00,00,000
 14.5% National Aluminium Co. Ltd. (partly redeemed)         7,000                  334           23,38,000           46,69,000
 11.5% Nirlon Ltd.                                              —                    —                   —            12,40,000
 13.5% Prism Cement Ltd.                                        —                    —                   —            79,47,074
14.75% Sapte Investments Pvt. Ltd                               —                    —                   —          6,20,31,250
 12.9% Tamil Nadu Industrial Development Corporation Ltd.      500             1,00,000         5,00,00,000         5,00,00,000
10.75% Tamil Nadu Industrial Development Corporation Ltd.      500             1,00,000         5,00,00,000         5,00,00,000
11.85% Tamil Nadu Urban Development Fund (partly redeemed)     350               40,000         1,40,00,000         2,10,00,000
         Unison Hotels Ltd.                                     —                    —                   —         10,06,92,049
14.75% Vsapte Investments Pvt. Ltd.                             —                    —                   —          6,20,31,250
                                                                                              134,02,64,500       227,12,46,073
                                                                                              264,07,41,500       451,55,23,073
Government Securities
Government of India Loans                                                                     349,35,69,000       229,93,26,500

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Schedule 5 (Continued)
INVESTMENTS (At Cost)                                                            Face Value               As at               As at
                                                                     Number of     per Unit     March 31, 2004      March 31, 2003
                                                                         Units      Rupees              Rupees              Rupees


Mutual Funds and Other Funds
Equity Funds
HDFC Equity Fund                                                  1,12,44,788          10      20,44,97,706                  —
HDFC Growth Fund (Switch of Option)                               1,00,00,000          10      13,07,10,000         9,83,00,000
HDFC Index Fund                                                            —           —                 —          5,00,00,000
HDFC Top 200 Fund                                                   57,35,108          10      11,34,34,705                  —
IL&FS Global India Fund (formerly IL&FS eCom Fund)                         —           —                 —          4,87,50,000
IL&FS Growth & Value Fund                                           58,51,375          10      10,00,00,000         4,87,50,000
     (8,51,375 (net) units acquired)
Mastergain 1992 (61,41,400 units redeemed)                             1,200           10            12,757         6,53,02,437
Mastershare (1,77,95,542 units redeemed)                              15,156           10          1,70,204        20,00,16,810
Mastershare Plus 1991 (24,23,900 units redeemed)                         400           10             6,350         3,84,86,943
Morgan Stanley Growth Fund (8,27,080 units acquired)               48,27,080           10       4,98,15,286         3,90,00,000
Prudential ICICI Power                                                    —            —                 —            98,40,000
Templeton India Growth Fund                                        25,00,000           10       2,43,25,000         2,43,25,000
UTI - Master Value Unit Plan                                       30,58,104           10      10,00,00,000                  —
                                                                                               72,29,72,008        62,27,71,190

Balanced Funds
DSP Merrill Lynch Balanced Fund                                           —            —                 —          7,42,50,000
HDFC Balanced Fund (63,20,824 (net) units redeemed)                36,79,176           10       5,00,00,000         9,88,00,000
Sun F & C Balanced Fund                                                   —            —                 —          2,98,50,000
                                                                                                5,00,00,000        20,29,00,000
Debt Funds
- Income Funds
Chola Triple Ace                                                           —           —                 —          8,88,88,889
DSP Merrill Lynch Savings Plus Fund                                        —           —                 —         10,00,00,000
Grindlays Super Saver Income Fund                                 1,00,00,000          10      10,00,00,000                  —
HDFC Fixed Investment Plan                                          50,00,000          10       5,00,00,000                  —
HDFC Gilt Fund                                                    1,32,37,401          10      20,00,00,000                  —
HDFC High Interest Fund                                           1,08,76,138          10      25,00,00,000                  —
HDFC Income Fund                                                           —           —                 —        100,00,00,000
HDFC MF Monthly Income Plan                                       9,62,35,458          10     100,00,00,000                  —
IL&FS Bond Fund                                                            —           —                 —         19,85,19,700
Kotak Bond (Wholesale Plan)                                                —           —                 —         10,00,00,000
Prudential ICICI Income Plan                                               —           —                 —          9,97,50,000
Sundaram Bond Saver                                                        —           —                 —          9,47,36,842
UTI - Monthly Income Plan 1999                                    5,10,00,000          10      50,74,50,000        50,74,50,000
                                                                                              210,74,50,000       218,93,45,431


                                                                                                                            61
Schedule 5 (Continued)
INVESTMENTS (At Cost)                                                             Face Value               As at               As at
                                                                 Number of          per Unit     March 31, 2004      March 31, 2003
                                                                     Units           Rupees              Rupees              Rupees

Liquid Funds
Grindlays Cash Fund                                         4,22,89,735                 10      50,00,00,000                  —
HDFC Liquid Fund (10,78,58,577 (net) units acquired)       23,42,07,266                 10     295,71,93,084       152,00,00,000
Prudential ICICI Liquid Plan                                2,17,41,494                 10      34,00,00,000                  —
                                                                                               379,71,93,084       152,00,00,000
Other Funds
AIG Indian Sectoral Equity Trust (7 units redeemed)                   72       10,00,000         7,23,80,933         7,94,36,049
Gujarat Venture Capital Fund - 1990 (partly redeemed)                 —               —             2,20,000            3,00,000
Gujarat Venture Capital Fund - 1995                                   —               —            64,00,000           64,00,000
IL&FS Venture Fund (1 unit redeemed)                                  17       10,00,000         1,68,89,389         1,75,48,917
India Value Fund (6,700 units acquired)                         1,27,287           1,000        13,52,87,000        12,05,87,000
Tamil Nadu Urban Development Fund                                  1,672        1,00,000        16,71,61,299        16,71,61,299
                                                                                                39,83,38,621        39,14,33,265
                                                                                               707,59,53,713       492,64,49,886
Notes :
          1) Unquoted investments include Rs. 90,00,000 (Previous Year Rs. 1,65,00,000) in respect of shares which are subject
             to a lock-in period and Rs. 99,99,000 (Previous Year Rs. 40,99,99,020) in respect of shares which are subject to
             restrictive covenant. Quoted investments include Rs. 23,86,12,092 (Previous Year Rs. 23,28,98,592) in respect of
             shares which are subject to restrictive covenant.
          2) Market value includes Rs. 627,88,96,577 (Previous Year Rs. 374,18,67,535) [Cost: Rs. 617,01,65,093 (Previous Year
             Rs. 378,85,49,811)] being repurchase price of units issued by Mutual Funds and Other Funds.
          3) Investments in Equity Shares, Preference Shares, Government Securities and units of Mutual Funds and Other Funds
             are held as long term investments. Investments in Liquid Funds are held as current investments.
          4) During the year, the Corporation purchased 2,330 shares and sold 3,495 shares (including 1,165 bonus shares
             received) of Procter & Gamble Hygiene & Health Care Ltd. of Rs. 0.14 crore. The Corporation purchased and sold
             36,000 shares of Moser Baer India Ltd. of Rs. 2 crores. 20,500 - 7% Preference shares of Sanmar Properties &
             Investments Ltd. (SPIL) received pursuant to a Scheme of Arrangmement between Chemplast Sanmar Ltd. and SPIL,
             were redeemed during the year.




  62
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Schedule 6
CURRENT ASSETS, LOANS AND ADVANCES [Note 9]
                                                                                              As at               As at
                                                                                    March 31, 2004      March 31, 2003
                                                                         Rupees             Rupees              Rupees
CURRENT ASSETS
Income Accrued on Investments                                                       33,45,14,626        54,36,26,912
Interest Accrued on Deposits                                                        27,45,90,342        21,85,59,705
Sundry Debtors (Unsecured)                                                             49,64,349         1,41,27,239
Cash and Bank Balances :
     Cash and Cheques on Hand                                      91,24,82,104                         72,73,50,844
With Scheduled Banks :
     Current Accounts                                             140,92,88,671                        156,43,17,884
     Deposit Accounts                                             532,25,15,018                        642,25,96,975
With Reserve Bank of India                                            10,05,606                             4,25,981
                                                                                   764,52,91,399
                                                                                   825,93,60,716       949,10,05,540
LOANS AND ADVANCES
Instalments due from borrowers                                    209,95,50,614                        200,05,14,037
Advances recoverable in cash or in kind or
for value to be received                                          511,36,09,211                        427,42,23,052
Corporate Deposits                                                849,19,23,529                       1173,05,49,825
                                                                                  1570,50,83,354
                                                                                  2396,44,44,070      2749,62,92,454

Schedule 7
CURRENT LIABILITIES AND PROVISIONS [Note 10]
                                                                                              As at               As at
                                                                                    March 31, 2004      March 31, 2003
                                                                         Rupees             Rupees              Rupees
CURRENT LIABILITIES
Interest Accrued but not Due                                      803,66,78,095                        875,10,89,934
Sundry Creditors                                                   10,21,91,732                          9,31,36,554
Advance Payments                                                   41,58,22,516                         25,47,01,331
Other Liabilities                                                 146,23,52,447                        122,47,02,783
                                                                                  1001,70,44,790      1032,36,30,602
PROVISIONS
Proposed Dividend                                                 332,93,31,134                        268,85,59,412
Additional Tax on Dividend                                         42,65,70,551                         34,44,71,675
Provision for premium payable on redemption of FRNs                27,65,23,972                         10,47,06,067
Provision for Contingencies                                       343,15,05,492                        312,38,61,961
Provision for Retirement Benefits                                  10,37,35,228                          7,27,57,087
                                                                                   756,76,66,377
                                                                                  1758,47,11,167      1665,79,86,804


                                                                                                                 63
     Schedule 8




64
     FIXED ASSETS
                                                             GROSS BLOCK                                                       DEPRECIATION                                    NET BLOCK
                                            As at                                           As at          As at                                            As at          As at          As at
                                  March 31, 2003         Additions     Deductions March 31, 2004 March 31, 2003         For the Year   Deductions March 31, 2004 March 31, 2004 March 31, 2003
                                          Rupees           Rupees          Rupees            Rupees           Rupees         Rupees        Rupees           Rupees          Rupees             Rupees
     Land :
         Freehold                    34,54,45,478       66,75,500              —       35,21,20,978               —              —             —                —      35,21,20,978    34,54,45,478
         Leasehold                    2,30,40,118              —               —        2,30,40,118        27,56,606       2,38,622            —         29,95,228      2,00,44,890     2,02,83,512
     Buildings :
         Own Use                   143,41,04,104     30,97,73,515     2,80,48,216     171,58,29,403     14,06,98,993    2,77,13,131     34,57,912     16,49,54,212    155,08,75,191   129,34,05,111
         Under Operating Lease     194,96,01,450               —      2,82,81,586     192,13,19,864      6,33,45,831    3,16,45,890      8,84,090      9,41,07,631    182,72,12,233   188,62,55,619
         Leasehold Improvements               —       3,30,80,977              —        3,30,80,977               —       55,32,027            —         55,32,027      2,75,48,950              —
     Computers :
         Hardware                    33,42,03,943     5,09,30,206       99,91,170      37,51,42,979     25,77,77,955    5,50,95,622     99,50,448     30,29,23,129      7,22,19,850        7,64,25,988
         Software                       75,60,910       57,39,321          70,500       1,32,29,731        51,28,643      29,80,061        70,500        80,38,204        51,91,527          24,32,267
      Furniture and Fittings,
         Office Equipment etc.:
         Own Use                     54,33,40,370     7,61,67,333     1,83,45,079      60,11,62,624     32,13,05,304    5,33,53,517 1,42,98,718       36,03,60,103     24,08,02,521    22,20,35,066
         Under Operating Lease        1,02,80,670       51,72,904              —        1,54,53,574        23,51,926      27,01,283          —           50,53,209      1,04,00,365       79,28,744
     Vehicles :
         Owned                        3,52,81,670       90,29,355       36,82,819       4,06,28,206      1,84,84,376      65,18,906     30,26,207      2,19,77,075      1,86,51,131        1,67,97,294
         Leased                         45,00,689              —               —          45,00,689        19,69,822      11,25,172            —         30,94,994        14,05,695          25,30,867
     Leased Assets :
         Plant & Machinery         183,19,29,490               —     12,55,63,921     170,63,65,569    171,02,15,817    4,89,28,658 12,55,63,921     163,35,80,554      7,27,85,015    12,17,13,673
         Vehicles                   30,92,82,917               —               —       30,92,82,917      30,92,82,917            —            —        30,92,82,917              —               —
         Railway Sidings            23,00,00,000               —               —       23,00,00,000      23,00,00,000            —            —        23,00,00,000              —               —
     Lease Terminal Adjustment                                                                         (18,23,27,079)            — (52,50,588)       (17,70,76,491)    17,70,76,491    18,23,27,079
                                   705,85,71,809     49,65,69,111    21,39,83,291     734,11,57,629    288,09,91,111 23,58,32,889 15,20,01,208       296,48,22,792    437,63,34,837   417,75,80,698

     Previous Year                      692,13,58,853       20,02,64,390      6,30,51,434 705,85,71,809 265,57,29,230 25,69,82,433 3,17,20,552       288,09,91,111    417,75,80,698   426,56,29,623
     Note :
     Buildings include Rs. 1,21,370 (Previous Year Rs. 1,21,370) being the cost of shares in Co-operative Housing Societies and Limited Companies.
Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




Schedule 9
OPERATING INCOME [Note 12]
                                                                  For the year ended
                                                                     March 31, 2004        Previous Year
                                                                              Rupees             Rupees
Interest on Loans                                                 2404,87,17,411       2247,78,51,295
Dividends                                                           86,62,43,528         96,72,32,996
     (Tax deducted at source Rs. Nil
     - Previous Year Rs. 10,08,51,938)
Lease Rental Income                                                 35,26,53,708         44,52,34,185
Other Operating Income                                             416,12,72,490        469,54,28,966
     (Tax deducted at source Rs. 17,39,89,601
     - Previous Year Rs. 19,20,57,193)
                                                                  2942,88,87,137       2858,57,47,442


Schedule 10
INTEREST AND OTHER CHARGES [Note 18 (i)]
                                                                  For the year ended
                                                                     March 31, 2004        Previous Year
                                                                              Rupees             Rupees
INTEREST
Loans                                                              613,49,84,371        617,23,41,657
Deposits                                                           866,61,85,007        957,49,67,592
Bonds and Debentures                                               357,17,13,932        357,42,18,110
Others                                                                  2,18,085            38,55,164
                                                                  1837,31,01,395       1932,53,82,523
OTHER CHARGES                                                       36,27,15,367         37,26,41,425
   [Includes Gain/(Loss) on Exchange Rs. 70,01,262
   - Previous Year Rs. (2,71,36,921)]
                                                                  1873,58,16,762       1969,80,23,948



Schedule 11
STAFF EXPENSES [Notes 15, 17 and 20 (ii)]
                                                                  For the year ended
                                                                     March 31, 2004        Previous Year
                                                                              Rupees             Rupees
Salaries and Bonus                                                  46,03,75,649         39,08,65,770
Contribution to Provident Fund and Other Funds                       7,22,25,492          5,74,25,090
Staff Training and Welfare Expenses                                  4,89,84,161          5,06,16,032
                                                                    58,15,85,302         49,89,06,892




                                                                                                  65
Schedule 12
ESTABLISHMENT EXPENSES [Note 17]
                                                 For the year ended
                                                    March 31, 2004      Previous Year
                                                             Rupees           Rupees
Rent                                               10,18,79,082        8,96,29,152
Rates and Taxes                                     3,11,80,049        1,89,37,201
Repairs and Maintenance - Buildings                 2,19,91,286        2,21,38,608
General Office Expenses                             1,17,84,011        1,49,15,214
Electricity Charges                                 5,27,06,143        4,25,81,981
Insurance Charges                                     76,21,581          70,72,013
                                                   22,71,62,152       19,52,74,169




Schedule 13
OTHER EXPENSES [Note 18]
                                                 For the year ended
                                                    March 31, 2004      Previous Year
                                                             Rupees           Rupees
Travelling and Conveyance                           6,49,61,873        6,27,19,888
Printing and Stationery                             4,78,16,909        5,08,15,206
Postage, Telephone and Fax                          9,68,12,105        8,19,32,683
Advertising                                        16,41,03,476        9,17,29,998
Repairs and Maintenance - Other than Buildings      3,59,57,231        4,08,06,785
Office Maintenance                                  4,35,68,049        3,50,74,020
Legal Expenses                                      3,29,09,576        3,19,50,632
Computer Expenses                                   3,09,13,986        2,72,23,643
Directors’ Fees and Commission                        25,60,000          26,55,000
Miscellaneous Expenses                              9,24,81,249        7,61,63,532
Auditors’ Remuneration                                61,85,890          56,54,615
                                                   61,82,70,344       50,67,26,002




  66
Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




Schedule 14
NOTES FORMING PART OF THE ACCOUNTS
1.    The Corporation has raised US $ 125 million from the US Capital Market under the Housing Guaranty Program of the United
      States Agency for International Development (USAID). As per the agreements entered into with scheduled banks and a
      financial institution, the Corporation has handed over the dollars to the banks / financial institution overseas and under a
      back-to-back arrangement obtained rupee funds in India. All payments in foreign currency are the responsibility of these
      banks / financial institution, which have provided a counter – guarantee to USAID.
2.    The Corporation has availed a loan of US $ 100 million from the Asian Development Bank (Loan II). In respect of tranches
      1 and 2 aggregating to US $ 60 million, as per 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 US $ 40 million, as per an 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.    The Corporation has raised US $ 100 million in the international markets through the issue of Floating Rate Notes (FRNs).
      Interest payable on the FRNs is shown under the head Interest and Other Charges (Schedule 10). The FRNs are
      redeemable in 2007 at a premium of US $ 15 million. The Corporation has entered into risk management arrangement
      whereby the amount of premium has been crystallised at Rs. 84.54 crores. In accordance with the Companies Act, 1956,
      the premium payable on redemption of the FRNs is charged to the Securities Premium Account over the life of the Notes.
4.    Gains / losses arising out of foreign exchange fluctuations in respect of foreign currency borrowings, net of risk
      management arrangements, are to the account of the Corporation. Wherever the Corporation has entered into a forward
      contract or an instrument that is, in substance, a forward exchange contract, the difference between the forward rate and
      the exchange rate on the date of the transaction is recognised as income or expense over the life of the contract. The
      amount of exchange difference in respect of such contracts to be recognised as income in the Profit and Loss Account
      over subsequent accounting periods is Rs. 0.57 crores (Previous Year the exchange difference to be recognised as
      expense over subsequent accounting period was Rs. 5.84 crores).
      Assets and liabilities in foreign currencies are revalued at the rates of exchange prevailing at the year-end. The reduced
      liability, net of risk management arrangements, of Rs. 2.68 crores arising upon revaluation at the year end (based on the
      prevailing exchange rate) has been written back to the Provision for Contingencies Account. In the previous year, Rs. 11.59
      crores was charged to the Provision for Contingencies Account upon revaluation of the assets and liabilities in foreign
      currencies.
5.    (i) Out of the total Bonds issued by the Corporation, Bond certificates aggregating to Rs. 29.25 crores (Previous Year
          Rs. 89.88 crores) have been purchased under a buy-back arrangement. These certificates have been kept alive for the
          purpose of re-issue.
      (ii) The maximum amount of Commercial Paper outstanding at any time during the year was Rs. 1,455 crores (Previous
           Year Rs. 475 crores).
6.    (i) Loans are secured by Promissory Notes and / or a negative lien on all assets of the Corporation other than Rs.Nil
          (Previous Year Rs. 2,24,04,270) taken over on amalgamation of HomeTrust Housing Finance Company Ltd. which are
          secured by hypothecation of specific deferred receivables and a negative lien on specific immovable properties
          mortgaged to the Corporation.
      (ii) Bonds are in the nature of Promissory Notes and are secured by a negative lien on all assets of the Corporation.

                                                                                                                              67
Schedule 14 (Continued)
NOTES FORMING PART OF THE ACCOUNTS

      (iii) a)   Non-convertible Debentures amounting to Rs. 4,586.80 crores (Previous Year Rs. 3,209.25 crores) are secured by
                 a negative lien on all assets of the Corporation and by a mortgage. These debentures are redeemable at par
                 between 2004 and 2013.
           b) Non-convertible Debentures amounting to Rs. 185 crores (Previous Year Rs. Nil) are secured by a negative lien on
              all assets of the Corporation. These debentures are redeemable between 2004 and 2005 at a premium of
              Rs. 11.37 crores. In accordance with the Companies Act, 1956, the premium payable on redemption of these
              debentures is charged to the Securities Premium Account over the life of the debentures.
      (iv) Floating Rate Notes are secured by a negative pledge on all the assets of the Corporation.
7.    (i) Loan Funds include Rs. 1,75,70,142 (Previous Year Rs. 1,65,91,101) from Directors.
      (ii) Deposits include Rs. 4,33,69,591 (Previous Year Rs. 3,94,86,348) received under the Home Loan Account Scheme of
           the National Housing Bank.
8.    (i) Loans granted by the Corporation are secured or partly secured by :
           (a) Equitable mortgage of property and / or
           (b) Pledge of shares, units, other securities, assignment of life insurance policies and / or
           (c) Hypothecation of assets and / or
           (d) Bank guarantees, company guarantees or personal guarantees and / or
           (e) Negative lien and / or
           (f) Assignment of hire purchase receivables and / or
           (g) Undertaking to create a security.
      (ii) In respect of loans aggregating to Rs. 408,16,81,449 (Previous Year Rs. 197,34,93,745), the Corporation has been
           assigned the right to future receivables along with a power of attorney authorising the Corporation, inter-alia, to obtain
           possession of the property in case of default.
9.    (i) Sundry Debtors include Rs. Nil (Previous Year Rs. 26,07,336) which are outstanding for over six months.
      (ii) Out of the total Loans and Advances (Schedule 6), amounts aggregating to Rs. 289,11,12,678 (Previous Year
           Rs. 586,78,79,364) are secured.
      (iii) Loans and Advances include Rs. 8,363 (Previous Year Rs. 14,215) given to an Officer of the Corporation. The
            aggregate maximum balance due at any time during the year, from directors and an officer, amounted to Rs. 1,31,131
            (Previous Year Rs. 19,862).
      (iv) Advances recoverable in cash or in kind are net of Provision for Taxation and include Rs. 62,25,87,392 (Previous Year
           Rs. 58,37,99,046) towards advances of capital nature, Rs. 86,62,500 (Previous Year Rs. 86,62,500) due from a private
           limited company in which one of the directors of the Corporation is interested as a director and Rs. 1,86,46,222
           (Previous Year Rs. 26,953) due from subsidiary companies.
      (v) Corporate Deposits include Rs. 3.25 crores (Previous Year Rs. 3.25 crores) due from a subsidiary company.
10. (i) There are no amounts payable to any Small Scale Industrial undertaking.
      (ii) As required under Section 205C of the Companies Act, 1956, the Corporation has transferred Rs. 6,09,009 (Previous
           Year Rs.4,96,746) to the Investor Education and Protection Fund (IEPF) during the year. As of March 31, 2004, no
           amount was due for transfer to the IEPF.
      (iii) Other Liabilities include Rs. Nil (Previous Year Rs. 7,34,000) due to subsidiary companies.

     68
Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




Schedule 14 (Continued)
NOTES FORMING PART OF THE ACCOUNTS

11. (i) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances)
        is Rs. 105.60 crores (Previous Year Rs. 119.76 crores).
      (ii) Uncalled liability on partly paid shares / debentures is Rs. Nil (Previous Year Rs. 11,00,00,525).
12. (i) Other Operating Income includes income from investments amounting to Rs. 117,27,76,170 (Previous Year
        Rs. 143,20,66,240), profit on sale of investments amounting to Rs. 130,83,52,463 (Previous Year Rs. 107,45,62,612),
        including Rs. 32,00,00,000 on account of sale of shares of HDFC Asset Management Company Ltd., a subsidiary
        company, profit on securitisation of housing loans amounting to Rs. 4,23,53,487 (Previous Year Rs. 14,21,69,610) net
        of the amount of Rs. 9,20,00,000 (Previous Year Rs. 42,70,00,000) provided by way of corporate undertaking and
        other interest income amounting to Rs. 163,77,90,370 (Previous Year Rs. 204,66,30,504).
      (ii) Dividend income includes Rs. 14,06,11,006 (Previous Year Rs. 10,43,83,825) received from subsidiary companies.
      (iii) Income from investments and profit on sale of investments include Rs. 20,73,15,596 (Previous Year Rs. 30,40,94,098)
            and Rs. 9,07,55,508 (Previous Year Rs. 12,18,23,922) respectively, in respect of current investments.
      (iv) In accordance with the Guidance Note on Accounting for Leases issued by the Institute of Chartered Accountants of
           India, an amount of Rs. 52,50,588 (Previous Year Rs. 48,04,720) towards Lease Equalisation has been included in the
           Lease Rental Income.
13. Other Income includes rent of Rs. 5,70,00,988 (Previous Year Rs. 5,54,41,183), out of which Rs. 21,84,064 (Previous Year
    Rs. 12,37,617) is in respect of rent for certain assets given on operating lease.
14. (i) Earnings in foreign currency on cash basis :
                                                                                                    Current Year     Previous Year
                                                                                                         Rupees            Rupees
             Interest on Bank Deposits                                                          5,84,23,488         8,51,09,927
             Others                                                                            17,97,19,565         1,82,78,050
      (ii) Expenditure in foreign currency on cash basis :
                                                                                                    Current year     Previous Year
                                                                                                         Rupees            Rupees
             Interest and Other Charges on Loans                                               57,22,66,899        51,56,68,103
             Others                                                                             1,27,30,244         1,89,18,973
15. Salaries and Bonus include Rs. 3,09,78,141 (Previous Year Rs. 1,64,71,172) towards provision made as per actuarial
    valuation in respect of accumulated leave salary encashable on retirement, in accordance with the Accounting Standard
    on ‘Accounting for Retirement Benefits in the Financial Statements of Employers’ (AS 15), issued by the Institute of
    Chartered Accountants of India.
16. Managerial Remuneration :
                                                                                                    Current year     Previous Year
                                                                                                         Rupees            Rupees
      Salaries and Commission                                                                    2,75,10,000        2,40,00,000
      Corporation’s contribution to Provident and Superannuation Funds                             22,03,200         20,25,000
      Perquisites                                                                                1,48,12,054         95,52,075

                                                                                                                            69
Schedule 14 (Continued)
NOTES FORMING PART OF THE ACCOUNTS

    Computation of net profit in accordance with Section 198 of the Companies Act, 1956 in respect of commission payable
    to Directors :
                                                                                                    Rupees                  Rupees
    Profit before Tax                                                                                            1026,97,98,999
    Add: Provision for Contingencies                                                        11,00,00,000
           Managerial Remuneration                                                           4,45,25,254
           Directors’ Fees and Commission                                                      25,60,000
           Accrued Loss on Redemption of Investments                                         4,16,12,139
                                                                                                                    19,36,97,393
                                                                                                                 1046,34,96,392
    Less: Profit on Sale of Investments                                                   130,83,52,463
    Amounts utilised out of Shelter Assistance Reserve                                      3,95,74,576
                                                                                                                  134,79,27,039
    Net Profit as per Section 198                                                                                 911,55,69,353

    i)  Commission payable to whole-time Directors :
             At 1% of net profit for each of the four whole-time Directors                                      31,90,44,927
             Restricted to                                                                                        1,93,50,000
    ii) Commission payable to non whole-time Directors :
             At 1% of net profit for all non whole-time Directors                                                 9,11,55,694
             Restricted to                                                                                          20,00,000
17. (i) Expenditure shown in Schedule 11 is net of recovery from subsidiary companies, in respect of Salaries Rs. 21,23,958
        (Previous Year Rs. 76,55,455) and Staff Welfare Expenses Rs. 79,162 (Previous Year Rs. 1,31,625). Expenditure shown
        in Schedule 12 is net of recovery from subsidiary companies, in respect of Rent Rs. 10,62,300 (Previous Year
        Rs. 9,54,762) and Electricity Charges Rs. 18,63,964 (Previous Year Rs. 28,55,333).
    (ii) Miscellaneous Expenses under Schedule 13 exclude Rs. 3,95,74,576 (Previous Year Rs. 2,93,70,104) in respect of
         amounts utilised out of Shelter Assistance Reserve during the year.
    (iii) The utilisation out of Shelter Assistance Reserve includes an amount of Rs. 10,00,000 paid to Prime Minister’s National
          Relief Fund, an approved fund in terms of Section 293(B) of the Companies Act, 1956.
18. (i) Interest on Deposits includes Rs. 7,40,099 (Previous Year Rs. 6,84,781) paid to the Chairman of the Corporation.
    (ii) Other Expenses include Provision for Wealth Tax amounting to Rs. 38,00,000 (Previous Year Rs. 39,00,000).
    (iii) Auditors’ Remuneration :
                                                                                                Current Year           Previous Year
                                                                                                     Rupees                  Rupees

         Audit Fees                                                                            31,44,000               30,79,700
         Tax Matters                                                                            9,65,000                8,75,000
         Other Matters                                                                         12,06,250                7,11,450
         Reimbursement of Expenses                                                              4,35,980                7,63,380
         Service Tax                                                                            4,34,660                2,25,085
                                                                                               61,85,890               56,54,615


  70
Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




Schedule 14 (Continued)
NOTES FORMING PART OF THE ACCOUNTS

      Audit Fees include Rs. 1,19,000 (Previous Year Rs. 1,29,700) paid to Branch Auditors and Rs. 5,25,000 (Previous Year
      Rs. 4,50,000) paid as internal audit fees to a firm in which some of the partners of the Branch Auditors are also partners.
      Reimbursement of expenses includes Rs. 2,51,343 (Previous Year Rs. 6,67,256) paid to a firm in which some of the
      partners of the Branch Auditors are also partners.
19. (i) As per the prudential norms prescribed by the National Housing Bank, in respect of the credit exposures, the total
        non performing assets of the Corporation comprising of sub-standard and doubtful assets, as on March 31,2004
        amounted to Rs. 265.07 crores (Previous Year Rs. 216.01 crores). (The aforesaid non performing assets are inclusive
        of Rs. 257.22 crores (Previous Year Rs. 208.83 crores) in respect of financing for housing and real estate projects). In
        terms of these prudential norms, the Corporation is required to carry a provision of Rs. 45.31 crores (Previous Year
        Rs. 37.37 crores) in respect of such assets. As a matter of prudence, however, over the years, the Corporation has
        been transferring additional amounts to the Provision for Contingencies account, including transfers from Special
        Reserve No. I. As on March 31, 2004, the Corporation had a balance of Rs. 343.15 crores (Previous Year Rs. 312.39
        crores) in the Provision for Contingencies account, inclusive of provision in respect of such assets of Rs. 70.47 crores
        (Previous Year Rs. 60.92 crores), standard assets and all other contingencies.
      (ii) During the year, in addition to the charge of Rs. 11 crores (Previous Year Rs. 9 crores) to the Profit and Loss Account,
           an amount of Rs. 50 crores (Previous Year Rs. 40 crores) has been transferred from Special Reserve No. I to Provision
           for Contingencies account, in accordance with industry practice.
      (iii) Provision for Contingencies debited to the Profit and Loss Account includes provision for diminution in the value of
            investments amounting to Rs. 10.07 crores (Previous Year Rs. 8.93 crores). The balance of the provision represents
            provision made against non-performing assets and other contingencies.
20. (i) Special Reserve has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961 out of
        the distributable profits of the Corporation. Special Reserve No. I relates to the amounts transferred upto Financial Year
        1996-97, whereas Special Reserve No. II relates to the amounts transferred thereafter.
      (ii) The Corporation has granted 21,09,088 stock options to its employees and directors. In terms of the Employee Stock
           Option Scheme 2002, the options can be exercised over a period of time upto October 17, 2009. The stock option
           discount has been amortised over the vesting period of two years. During the year, Rs. 1,07,20,237 (Previous Year
           Rs. 48,29,651) representing the proportionate charge for the year has been included in the Accounts, under Salaries
           and Bonus. The unamortised amount has been netted off from the total stock options outstanding and is shown
           under Reserves and Surplus, in accordance with the relevant guidelines issued by SEBI.
21. During the year, the Corporation utilised Rs. 120,73,91,129 (Previous Year Rs. 16,19,24,382) out of the Securities Premium
    Account in accordance with Section 78 of the Companies Act, 1956 towards the premium paid/payable on the
    redemption of Non-convertible Debentures and the Floating Rate Notes of the Corporation. The tax impact of the same
    amounting to Rs.43,31,51,568 (Previous Year Rs.5,95,07,211 has been recognised in the provision for current tax. A sum
    of Rs. Nil (Previous Year Rs. 71,96,07,130) was utilised for the issue of fully paid-up bonus shares to the equity
    shareholders of the Corporation.
22. (i) Contingent liability in respect of guarantees provided by the Corporation aggregated to Rs. 47.08 crores (Previous
         Year Rs. 0.61 crores).
    (ii) Contingent liability in respect of income-tax demands, net of amounts provided for and disputed by the Corporation,
         amounts to Rs.158.08 crores (Previous Year Rs. 63.89 crores). The matters in dispute are under appeal.
23. The Corporation’s main business is to provide loans for the purchase or construction of residential houses. 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), issued by the Institute of Chartered Accountants of India.

                                                                                                                               71
Schedule 14 (Continued)
NOTES FORMING PART OF THE ACCOUNTS
24. As per the Accounting Standard on ‘Related Party Disclosures’ (AS 18), issued by the Institute of Chartered Accountants
    of India, the related parties of the Corporation are as follows :
    A) Subsidiary Companies
         HDFC Developers Ltd.                                   HDFC Investments Ltd.
         HDFC Holdings Ltd.                                     HDFC Asset Management Company Ltd.
         HDFC Trustee Company Ltd.                              HDFC Realty Ltd.
         HDFC Standard Life Insurance Company Ltd.              HDFC Chubb General Insurance Company Ltd.
         GRUH Finance Ltd.
    B) Associate Companies
         HDFC Bank Ltd.                                         Credit Information Bureau (India) Ltd.
         Intelenet Global Services Ltd.                         HDFC Securities Ltd.
         GW Capital Pvt. Ltd.                                   Rockfort Estate Developers Ltd.
         Indian Association for Savings and Credit
    C) Key Management Personnel
         Mr Deepak S Parekh                                     Mr Keki M Mistry
         Mrs Renu S Karnad                                      Mr R V S Rao
    The nature and volume of transactions of the Corporation during the year, with the above related parties were as follows :
               PARTICULARS                  Subsidiary Companies                  Associate Companies             Key Management Personnel
                                         Current Year      Previous Year    Current Year      Previous Year     Current Year    Previous Year
                                             Rupees                Rupees       Rupees             Rupees           Rupees           Rupees
       INCOME
            Dividend                    14,06,11,006 10,43,83,825 11,65,80,000     9,71,50,000                         Nil              Nil
            Interest                     1,55,50,541 16,64,57,019    2,03,26,489   2,45,42,691                     63,366         1,24,451
            Consultancy and Other Fees     74,26,360   1,36,68,965   8,04,17,363        16,000                         Nil              Nil
            Rent                         4,74,15,876   4,68,34,010     56,15,482     62,54,477                         Nil              Nil
            Other Income                 1,23,72,105     39,36,922      4,42,712     76,94,631                         Nil              Nil
       EXPENDITURE
            Interest                       33,10,680     29,76,028   2,12,05,308   3,05,03,664                   7,51,198         6,94,845
            Bank and Other Charges         21,13,742     13,23,983   2,08,50,070     62,39,568                         Nil              Nil
            Rent Paid                       1,75,645            Nil           Nil           Nil                        Nil              Nil
            Purchase of Fixed Assets        2,21,549     35,05,147            Nil           Nil                        Nil              Nil
            Remuneration                          Nil           Nil           Nil           Nil               4,45,25,254      3,55,77,075
       ASSETS
            Investments                480,00,13,509 367,83,87,639 190,15,64,300 180,15,63,375                         Nil             Nil
            Loans                      124,99,81,705 86,85,16,895 34,75,00,000 28,50,00,000                      4,37,356       31,77,495
            Deposits                     3,25,00,000   3,25,00,000 25,95,16,694 10,00,00,000                           Nil             Nil
            Others                       2,21,41,422        26,953 29,51,23,042      96,62,500                         Nil             Nil
       LIABILITIES
            Term Loan                             Nil           Nil           Nil 37,50,00,000                        Nil              Nil
            Deposits                     5,69,34,000   5,00,00,000 12,42,54,769       4,08,692                 70,67,902        60,88,861
            Others                          5,10,534      7,34,000   8,53,22,985            Nil                       Nil              Nil

25. In accordance with the Accounting Standard on ‘Leases’ (AS 19), issued by the Institute of Chartered Accountants of
    India, the following disclosures in respect of Operating and Finance Leases are made :
    (i) Lease Rental Income includes Rs. 27,31,04,002 (Previous Year Rs. 26,76,72,660) - including Rs. 1,30,35,120
         (Previous Year Rs. 1,41,13,025) towards contingent rent - in respect of properties leased out by the Corporation under


  72
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Schedule 14 (Continued)
NOTES FORMING PART OF THE ACCOUNTS

             Operating Leases. Out of the above, in respect of the non-cancellable leases, the future minimum lease payments are
             as follows :
                                                                                                                                 Current Year               Previous Year
                                                                                                                                      Rupees                      Rupees
                Not later than one year                                                                                       3,39,73,548              1,78,53,773
                Later than one year but not later than five years                                                             4,33,34,782              1,27,02,425

      (ii) The Corporation had acquired, in the previous year, certain motor cars under a Finance Lease for a period of 4 years,
           for an aggregate fair value of Rs. 45,00,689. The total minimum lease payments (MLP) in respect thereof and the
           present value of the future lease payments, discounted at the interest rate implicit in the lease are :

                Period                                               Total MLP                             Interest                             Principal
                                                                      Rupees                               Rupees                               Rupees
                                                             Current Year        Previous Year   Current Year         Previous Year     Current Year        Previous Year
                Not later than one year                     16,09,560            16,09,560       2,28,933              4,74,441        13,80,627            11,35,119
                Later than one year but
                not later than five years                    4,02,390            20,11,950         12,885              2,41,818         3,89,505            17,70,132
                Total                                       20,11,950            36,21,510       2,41,818              7,16,259        17,70,132            29,05,251
      (iii) The Corporation has acquired properties under non-cancellable operating leases for periods ranging from 36 months
            to 108 months. The total minimum lease payments for the current year, in respect thereof, included under Rent,
            amount to Rs.1,01,17,214 (Previous Year Rs. 61,62,151).
            The future lease payments in respect of the above are as follows:

                                                                                                                                 Current Year               Previous Year
                                                                                                                                      Rupees                      Rupees
                Not later than one year                                                                                         90,43,763              1,01,92,568
                Later than one year but not later than five years                                                             3,82,30,312              3,21,59,948
                Later than five years                                                                                         1,14,06,240              2,66,14,560
26. In accordance with the Accounting Standard on ‘Earnings Per Share’ (AS 20), issued by the Institute of Chartered
    Accountants of India :
    (i) In calculating the Basic Earnings Per Share the net Profit After Tax of Rs. 851,77,98,999 (Previous Year
         Rs. 690,29,38,705) has been adjusted for amounts utilised out of Shelter Assistance Reserve of
         Rs. 3,95,74,576 (Previous year Rs. 2,93,70,104).
         Accordingly the Basic Earnings Per Share have been calculated based on the adjusted net Profit After Tax of
         Rs. 847,82,24,423 (Previous Year Rs. 687,35,68,601) and the average number of shares during the year of
         24,49,21,466 (Previous Year 24,38,53,554).
    (ii) The reconciliation between the Basic and the Diluted Earnings Per Share is as follows :

                                                                                                                                 Current Year               Previous Year
                                                                                                                                      Rupees                      Rupees
                Basic Earnings Per Share                                                                                              34.62                      28.19
                Effect of outstanding Stock Options                                                                                   (0.41)                     (0.23)
                Diluted Earnings Per Share                                                                                            34.21                      27.96
      (iii) The Basic Earnings Per Share have been computed by dividing the adjusted net Profit After Tax by the weighted
            average number of equity shares for the respective periods; whereas the Diluted Earnings Per Share have been

                                                                                                                                                                    73
Schedule 14 (Continued)
NOTES FORMING PART OF THE ACCOUNTS
            computed by dividing the adjusted net Profit After Tax by the weighted average number of equity shares, after giving
            dilutive effect of the outstanding Stock Options for the respective periods.
            The relevant details as described above are as follows :
                                                                                                              Current Year               Previous Year
             Weighted average number of shares for computation of
                Basic Earnings Per Share                                                                24,49,21,466                   24,38,53,554
             Diluted effect of outstanding Stock Options                                                   29,36,494                      19,47,082
             Weighted average number of shares for computation of
                Diluted Earnings Per Share                                                              24,78,57,960                   24,58,00,636
27. In compliance with the Accounting Standard relating to ‘Accounting for Taxes on Income’ (AS 22), issued by the Institute
    of Chartered Accountants of India, the Corporation has provided Rs. 12,20,00,000 (Previous Year Rs. 12,26,50,000,
    deferred tax asset (net)) in the Profit and Loss Account for the year ended March 31, 2004 towards deferred tax liability
    for the year, arising on account of timing differences.
    The major components of deferred tax assets and liabilities are :
                                                                       Assets                                            Liabilities
                                                            Current Year           Previous Year              Current Year               Previous Year
                                                                Rupees                  Rupees                     Rupees                      Rupees
       a)    Depreciation                                                                               36,79,66,929                   30,34,28,711
       b)    Provision for Contingencies                 99,40,96,671           100,34,79,040
       c)    Lease Adjustments                                                                            6,41,80,112                   6,66,53,648
       d)    Accrued Redemption Loss (net)                2,73,05,391             2,42,79,243
       e)    Others (net)                                           -             1,01,53,622            4,34,25,475
             Total                                      102,14,02,062           103,79,11,905           47,55,72,516                   37,00,82,359
             Net Deferred Tax Asset                      54,58,29,546            66,78,29,546
28. In compliance with the Accounting Standard relating to ‘Financial Reporting of Interests in Joint Ventures’ (AS 27), issued
    by the Institute of Chartered Accountants of India, the Corporation has interests in the following jointly controlled entities,
    which are incorporated in India :
                                                                                                                                        Rupees in crores
       Names of Companies                                  Percentage of           Amount of Interest based on the last Audited Accounts
                                                            Shareholding                    for the year ended March 31, 2004
                                                                                    Assets           Liabilities         Income           Expenditure
       HDFC Standard Life Insurance Co. Ltd.                     74.82             413.55              32.00              11.48                29.01
                                                               (73.69)           (233.20)            (22.39)             (8.80)              (44.32)
       HDFC Chubb General Insurance Co. Ltd.                     74.00             133.98               6.94               6.49                22.91
                                                               (74.00)            (76.61)             (9.29)             (2.27)               (6.96)
       Intelenet Global Services Ltd.                            50.00              84.17              55.18              58.61                53.16
                                                               (50.00)            (35.58)            (18.52)            (10.88)              (12.44)
    Figures in bracket pertains to the Previous Year.
29. Particulars of dividend payable to non-resident shareholders (including Foreign Institutional Investors) are as under :
                                                                                                              Current Year                 Previous Year
    Type of Dividend                                                                                          Annual                      Annual
    Year to which the dividend relates                                                                      2002-03                     2001-02
    Number of non-resident shareholders                                                                          560                         493
    Number of shares held by them                                                                       18,26,72,007                 8,68,96,790
    Gross amount of dividend                                                                       Rs. 268,85,59,412           Rs. 217,24,19,750
30. Figures for the previous year have been regrouped wherever necessary.

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Schedule 15
SIGNIFICANT ACCOUNTING POLICIES
1.    SYSTEM OF ACCOUNTING
      The Corporation adopts the accrual concept in the preparation of the accounts.
      The Balance Sheet and the Profit and Loss Account of the Corporation are prepared in accordance with the provisions
      contained in Section 211 of the Companies Act, read with Schedule VI thereto and the approvals granted under the
      Section by the Company Law Board.

2.    INFLATION
      Assets and liabilities are recorded at historical cost to the Corporation. These costs are not adjusted to reflect the
      changing value in the purchasing power of money.

3.    INTEREST ON HOUSING LOANS
      Repayment of housing loans is generally by way of Equated Monthly Instalments (EMIs) comprising principal and interest.
      EMIs commence once the entire loan is disbursed. Pending commencement of EMIs, pre-EMI interest is payable every
      month. Interest on loans is computed either on an annual rest or on a monthly rest basis.

4.    INCOME FROM LEASED ASSETS
      Lease rental income in respect of finance leases is recognised on the basis of the implicit rate of return, in accordance
      with the Accounting Standard on ‘Leases’ (AS 19) issued by the Institute of Chartered Accountants of India.

5.    INCOME FROM INVESTMENTS
      In respect of Investments in Schemes of Unit Trust of India and Other Mutual Funds with assured returns, the income is
      accounted on an accrual basis.
      The gain/loss on account of Investments in Preference Shares, Debentures/Bonds and Government Securities held as long-
      term investments and acquired at a discount/premium, is recognised over the life of the security on a pro-rata basis.

6.    BROKERAGE AND SERVICE CHARGES ON DEPOSITS
      Brokerage, other than incentive brokerage, and service charges on deposits are amortised over the period of the deposit.
      Incentive brokerage, which is payable to agents who achieve certain collection targets, is charged to the Profit and Loss
      Account.

7.    TRANSLATION OF FOREIGN CURRENCY
      Assets and liabilities in foreign currencies are converted at the rates of exchange prevailing at the year-end.

8.    INVESTMENTS
      Investments are capitalised at cost inclusive of brokerage and stamp charges and are classified into two categories, viz.
      Current or Long Term. Provision for diminution in the value of investments is made in accordance with the guidelines issued
      by the National Housing Bank and the Accounting Standard on ‘Accounting for Investments’ (AS 13) issued by the Institute
      of Chartered Accountants of India, and is recognised through the Provision for Contingencies Account.

9.    FIXED ASSETS
      Fixed Assets are capitalised at cost inclusive of legal and/or installation expenses. Assets acquired under Finance Leases are accounted
      in accordance with the Accounting Standard on ‘Leases’ (AS 19) issued by the Institute of Chartered Accountants of India.

                                                                                                                                          75
Schedule 15 (Continued)
SIGNIFICANT ACCOUNTING POLICIES

10. DEPRECIATION
   Depreciation on all Fixed Assets other than Leased Assets and Leasehold Improvements, is provided for the full year in
   respect of assets acquired during the year. No depreciation is provided in the year of sale.
   In respect of Leased Assets and Leasehold Improvements depreciation is provided on a pro-rata basis from the date of
   installation / acquisition.
   Depreciation on Buildings, Computers, Leased Assets and Leasehold Improvements, is calculated as per the straight line
   method; and on other assets as per the reducing balance method. All assets except Computers and Leased Assets are
   depreciated at rates specified by the Companies Act, 1956. Depreciation on Computers is calculated at the rate of 25
   per cent per annum. Depreciation in respect of finance leases is provided on the straight line method over the primary
   period of lease or over the specified period, as defined under Section 205(5)(a) of the Companies Act, 1956, whichever
   is shorter. Depreciation in respect of Leasehold Improvements is provided on the straight line method over the primary
   period of the lease.
11. PROVISION FOR CONTINGENCIES
   The Corporation’s policy is to ensure that the balance in Provision for Contingencies is adequate to cover the total
   principal amount outstanding in respect of all non-performing assets, as also all other contingencies. All loans and other
   credit exposures where the instalments are past due for more than six months are classified as non-performing assets in
   accordance with the prudential norms prescribed by the National Housing Bank.
12. RETIREMENT BENEFITS
   The Corporation has various schemes of retirement benefits, such as Provident Fund, Superannuation Fund and Gratuity
   Fund. All these funds and the schemes thereunder are recognised by the Income-tax authorities and are administered by
   various trustees. The Corporation’s contributions to these funds are charged to the Profit and Loss Account every year. The
   contribution to the Gratuity Fund is made, based on the actuarial valuation determined each year, except in the case of
   Dubai branch where the provision for gratuity is made in accordance with the prevalent local laws.
   The Corporation also has a scheme which enables employees to encash the accumulated privilege leave on retirement.
   The Corporation’s liability in respect of this leave encashment scheme is also determined on the basis of actuarial valuation,
   and the same is charged to the Profit and Loss Account.
13. INCOME-TAX
   The accounting treatment for Income-tax in respect of the Corporation’s income is based on the Accounting Standard on
   ‘Accounting for Taxes on Income’ (AS 22) issued by the Institute of Chartered Accountants of India. The provision made
   for Income-tax in the Accounts comprises both, the current tax and the deferred tax. The deferred tax assets and liabilities
   for the year, arising on account of timing differences, are recognised in the Profit and Loss Account; and the cumulative
   effect thereof is reflected in the Balance Sheet. The major components of the respective balances of deferred tax assets
   and liabilities are disclosed in the Accounts.
14. SECURITISED ASSETS
   Derecognition of securitised assets in the books of the Corporation, recognition of gain or loss arising on securitisation and
   accounting for credit enhancement provided by the Corporation is based on the Guidance Note on Accounting for
   Securitisation issued by the Institute of Chartered Accountants of India.
   Securitised assets are derecognised in the books of the Corporation based on the principle of surrender of control over
   the assets and the entire credit enhancement is fully provided for in the accounts of the Corporation.

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BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE
(Submitted in terms of Part IV of Schedule VI to the Companies Act, 1956)
I.   Registration Details
     Registration No.                             1 9 9 1 6                     State Code   1 1
     Balance Sheet Date                  3 1      3    2 0 0 4
II.      Capital raised during the year (Amount in Rs '000)
                 Public Issue                                                                          Rights Issue
                             N I L                                                                                 N I L
                Bonus Issue                                                                        Private Placement
                             N I L                                                                                 N I L
               Stock Options
                       2 2 0 2 6
III.     Position of Mobilisation and Deployment of Funds (Amount in Rs ’000)
                Total Liabilities                                                                Total Assets
          3 3 8 3 6 2 9 8 8                                                                  3 3 8 3 6 2 9 8 8
                                                      SOURCES OF FUNDS
               Paid-up Capital                                                                Reserves and Surplus
                  2 4 6 6 1 3 2                                                                3 1 4 7 1 7 5 8
                Secured Loans                                                                   Unsecured Loans
          1 7 4 6 0 1 3 9 0                                                                  1 1 2 2 3 8 9 9 7
                                                    APPLICATION OF FUNDS
                     Loans                                                                       Net Fixed Assets
          2 7 9 7 4 2 7 2 3                                                                         4 3 7 6 3 3 5
                  Investments                                                                   Net Current Assets
              2 9 7 3 3 6 5 7                                                                       6 3 7 9 7 3 3
             Deferred Tax Asset                                                              Miscellaneous Expenditure
                     5 4 5 8 2 9                                                                              N I L
            Accumulated Losses
                                N I L
IV.      Performance of the Company (Amount in Rs. ’000)
                 Total Income                                                                   Total Expenditure
              3 0 7 7 8 4 6 6                                                                   2 0 5 0 8 6 6 7
               Profit Before Tax                                                                 Profit After Tax
              1 0 2 6 9 7 9 9                                                                     8 5 1 7 7 9 9
         Earnings per Share (in Rs.)                                                               Dividend %
                         3 4 . 6 2                                                                             1 3 5
V.       Generic Names of three Principal Services of the Company (as per monetary terms)
         Item Code No.         N I L
         (ITC Code)
         Product Description   H O U S I N G           F I N A N C E
         Item Code No.         N I L
         (ITC Code)
         Product Description   C O N S U L T A N C Y            S E R V I C E S
         Item Code No.         N I L
         (ITC Code)
         Product Description   L E A S I N G

                                                                                                                           77
     STA                                                 CT,
                                              COMPANIES ACT       RELA            SIDIARY
                                                                               SUBSIDIAR COMPANIES
     STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 REL ATING TO SUBSIDIARY COMPANIES




78
     Names of the Subsidary                                     HDFC                HDFC        HDFC            HDFC        HDFC           HDFC              HDFC           GRUH     HDFC Chubb
     Companies                                             Developers         Investments    Holdings          Asset      Trustee          Realty    Standard Life        Finance         General
                                                                  Ltd.               Ltd.         Ltd.    Management     Co. Ltd.            Ltd.        Insurance            Ltd.      Insurance
                                                                                                             Co. Ltd.                                      Co. Ltd.                       Co. Ltd.

     The financial year of the subsidiary companies
     ended on                                                March 31,         March 31,     March 31,      March 31,   March 31,      March 31,        March 31,       March 31,       March 31,
                                                                 2004              2004          2004           2004        2004           2004             2004            2004            2004
     Number of shares of the subsidiary
     companies held by HDFC Limited at
     the above date                                            50,000        3,26,70,500     8,00,070     1,26,05,661   1,00,000       40,00,070     19,11,77,000     1,63,90,604     8,88,00,000

     The net aggregate of profits of the subsidiary
     companies so far as these concern the
     members of HDFC Limited:

     (i)   dealt with in the accounts of
           HDFC Limited amounted to:
           (a) for subsidiaries’ financial year ended on
               March 31, 2004 - interim dividend (Rs.)             —         7,35,08,625           —              —           —               —                 —              —               —
           (b) for previous financial years of the
               subsidiaries since these became
               subsidiaries of HDFC Limited (Rs.)          1,91,00,000      22,03,74,381           —      3,00,50,000         —               —                 —     5,32,40,744              —

     (ii) not dealt with in the accounts of HDFC
          Limited amounted to:
           (a) for subsidiaries’ financial year ended
               on March 31, 2004 (Rs.)                      22,36,559        2,28,53,114     3,29,882    14,29,71,804   2,51,871     (56,86,643)    (17,53,40,670)    8,23,79,136 (16,42,23,760)
           (b) for previous financial years of the
               subsidiaries since these became
               subsidiaries of HDFC Limited (Rs.)          4,17,23,376       3,11,46,597     4,47,520     7,04,35,187     15,679    (6,28,26,394)   (55,85,18,581)    2,53,57,292    (4,68,29,420)




                                                                         Deepak S. Parekh                      Directors
                                                                         Chairman                              S. B. Patel
                                                                                                               B. S. Mehta
                                                                                                               D. N. Ghosh
                                                                         Keshub Mahindra                       S. A. Dave
                                                                         Vice Chairman                         D. M. Sukthankar
                                                                                                               S. Venkitaramanan
                                                                         K. M. Mistry                          R. S. Tarneja
                                                                         Managing Director                     D. M. Satwalekar
                                                                                                               N. M. Munjee

                                                                     Renu S. Karnad                            Susir Kumar M.
     MUMBAI, May 7, 2004.                                            Executive Director                        Company Secretary
Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




Auditors’ Report
TO THE BOARD OF DIRECTORS OF HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED ON THE CONSOLIDATED
FINANCIAL STATEMENTS OF HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED AND ITS SUBSIDIARIES

1. We have examined the attached                                  evaluating the overall financial statement     auditors on separate financial statements
Consolidated Balance Sheet of                                     presentation. We believe that our audit        of the subsidiaries and associates
HOUSING DEVELOPMENT FINANCE                                       provides a reasonable basis for our            referred to in paragraph 3 above, and
CORPORATION LIMITED and its                                       opinion.                                       to the best of our information and
subsidiaries (“the Group”) as at March                                                                           according to the explanations given to
31, 2004, the Consolidated Profit and                             3. We did not audit the financial              us, we are of the opinion that the
Loss Account and the Consolidated                                 statements of three subsidiaries, whose        aforesaid consolidated financial
Cash Flow Statement of the Group for                              financial statements reflect total assets of   statements, read together with Note 2
the year ended on that date, both                                 Rs.974.75 crores as at March 31, 2004,         of Schedule 14 regarding associates
annexed thereto. The Consolidated                                 total revenues of Rs.191.47 crores and         which have not been consolidated, give
Accounts include investments in affiliates                        cash flows amounting to Rs.15.10 crores        a true and fair view in conformity with
accounted for on the equity method in                             for the year ended on that date. We            the accounting principles generally
accordance with Accounting Standard                               have also not audited the accounts of          accepted in India :
23 (Accounting for Investments in                                 two associates. The financial statements
Associates in Consolidated Financial                              of these subsidiaries and associates                (a) in the case of the Consolidated
Statements). These financial statements                           have been audited by other auditors            Balance Sheet, of the consolidated state
are the responsibility of the                                     whose reports have been furnished to           of affairs of the Group as at March 31,
Corporation’s Management. Our                                     us, and in our opinion, insofar as it          2004;
responsibility is to express an opinion                           relates to the amounts included in
on these financial statements based on                            respect of these subsidiaries and                   (b) in the case of the Consolidated
our audit.                                                        associates, is based solely on the             Profit and Loss Account, of the
                                                                  reports of the other auditors.                 consolidated profit of the Group for the
2. We conducted our audit in                                                                                     year ended on that date and
accordance with the generally                                     4. We report that the consolidated
accepted auditing standards in India.                             financial statements have been prepared             (c) in the case of the Consolidated
These Standards require that we plan                              by the Corporation in accordance with          Cash Flow Statement, of the
and perform the audit to obtain                                   the requirements of Accounting                 consolidated cash flows of the Group
reasonable assurance whether the                                  Standard 21 (Consolidated Financial            for the year ended on that date.
financial statements are free of material                         Statements) and Accounting Standard
misstatements. An audit includes,                                 23 (Accounting for Investments in
examining, on a test basis, evidence                              Associates in Consolidated Financial                           For S. B. BILLIMORIA & CO.
                                                                                                                                        Chartered Accountants
supporting the amounts and disclosures                            Statements), issued by the Institute of
in the financial statements. An audit also                        Chartered Accountants of India.
includes assessing the accounting                                                                                                            Nalin M. Shah
principles used and significant estimates                         5. Based on our audit and on                   MUMBAI,                              Partner
made by the Management, as well as                                consideration of reports of other              June 15, 2004        (Membership No. 15860)




                                                                                                                                                       79
Housing Development Finance Corporation Limited
Consolidated Balance Sheet as at March 31, 2004
                                                   Schedule                                            March 31, 2003
                                                               Rupees in crores    Rupees in crores   Rupees in crores

SOURCES OF FUNDS
SHAREHOLDERS’ FUNDS
Share Capital                                           1             246.61                                 244.41
Reserves and Surplus                                    2           3,425.61                               3,009.44
                                                                                       3,672.22           3,253.85
POLICY LIABILITIES (Policyholders’ Funds)                                                350.20             105.93
LOAN FUNDS                                              3                             29,242.28          23,794.18
MINORITY INTEREST                                                                        178.51              37.42
DEFERRED TAX LIABILITY (Note 22)                                                           2.03               4.26
                                                                                      33,445.24          27,195.64


APPLICATION OF FUNDS
LOANS                                                   4                             28,556.47          22,305.45
INVESTMENTS                                             5                              3,518.36           3,221.15
DEFERRED TAX ASSET (Note 22)                                                              56.05              66.83
CURRENT ASSETS, LOANS AND ADVANCES                      6           2,603.83                              2,878.90
Less : CURRENT LIABILITIES AND PROVISIONS               7           1,942.78                              1,746.82
NET CURRENT ASSETS                                                                        661.05           1,132.08
FIXED ASSETS                                            8
Gross Block                                                            988.16                                774.12
Less : Depreciation                                                    340.35                                307.77
Net Block                                                                                 647.81             466.35
MISCELLANEOUS EXPENDITURE
Preliminary Expenditure to the extent not written off                     3.98                                  3.78
Deferred Revenue Expenditure                                              1.52                                    —
                                                                                             5.50               3.78
                                                                                      33,445.24          27,195.64

Notes forming part of the Accounts                      14
Significant Accounting Policies                         15
Schedules 1 to 15 annexed hereto form part of the Accounts




As per our report attached.

For S. B. Billimoria & Co.                                    Deepak S. Parekh
Chartered Accountants                                         Chairman

                                                              K. M. Mistry
Nalin M. Shah                                                 Managing Director
Partner
                                                              Renu S. Karnad
MUMBAI, June 15, 2004.                                        Executive Director

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Housing Development Finance Corporation Limited
Consolidated Profit And Loss Account for the year ended March 31, 2004
                                                                   Schedule                                                 Previous Year
                                                                                   Rupees in crores   Rupees in crores   Rupees in crores
INCOME
Operating Income                                                      9                                    3,115.86           2,970.30
Fees and Other Charges                                                                                       131.26             114.75
Other Income                                                                                                   5.21               3.94
                                                                                                           3,252.33           3,088.99
EXPENDITURE AND CHARGES
Interest and Other Charges                                           10                                    1,931.86           2,026.73
Staff Expenses                                                       11                                       79.01              59.80
Establishment Expenses                                               12                                       24.49              22.14
Other Expenses                                                       13                                       87.49              68.43
Amounts Transferred to Policyholders’ Account                                                                 28.80              38.88
Operating Loss from General Insurance Business                                                                30.14               5.57
Depreciation                                                                                                  43.27              32.47
Preliminary expenses written off                                                                               1.09               0.77
Provision for Contingencies (Note 16)                                                                         13.25              11.25
                                                                                                           2,239.40           2,266.04
Profit Before Tax (before profit of associates and adjustment
         for minority interest)                                                                            1,012.93             822.95
Less : Provision for Tax (includes Deferred Tax Rs 8.55 crores
         (Previous Year net of Deferred Tax Rs. 12.18 crores)                                                193.85             171.93
Profit After Tax (before profit of associates and adjustment for
         minority interest)                                                                                  819.08             651.02
Add : Net share of profit of associates (Equity method) (Note 2)                                             125.21              93.58
Less : Share of profit / (loss) of minority interest                                                          (2.75)              6.51
PROFIT AFTER TAX ATTRIBUTABLE TO THE CORPORATION                                                             947.04             738.09
LESS : APPROPRIATIONS:
         Special Reserve No. II                                                           235.26                                226.60
         Special Reserve (under Section 45-IC(1) of the
            Reserve Bank of India Act, 1934)                                                0.01                                  0.01
         General Reserve                                                                  245.23                                160.39
         Shelter Assistance Reserve                                                         4.00                                  4.00
         Proposed Dividend                                                                332.93                                268.86
         Additional Tax on Dividend                                                        43.70                                 35.40
         Tax on Interim Dividend                                                            0.94                                    —
         Tax on Preference Dividend                                                         0.25                                    —
                                                                                                             862.32             695.26
BALANCE CARRIED TO SCHEDULE 2                                                                                 84.72              42.83
EARNINGS PER SHARE (Face Value Rs. 10) :
— Basic (Rs.)                                                                                                  38.51              30.14
— Diluted (Rs.)                                                                                                38.05              29.91
Notes forming part of the Accounts                                   14
Significant Accounting Policies                                      15
Schedules 1 to 15 annexed hereto form part of the Accounts.


As per our report attached.

For S. B. Billimoria & Co.                                           Deepak S. Parekh
Chartered Accountants                                                Chairman

                                                                     K. M. Mistry
Nalin M. Shah                                                        Managing Director
Partner
                                                                     Renu S. Karnad
MUMBAI, June 15, 2004.                                               Executive Director


                                                                                                                                   81
Housing Development Finance Corporation Limited
Consolidated Cash Flow Statement for the year ended March 31, 2004
                                                                                                          Previous Year
                                                                                    Rupees in crores   Rupees in crores
 A. CASH FLOW FROM OPERATING ACTIVITIES
    Net Profit after tax and extraordinary items                                           947.04             738.09
    Add: Provision for tax                                                                 193.85             171.93
    Profit before tax                                                                    1,140.89             910.02
    Adjustments for:
    Depreciation (Net of Lease Equalisation adjustment and
         amortisation of Goodwill)                                                          36.16              31.95
    Preliminary expenses written off                                                         1.09               0.77
    Provision for Contingencies                                                             13.25              11.25
    Stock option discount (Net of options excercised)                                       (0.51)             (0.41)
    Provision for Retirement Benefits                                                        4.69               2.26
    Profit on sale of Fixed Assets                                                          (0.02)             (0.11)
    Operating Profit before Working Capital changes                                      1,195.55             955.73
    Adjustments for:
    Current Assets                                                                         267.51            (481.88)
    Current Liabilities                                                                     (2.95)            184.53
    Cash generated from operations                                                       1,460.11             658.38
    Advance tax paid                                                                      (242.81)           (205.39)
    Net cash from operating activities                                                   1,217.30             452.99
B. CASH FLOW FROM INVESTING ACTIVITIES
    Purchase of Fixed Assets                                                              (150.65)            (34.94)
    Sale of Fixed Assets                                                                     6.30               3.88
    Investments (net)                                                                     (199.58)            (92.87)
    Goodwill on acquisition of a subsidiary                                                 (0.42)             (1.96)
    Capital Reserve on acquisition of a subsidiary                                             —                0.44
    Net cash used in investing activities                                                 (344.35)           (125.45)
C. CASH FLOW FROM FINANCING ACTIVITIES
    Share Capital – Equity                                                                   2.20               0.74
    Securities Premium                                                                      46.74              12.83
    Borrowings (Net)                                                                     5,448.07           4,561.55
    Loans disbursed (Net)                                                               (6,251.02)         (4,655.91)
    Dividend paid                                                                         (271.59)           (306.54)
    Tax paid on equity dividend                                                            (35.40)             (0.50)
    Reserve for contingencies                                                               (1.58)              2.11
    Redemption premium on NCDs and FRNs                                                   (103.56)             (5.72)
    Goodwill on amalgamation                                                              (149.41)                —
    Preliminary and deferred revenue expenses incurred                                      (2.81)             (3.08)
    Policy liabilities                                                                     244.27              86.01
    Increase in Minority Interest                                                          140.12               1.09
    Shelter Assistance Reserve – Utilisation                                                (3.96)             (2.94)
    Net cash used in financing activities                                                 (937.93)           (310.36)
    Net Increase/(Decrease) in cash and cash equivalents                                   (64.98)             17.18
    Cash and cash equivalent as at the beginning of the year                               918.05             935.23
    Cash and cash equivalent as at the end of the year                                     853.07             918.05
                                                                                           (64.98)             17.18

As per our report attached.
                                                               Deepak S. Parekh
For S. B. Billimoria & Co.                                     Chairman
Chartered Accountants
                                                               K. M. Mistry
Nalin M. Shah                                                  Managing Director
Partner
                                                               Renu S. Karnad
MUMBAI, June 15, 2004.                                         Executive Director

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Schedules
Annexed to and forming part of the Accounts


Schedule 1
SHARE CAPITAL
                                                                                                                  As at              As at
                                                                                                        March 31, 2004    March 31, 2003
                                                                                                       Rupees in crores   Rupees in crores
AUTHORISED
     26,00,00,000 Equity Shares of Rs. 10 each                                                                260.00             260.00


ISSUED, SUBSCRIBED AND PAID-UP
   24,66,17,121 Equity Shares of Rs. 10 each                                                                  246.61             244.41
                             (Includes 12,19,60,713 Equity Shares of Rs. 10 each, allotted as
                             fully paid-up Bonus Shares out of Securities Premium Account
                             and Capital Redemption Reserve)
                             (Previous Year 24,44,14,492 Equity Shares of Rs. 10 each)

Schedule 2
RESERVES AND SURPLUS
                                                                                                                  As at              As at
                                                                                                        March 31, 2004    March 31, 2003
                                                                                    Rupees in crores   Rupees in crores   Rupees in crores
SPECIAL RESERVE No. I
Opening Balance                                                                            194.35                                234.35
Less : Transfer to Provision for Contingencies                                              50.00                                 40.00
                                                                                                              144.35             194.35
SPECIAL RESERVE No. II
Opening Balance                                                                            838.50                                611.24
Add : Opening adjustments (Note 1(iii))                                                      0.08                                  0.66
Add : Transfer from the Profit and Loss Account                                            235.26                                226.60
                                                                                                            1,073.84             838.50
SPECIAL RESERVE
Under Section 45-IC(1) of the RBI Act, 1934
Opening Balance                                                                               0.01                                    —
Add : Transfer from the Profit and Loss Account                                               0.01                                  0.01
                                                                                                                 0.02               0.01
GENERAL RESERVE
Opening Balance                                                                          1,120.18                                880.35
Add : Opening Adjustments (Note 1(iii))                                                     87.76                                 59.44
Add : Transfer from Debenture Redemption Reserve                                               —                                  20.00
                                                                                         1,207.94                                959.79
Less : Deferred tax transferred from Reserve for
       Contingencies (Note 5)                                                                 1.58                                     —
                                                                                         1,206.36                                959.79
Add : Transfer from the Profit and Loss Account                                            245.23                                160.39
                                                                                                            1,451.59           1,120.18
                                                                  Carried forward                           2,669.80           2,153.04

                                                                                                                                    83
Schedule 2 (Continued)
RESERVES AND SURPLUS                                                                                    As at              As at
                                                                                              March 31, 2004     March 31, 2003
                                                                          Rupees in crores   Rupees in crores   Rupees in crores
                                                Brought forward                                   2,669.80           2,153.04
DEBENTURE REDEMPTION RESERVE
Opening Balance                                                                        —                                 20.00
Less : Transfer to General Reserve                                                     —                                 20.00
                                                                                                          —                 —
SECURITIES PREMIUM
Opening Balance                                                                  815.95                                890.52
Add : Opening adjustments (Note 1(iii))                                            0.06                                  0.75
Add : Received during the year                                                    46.74                                 12.83
                                                                                 862.75                                904.10
Less : Amounts utilised (Note 4)                                                 120.74                                 88.15
                                                                                                    742.01             815.95
EMPLOYEE STOCK OPTION OUTSTANDING
Opening Balance                                                                     1.94                                  2.35
Add : Net Charge for the year                                                       1.07                                  0.48
                                                                                    3.01                                  2.83
Less : Options exercised                                                            1.58                                  0.89
                                                                                                       1.43               1.94
CAPITAL REDEMPTION RESERVE
Opening Balance                                                                        —                                 50.00
Less: Utilised for issue of Bonus Shares                                               —                                 50.00
                                                                                                          —                 —
SHELTER ASSISTANCE RESERVE
Opening Balance                                                                    10.63                                  9.57
Add : Transfer from the Profit and Loss Account                                     4.00                                  4.00
                                                                                   14.63                                 13.57
Less : Utilised during the year                                                     3.96                                  2.94
                                                                                                      10.67              10.63
CAPITAL RESERVE                                                                                        0.04               0.04
RESERVE FOR CONTINGENCIES (Note 5)
Opening Balance                                                                     7.26                                  7.18
Add : Opening Adjustments (Note 1(iii))                                             0.04                                  0.89
                                                                                    7.30                                  8.07
Add : Deferred Tax Liability (Note 22)                                              2.32                                 (2.11)
                                                                                    9.62                                  5.96
Add : Created during the year                                                       6.12                                  1.30
                                                                                   15.74                                  7.26
Less : Transferred to Instalments due from borrowers                               15.74                                    —
                                                                                                          —               7.26
CAPITAL RESERVE ON CONSOLIDATION
Opening Balance                                                                     4.56                                  4.12
Add : On increase in shareholding in a subsidiary                                     —                                   0.44
                                                                                                       4.56               4.56
PROFIT AND LOSS ACCOUNT (of subsidiaries and
    jointly controlled entities)                                                  84.72                                  42.83
Add: Opening profit of subsidiaries and joint controlled entities (net)           16.02                                  36.52
                                                                                 100.74                                  79.35
Add: Opening Adjustments (net) (Note 1(iii))                                    (103.64)                                (63.33)
                                                                                                     (2.90)              16.02
                                                                                                  3,425.61           3,009.44


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Schedule 3
LOAN FUNDS [Notes 6 and 7]
                                                                                                As at              As at
                                                                                      March 31, 2004    March 31, 2003
                                                                  Rupees in crores   Rupees in crores   Rupees in crores
LOANS
Asian Development Bank                                                   444.07                                462.04
DEG – Deutsche Investitions – und Entwicklungsgesellschaft MbH           223.85                                    —
Under the Housing Guaranty Program of the United States Agency
   for International Development                                           4.80                                 53.84
International Finance Corporation                                        902.46                                    —
Commonwealth Development Corporation                                         —                                  11.51
Army Group Insurance                                                         —                                 200.00
National Housing Bank                                                    676.91                                763.40
Syndicated Loans – International                                         962.35                                948.24
Scheduled Banks and Financial Institution                              8,961.78                              6,259.14
Life Insurance Corporation of India                                          —                                 320.00
Kreditanstalt für Wiederaufbau                                            85.17                                  0.50
Others (Finance Lease)                                                     0.32                                  0.48
                                                                                        12,261.71
BONDS                                                                                      341.41              399.30
Redeemable at par between 2004 and 2024
DEBENTURES
Non-convertible Debentures                                             4,771.80                              3,209.25
Floating Rate Notes – International (Redeemable in 2007)                 484.01                                484.96
                                                                                          5,255.81
Under a Line from Kreditanstalt für Wiederaufbau (Unsecured)                                 41.17              93.18
Loans from Scheduled Banks (Unsecured)                                                      391.81             810.08
Commecial Paper (Unsecured)                                                               1,455.00             475.00
DEPOSITS (Unsecured)                                                   9,478.58                              9,292.58
Interest Accrued and Due                                                  16.79                                 10.68
                                                                                          9,495.37
                                                                                        29,242.28          23,794.18



Schedule 4
LOANS [Note 8 ]
                                                                                                As at              As at
                                                                                      March 31, 2004    March 31, 2003
                                                                                     Rupees in crores   Rupees in crores

Individuals                                                                             19,736.26          16,010.24
Corporate Bodies                                                                         8,493.70           6,115.12
Others                                                                                     326.51             180.09
                                                                                        28,556.47          22,305.45


                                                                                                                  85
Schedule 5
INVESTMENTS
                                                                                                  As at                  As at
                                                                                        March 31, 2004         March 31, 2003
                                                                                       Rupees in crores       Rupees in crores
INVESTMENT IN ASSOCIATES :
Equity Investments in associates by the Holding Company                                       190.15                 180.15
Equity Investment in associate by Subsidiaries                                                 73.32                  73.30
                                                                                              263.47                 253.45
Add : Goodwill on acquisition of a subsidiary                                                   2.38                   1.96
Add : Goodwill on acquisition of associates
      (share of pre-acquisition losses)                                                          0.88                    0.89
                                                                                              266.73                 256.30
Less: Capital Reserve on acquisition of an associate
      (Share of pre-acquisition profit)                                                         0.53                     —
                                                                                              266.20                 256.30
Add : Adjustments for post-acquisition share of profit / loss of
      associates (Equity method)                                                              346.87                 241.78
                                                                                              613.07                 498.08

OTHER INVESTMENTS :
Other than Insurance Companies
Equity Shares                                                                                 449.62                 466.85
Preference Shares                                                                             120.76                 292.08
Debentures & Bonds                                                                            710.88                 973.61
Government Securities                                                                         351.94                 234.03
Mutual Funds and Other Funds                                                                  751.52                 530.50
Properties                                                                                     15.48                  22.85
                                                                                            2,400.20               2,519.92
Less : Provision for Diminution in Value of Investments                                        26.56                  23.90
                                                                                            2,373.64               2,496.02

Insurance Companies
Equity Shares                                                                                  39.19                   5.82
Debentures and Bonds                                                                          104.39                  39.51
Government and other Approved Securities                                                      362.72                 173.29
Mutual Funds                                                                                   29.09                   8.44
                                                                                              535.39                 227.06
Less : Provision for Diminution in Value of Investments                                         3.74                   0.01
                                                                                              531.65                 227.05
                                                                                            3,518.36               3,221.15



Notes :
Other Investments (Other than Insurance Companies)
1. Debentures and Bonds include Rs. 134.03 crores (Previous Year Rs. 227.11 crores) in respect of current investments.
2. Mutual Funds and Other Funds include Rs. 423.65 crores (Previous Year Rs. 189.85 crores) in respect of current
    investments.

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Schedule 6
CURRENT ASSETS, LOANS AND ADVANCES [Note 9 ]
                                                                                                As at              As at
                                                                                      March 31, 2004    March 31, 2003
                                                                  Rupees in crores   Rupees in crores   Rupees in crores
CURRENT ASSETS
Income Accrued on Investments                                                                 45.00              59.53
Interest Accrued on Deposits                                                                  27.87              22.05
Sundry Debtors (Unsecured)                                                                     6.34               2.62
Construction Work in Progress                                                                  5.98              15.48
Stock-in-trade                                                                                 3.54               0.78
Cash and Bank Balances :
     Cash and Cheques on Hand                                            105.09                                 80.18
     With Scheduled Banks – Current Accounts                             180.87                                163.08
                            – Deposit Accounts                           565.18                                673.38
     With Reserve Bank of India                                            1.93                                  1.41
                                                                                            853.07
Commercial Paper                                                                              4.90                 —
Treasury Bills                                                                               29.51                 —
                                                                                            976.21           1,018.51
LOANS AND ADVANCES
Instalments due from borrowers                                           217.38                                207.58
Advances recoverable in cash or in kind or for
     value to be received                                                560.18                                483.00
Corporate Deposits                                                       850.06                              1,169.81
                                                                                          1,627.62
                                                                                          2,603.83           2,878.90
Schedule 7
CURRENT LIABILITIES AND PROVISIONS [Notes 10 and 11]
                                                                                                As at              As at
                                                                                      March 31, 2004    March 31, 2003
                                                                  Rupees in crores   Rupees in crores   Rupees in crores
CURRENT LIABILITIES
Interest Accrued but not Due                                             815.76                                887.18
Sundry Creditors                                                          50.83                                 34.66
Advance Payments                                                          45.77                                 40.85
Other Liabilities                                                        181.90                                135.40
                                                                                          1,094.26           1,098.09
PROVISIONS
Solatium Fund                                                              1.08                                    —
Proposed Dividend – HDFC Ltd.                                            332.93                                268.86
Proposed Dividend – Subsidiaries                                           6.84                                  2.73
Additional Tax on Proposed Dividend                                       44.58                                 35.40
Provision for premium payable on FRNs                                     27.65                                 10.47
Provision for Contingencies                                              351.19                                318.33
Provision for Retirement Benefits                                         12.78                                  8.09
Provision for Others                                                       3.25                                    —
Reserve for Unexpired Risk                                                54.65                                  4.52
Provision for Claims                                                      13.57                                  0.33
                                                                                            848.52
                                                                                          1,942.78           1,746.82


                                                                                                                  87
     Schedule 8
     FIXED ASSETS
                                                                                                                                                                                                 Rupees in crores




88
                                                                          GROSS BLOCK                                                        DEPRECIATION                                          NET BLOCK
                                                  As at                                                  As at          As at                                                      As at          As at          As at
                                        March 31, 2003    Additions @Amalgamation Deductions   March 31, 2004 March 31, 2003 @Amalgamation   For the Year   Deductions   March 31, 2004 March 31, 2004 March 31, 2003
     Land :
        Freehold                               40.14        0.67            —         4.65           36.16               —             —             —            —                —           36.16           40.14
        Leasehold                                2.30          —            —            —            2.30             0.27            —          0.02            —              0.29            2.01           2.03
     Buildings :
        Own Use                              166.21        30.84            —         3.06         193.99            15.24             —          3.24          0.35           18.13         175.86          150.97
        Under Operating Lease                194.96            —            —         2.83         192.13              6.34            —          3.16          0.09             9.41        182.72          188.62
     Leasehold Improvements                      1.05       5.67         2.55         2.79            6.48             0.46         2.47          1.24          2.63             1.54            4.94           0.59
     Computers :
        Hardware                               47.40       17.17         2.56         3.83           63.30           33.72          2.51        11.11           2.63           44.71           18.59           13.68
        Software                                 4.87       6.11            —         0.01           10.97             1.55            —          1.81         (0.78)            4.14            6.83           3.32
     Furniture & Fittings / Office
        Equipment etc.
        Own Use                                70.63       15.03         1.22         3.23           83.65           37.92          1.17          8.60          2.59           45.10           38.55           32.71
        Under Operating Lease                    1.04       0.52            —            —            1.56             0.23            —          0.27            —              0.50            1.06           0.81
     Vehicles :
        Owned                                    4.67       1.48            —         0.59            5.56             2.43            —          0.96          0.30             3.09            2.47           2.24
        Leased                                   0.65          —            —         0.07            0.58             0.19            —          0.11         (0.04)            0.34            0.24           0.46
     Leased Assets :
        Plant & Machinery                    184.66            —            —        12.56         172.10           172.50             —          4.89        12.56           164.83             7.27          12.16
        Vehicles                               30.93           —            —            —           30.93           30.93             —             —            —            30.93             0.00           0.00
        Railway Sidings                        23.00           —            —            —           23.00           23.00             —             —            —            23.00             0.00           0.00
        Computers                                0.20          —            —            —            0.20             0.20            —             —            —              0.20            0.00           0.00
     Goodwill                                    0.00     149.41            —            —         149.41              0.00            —          7.47            —              7.47        141.94             0.00
     Website Development                         1.41          —            —            —            1.41             1.02            —          0.39            —              1.41            0.00           0.39
     Lease Terminal Ajustment                      —           —            —            —               —         (18.23)             —             —        (0.53)         (17.70)           17.70           18.23

                                             774.12       226.90         6.33        33.62         973.73           307.77          6.15        43.27         19.80           337.39         636.34          466.35

     Opening adjustments
     (Note 1 (iii))                            14.43                                                 14.43             2.96                                                      2.96          11.47           11.47
                                             788.55       226.90         6.33        33.62         988.16           310.73          6.15        43.27       #19.80            340.35         647.81          477.82

     Previous Year                           748.12        34.94            —         8.94          774.12          280.68             —        32.47           5.38          307.77          466.35         467.44


     @ Refer Note 3
     # Net of depreciation for the year amounting to Rs. 2.27 crores (Previous Year Rs. 0.50 crores) included in amounts transferred to policyholders’ account
Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




Schedule 9
OPERATING INCOME [Note 13]
                                                                  For the year ended
                                                                      March 31, 2004       Previous Year
                                                                     Rupees in crores   Rupees in crores

Interest on Loans                                                         2,478.85           2,320.76
Dividends                                                                    63.33              77.27
Lease Rental Income                                                          35.27              44.73
Management and Trusteeship Fees                                              93.92              44.49
Other Operating Income                                                      444.49             483.05
                                                                          3,115.86           2,970.30
Schedule 10
INTEREST AND OTHER CHARGES
                                                                  For the year ended
                                                                      March 31, 2004       Previous Year
                                                                     Rupees in crores   Rupees in crores

INTEREST
Loans                                                                       649.19             652.24
Deposits                                                                    883.00             977.09
Bonds                                                                       357.17             357.42
Others                                                                        0.02               0.39
                                                                          1,889.38           1,987.14
OTHER CHARGES                                                                42.48              39.59
                                                                          1,931.86           2,026.73
Schedule 11
STAFF EXPENSES
                                                                  For the year ended
                                                                      March 31, 2004       Previous Year
                                                                     Rupees in crores   Rupees in crores

Salaries and Bonus                                                           64.80               47.87
Contribution to Provident Fund and Other Funds                                7.99                6.25
Staff Training and Welfare Expenses                                           6.22                5.68
                                                                             79.01               59.80
Schedule 12
ESTABLISHMENT EXPENSES
                                                                  For the year ended
                                                                      March 31, 2004       Previous Year
                                                                     Rupees in crores   Rupees in crores

Rent                                                                         10.57               10.52
Rates and Taxes                                                               3.20                1.98
Repairs and Maintenance – Buildings                                           2.45                2.42
General Office Expenses                                                       1.18                1.49
Electricity Charges                                                           6.02                4.78
Insurance Charges                                                             1.07                0.95
                                                                             24.49               22.14


                                                                                                  89
Schedule 13
OTHER EXPENSES
                                                                                             For the year ended
                                                                                                 March 31, 2004               Previous Year
                                                                                                Rupees in crores           Rupees in crores

Travelling and Conveyance                                                                                 8.62                        7.87
Printing and Stationery                                                                                   6.41                        4.95
Postage, Telephone and Fax                                                                              13.46                       10.75
Advertising                                                                                             19.33                       12.01
Repairs and Maintenance - Other than Buildings                                                            5.06                        4.19
Office Maintenance                                                                                        4.50                        3.64
Legal Expenses                                                                                            4.46                        3.20
Computer Expenses                                                                                         3.51                        3.03
Directors’ Fees and Commission                                                                            0.46                        0.34
Miscellaneous Expenses (Note 15)                                                                        20.90                       17.79
Auditors’ Remuneration                                                                                    0.78                        0.66
                                                                                                        87.49                       68.43

Schedule 14
NOTES FORMING PART OF THE ACCOUNTS
1.    The consolidated financial statements comprise the individual financial statements of HDFC Ltd. and its subsidiaries as on
      March 31, 2004 and for the year ended on that date.
      (i) The financial statements of the following subsidiary companies have been consolidated as per Accounting Standard 21
          on ‘Consolidated Financial Statements’ issued by the Institute of Chartered Accountants of India :
                   Name of Subsidiary                                                                      Proportion of Ownership
                                                                                                                  Interest (%)
                                                                                                     Current Year              Previous Year

                   HDFC Developers Ltd.                                                                  100.00                    100.00
                   HDFC Investments Ltd.                                                                 100.00                    100.00
                   HDFC Holdings Ltd.                                                                    100.00                    100.00
                   HDFC Asset Management Co. Ltd.                                                         50.10                     60.10
                   HDFC Trustee Co. Ltd.                                                                 100.00                    100.00
                   HDFC Realty Ltd.                                                                      100.00                    100.00
                   GRUH Finance Ltd.                                                                      61.85                     61.29
      All the subsidiaries are incorporated in India.
      (ii) The financial statements of the following subsidiaries which are in the nature of jointly controlled entities, have been
           consolidated as per Accounting Standard 21 on ‘Consolidated Financial Statements’ issued by the Institute of Chartered
           Accountants of India, consequent to the limited revision to Accounting Standard 27 on ‘Financial Reporting of Interests in
           Joint Ventures’ issued by the Institute of Chartered Accountants of India. The said subsidiaries, for the previous year were
           consolidated as per the Accounting Standard 27 on ‘Financial Reporting of Interests in Joint Ventures’ issued by the

     90
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Schedule 14 (Continued)
NOTES FORMING PART OF THE ACCOUNTS

             Institute of Chartered Accountants of India. The figures for the previous year have not been re-grouped in respect of
             these subsidiary companies. Accordingly, the figures for the previous year are not comparable.
                           Name of Subsidiary (Jointly Controlled Entity)                                     Proportion of Ownership
                                                                                                                     Interest (%)
                                                                                                        Current Year              Previous Year

                           HDFC Standard Life Insurance Co. Ltd.                                            74.82                      73.69
                           HDFC Chubb General Insurance Co. Ltd.                                            74.00                      74.00
      These companies are incorporated in India.

      (iii) Consequent to the above change and due to changes in the ownership interest, certain opening balances have been
            considered based on the current ownership and accordingly the differences are reflected as ‘Opening Adjustments’.

      (iv) The following amounts are included in the Financial Statements in respect of the jointly controlled entities referred to in
           Note 1(ii) above, based on the proportionate consolidation method:
                                                                                                                   Rupees in crores
                                                                                                        Current Year              Previous Year

                           Income                                                                                —                     10.85
                           Expenditure                                                                           —                     51.05
                           Assets                                                                                —                    306.05
                           Liabilities                                                                           —                     27.91

2.    HDFC Ltd. has investments in the following associates, which are accounted for, on the Equity method, in accordance with
      the Accounting Standard 23 on ‘Accounting for Investments in Associates in Consolidated Financial Statements’ issued by the
      Institute of Chartered Accountants of India :
                           Name of Associate                                Nature of Business                Proportion of Ownership
                                                                                                                     Interest (%)
                                                                                                        Current Year              Previous Year

                           Credit Information Bureau (India) Ltd.           Credit Information Bureau       40.00                      40.00
                           HDFC Bank Ltd.                                   Banking Services                24.18                      24.47
                           HDFC Securities Ltd.                             Securities Broking              29.48                      29.48
                           Intelenet Global Services Ltd.                   Call Centre                     50.00                      50.00

      Though Intelenet Global Services Ltd. is a jointly controlled entity, in terms of paragraph 29 of Accounting Standard 27 on
      ‘Financial Reporting of Interests in Joint Ventures’ issued by the Institute of Chartered Accountants of India, the same has
      not been considered as a joint venture, but as an associate in accordance with Accounting Standard 23 on ‘Accounting
      for Investments in Associates in Consolidated Financial Statements’ issued by the Institute of Chartered Accountants of
      India.

      The investments of HDFC Ltd. in the following associates have not been accounted for, on the Equity method, in accordance
      with the Accounting Standard 23 on ‘Accounting for Investments in Associates in Consolidated Financial Statements’ issued
      by the Institute of Chartered Accountants of India, since the amounts are not material.

                                                                                                                                         91
Schedule 14 (Continued)
NOTES FORMING PART OF THE ACCOUNTS

          Name of Associate                                 Nature of Business     Amount Invested           Proportion of Ownership
                                                                                   Rupees in crores                Interest (%)
                                                                                                        Current Year          Previous Year

          GW Capital Pvt Ltd.                               Venture Capital              0.78               22.50                   22.50
          Indian Association of Savings and Credit          Micro Finance                0.30               49.98                   49.98
          Rockfort Estate Developers Ltd.                   Real Estate                  0.02               49.00                   49.00

3.    Amalgamation of HDFC AMC Services Company Private Limited (HASCPL) [formerly known as Zurich Asset Management
      Company (India) Private Limited] and HDFC AMC Mauritius Limited (HAML) [formerly known as Zurich Finance (Mauritius)
      Limited] with HDFC Asset Management Company Limited (HDFC AMC):

      (a) Pursuant to the Scheme of Amalgamation of the erstwhile HASCPL and HAML with HDFC AMC, as approved by the
          shareholders in the Court-convened meeting held on 29th December, 2003, and subsequently sanctioned by the
          Hon’ble High Court of Mumbai on 4th March, 2004, gross assets amounting to Rs. 15.04 crores and gross liabilities
          amounting to Rs. 3.24 crores of the erstwhile HASCPL and HAML were transferred to and vested in HDFC AMC with
          retrospective effect from 19th June, 2003 (Appointed Date). The Scheme of Amalgamation has accordingly, been given
          effect to in these accounts.

      (b) HASCPL was primarily in the business of asset management and managing the schemes of erstwhile Zurich India Mutual
          Fund. HAML was the holding company of HASCPL.

      (c) The amalgamation has been accounted for under the “Purchase” method as prescribed by Accounting Standard 14
          issued by the Institute of Chartered Accountants of India. Accordingly, the assets and the liabilities of the erstwhile
          HASCPL and HAML as at 19th June, 2003 have been taken over at their book values.

      (d) As provided in the Scheme of Amalgamation, 2,43,24,000 shares of Rs. 10 each of HASCPL and 14,75,252 shares of
          USD 1 each of HAML held directly / indirectly by HDFC AMC stand cancelled. The Goodwill of Rs. 149.41 crores, arising
          as a result thereof, is being amortised equally over a period of 20 years, commencing from the current year.

4.    During the year, Rs. 120.74 crores (Previous Year Rs. 16.19 crores) was utilised out of the Securities Premium Account in
      accordance with Section 78 of the Companies Act, 1956 towards the premium paid / payable on the redemption of
      Non-convertible Debentures and the Floating Rate Notes of HDFC Ltd. The tax impact of the same amounting to Rs. 43.31
      crores (Previous Year Rs. 5.95 crores) has been recognised in the provision of current tax. A sum of Rs Nil (Previous Year
      Rs. 71.96 crores) was utilised for the issue of fully paid-up bonus shares to the equity shareholders of HDFC Ltd.

5.    In respect of home loans transferred / assigned by a subsidiary company, a portion of the surplus has been set aside
      towards ‘Contingencies on Loans Sold’ to meet any contingencies arising on such loans transferred / assigned, which is
      adjusted after considering prepayments, remaining tenure of the loans and the outstanding loan balance. The balance in
      contingencies has been treated as provisions and the same has been reduced from Instalments due from borrowers.
      Consequently, the deferred tax liability, which in earlier years was created out of Reserve for Contingencies, has been
      adjusted against the General Reserve and balance in the Profit and Loss Account, during the year.

6.    (i) Loans are secured by Promissory Notes and / or a negative lien on all the assets, other than Rs. Nil (Previous Year Rs. 2.24
          crores) taken over on amalgamation of HomeTrust Housing Finance Co. Ltd. with HDFC Ltd. which are secured by
          hypothecation of specific deferred receivables and a negative lien on specific immovable properties mortgaged to

     92
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Schedule 14 (Continued)
NOTES FORMING PART OF THE ACCOUNTS

             HDFC Ltd. and refinance from National Housing Bank amounting to Rs. 10.42 crores (Previous Year Rs. 9.76 crores)
             availed by one of the subsidiary companies which is secured by book debts refinanced, together with the underlying
             securities.
      (ii) Bonds are in the nature of Promissory Notes and are secured by a negative lien on all assets.

      (iii) a)      Non-convertible Debentures amounting to Rs. 4,586.80 crores (Previous Year Rs. 3,209.25 crores) are secured by a
                    negative lien on all assets of the Corporation and by a mortgage. These debentures are redeemable at par between
                    2004 and 2013.

             b) Non-convertible Debentures amounting to Rs. 185 crores (Previous Year Rs. Nil) are secured by a negative lien on all
                assets of the Corporation. These debentures are redeemable between 2004 and 2005 at a premium of Rs. 11.37
                crores. In accordance with the Companies Act, 1956, the premium payable on redemption of these debentures is
                charged to the Securities Premium Account over the life of the debentures.

      (iv) Floating Rate Notes are secured by a negative pledge on all the assets of HDFC Ltd.

7.    Loan Funds include Rs. 1.76 crores (Previous Year Rs. 1.66 crores) from Directors.

8.    Loans granted 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.    (i) Sundry Debtors include Rs. 0.01 crores (Previous Year Rs. 0.27 crores) which are outstanding for over six months.
      (ii) Loans and Advances include Rs. 0.04 crores (Previous Year Rs. 0.08 crores) given to Directors and Officers. The
           aggregate maximum balance due at any time during the year, in respect of the above, amounted to Rs. 0.06 crores
           (Previous Year Rs. 0.08 crores).
10. There are no amounts payable to any Small Scale Industrial undertaking.
11. (i) Reserve for Unexpired Risk represents proportion of premium written relating to the period of insurance subsequent to
        the Balance Sheet date, calculated on the basis of 1/365th method, subject to a minimum of 50% of the net premium
        written during the period in respect of the Company (HDFC Chubb General Insurance Company Ltd).
      (ii) Provision for claims represents estimated liability for outstanding claims in respect of direct business based on claims
           reported till the end of the year as well as for claims incurred but not reported (IBNR) and claims incurred but not
           enough reported (IBNER) as certified by the appointed actuary of the Company (HDFC Chubb General Insurance
           Company Ltd).
      (iii) HDFC Chubb General Insurance Company Ltd. has provided 1% of gross written premium on motor business
            underwritten during the year towards Solatium Fund as per the decision of Executive Committee of General Insurance
            Council.

                                                                                                                                      93
Schedule 14 (Continued)
NOTES FORMING PART OF THE ACCOUNTS

12. (i) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is
        Rs. 118.11 crores (Previous Year Rs. 120.80 crores).

    (ii) Uncalled liability on partly paid shares is Rs. Nil (Previous Year Rs. 11 crores).

13. (i) Other Operating Income includes income from investments amounting to Rs. 123.92 crores (Previous Year Rs.145.43
        crores), profit on sale of investments amounting to Rs. 138.68 crores (Previous Year Rs.110.40 crores), including Rs. 32
        crores on account of sale of shares of HDFC Asset Management Company Ltd. by HDFC Ltd., (Previous year Rs.47.50
        crores on account of renunciation of Right Shares of HDFC Chubb General Insurance Company Ltd. by HDFC Ltd.), profit
        on securitisation of loans amounting to Rs. 4.23 crores (Previous Year Rs. 14.22 crores) and other interest income
        amounting to Rs. 164.72 crores (Previous Year Rs. 213 crores).

    (ii) Dividend income includes Rs. 15.58 crores (Previous Year Rs. 0.12 crores) in respect of current investments.

    (iii) Income from investments and profit on sale of investments include Rs. 20.89 crores (Previous Year Rs. 30.40 crores) and
          Rs. 11.77 crores (Previous Year Rs. 12.35 crores) respectively, in respect of current investments.

14. Managerial Remuneration :
                                                                                                   Current Year          Previous Year
                                                                                               Rupees in crores       Rupees in crores
    Salaries and Commission                                                                              4.33                    3.45
    Contribution to Provident and Superannuation Funds                                                   0.39                    0.31
    Perquisites                                                                                          1.58                    1.06

15. Other Expenses include Provision for Wealth Tax Rs. 0.39 crores (Previous Year Rs. 0.39 crores).

16. (i) As per the prudential norms prescribed by the National Housing Bank, applicable to HDFC Ltd. and GRUH Finance Ltd., a
        provision of Rs. 47.00 crores (Previous Year Rs. 39.55 crores) is required to be carried as of March 31, 2004 in respect
        of their non-performing assets. As a matter of prudence, however, over the years, these companies have transferred
        additional amounts to the Provision for Contingencies Account, including transfers from Special Reserve No. I. As of
        March 31, 2004, the balance in the Provision for Contingencies Account of Rs. 351.19 crores (Previous Year Rs. 318.33
        crores) represented provision in respect of non-performing assets, standard assets, except for standard assets of GRUH
        Finance Ltd. amounting to Rs. 571.83 crores (Previous Year Rs. 545.13 crores) and all other contingencies.

    (ii) During the year, in addition to the charge of Rs. 13.25 crores (Previous Year Rs. 11.25 crores) to the Profit and Loss
         Account, an amount of Rs. 50 crores (Previous Year Rs. 40 crores) has been transferred from Special Reserve No. I to the
         Provision for Contingencies Account, in accordance with industry practice.

    (iii) Provision for Contingencies debited to the Profit and Loss Account includes provision for diminution in the value of
          investments amounting to Rs. 10.19 crores (Previous Year Rs. 8.17 crores). The balance of the provision represents
          provision made against non-performing assets and other contingencies.

17. (i) Contingent liability in respect of guarantees provided aggregated to Rs. 47.08 crores (Previous Year Rs. 0.61 crores).

    (ii) Contingent liability in respect of income-tax demands, disputed, amounts to Rs. 167.63 crores, net of amounts
         provided (Previous Year Rs. 72.90 crores). The matters in dispute are under appeal.

  94
     Schedule 14 (Continued)
     NOTES FORMING PART OF THE ACCOUNTS

     18. As per the Accounting Standard 17 on ‘Segment Reporting’ issued by the Institute of Chartered Accountants of India, the main segments
         and the relevant disclosures relating thereto are as follows:
                                                                                                                                                                                            Rupees in crores
                                              Housing           Life Insurance       General            Asset             Others             Inter-segment           Unallocated               Total
                                                                                    Insurance        Management                               Adjustments
                                             CY          PY       CY         PY      CY         PY     CY         PY     CY          PY        CY            PY      CY            PY        CY            PY
         Segment Revenue                3,162.28   3,059.35    15.34       8.80    8.77    2.27      98.27   44.98     12.35   10.70       (44.68)    (37.11)         —            —    3,252.33   3,088.99

         Segment Result                 1,042.68    863.05    (23.43)   (35.52) (22.19) (4.68)       44.42   22.45      9.73       7.26    (38.28)    (29.61)         —            —    1,012.93       822.95

         Income–tax (Current)                —          —         —          —       —          —      —       —         —          —          —             —    185.30    184.11       185.30        184.11
                                                                                                                                                                                                                 Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




         Deferred tax                        —          —         —          —       —          —      —       —         —          —          —             —      8.55    (12.18)        8.55        (12.18)

         Total Result                   1,042.68    863.05    (23.43)   (35.52) (22.19) (4.68)       44.42   22.45      9.73       7.26    (38.28)    (29.61) (193.85)     (171.93)      819.08        651.02

         Capital Employed

         Segment Assets

         Loans                         28,555.89 22,305.45      0.58         —       —          —      —       —         —          —          —             —        —            — 28,556.47 22,305.45

         Investments                    2,992.21   3,002.99   403.49    161.99 128.16     65.06      40.52   31.18     84.38   83.14      (130.40)   (123.21)         —            —    3,518.36   3,221.15

         Current Assets,
            Loans and Advances
            (Net of Tax Asset)          2,221.42   2,642.98    98.09     42.21    44.84    7.81      12.82    6.88      2.65   21.34       (21.37)    (17.80)     245.38    175.48      2,603.83   2,878.90

         Fixed Assets                    446.33     431.63     47.35     28.54     8.04    3.71      68.44    2.42      0.04       0.84     77.61      (0.79)         —            —     647.81        466.35

         Deferred Tax Asset                  —          —         —          —       —          —      —       —         —          —          —             —     56.05     66.83        56.05         66.83

         Total Assets                  34,215.85 28,383.05    549.51    232.74 181.04     76.58 121.78       40.48     87.07 105.32        (74.16)   (141.80)     301.43    242.31 35,382.52 28,938.68

         Segment Liabilities

         Loan Funds                    29,256.02 23,807.68        —          —     1.88    0.19        —       —        3.25       3.24    (18.87)    (16.93)         —            — 29,242.28 23,794.18

         Current Liabilities
            and Provisions
            (Net of Tax Liabilities)    1,788.66   1,695.03    43.00     22.38    90.57    9.10      28.03    7.16      3.39   13.91       (10.87)     (0.76)         —            —    1,942.78   1,746.82

         Deferred Tax Liability              —          —         —          —       —          —      —       —         —          —          —             —      2.03       4.26        2.03          4.26

         Total Liability               31,044.68 25,502.71     43.00     22.38    92.45    9.29      28.03    7.16      6.64   17.15       (29.74)    (17.69)       2.03       4.26 31,187.09 25,545.26

         Net Segment Assets             3,171.17   2,880.34   506.51    210.36    88.59   67.29      93.75   33.32     80.43   88.17       (44.42)   (124.11)     299.40    238.05      4,195.43   3,393.42

         Other Information

         Capital Expenditure              50.08      20.66     17.72       8.42    5.43    4.20 160.25        1.66       —         0.28     (0.25)     (0.28)         —            —     233.23         34.94

         Depreciation                     24.50      26.97      9.03       4.00      —          —     5.24    1.11      0.57       0.57      3.93      (0.18)         —            —      43.27         32.47

         Non-cash expenses other
           than Depreciation              19.16      15.96      0.18       0.40    0.81    0.27       0.02    0.02      0.07       0.06        —             —        —            —      20.24         16.71




95
Schedule 14 (Continued)
NOTES FORMING PART OF THE ACCOUNTS
19. As per the Accounting Standard 18 on ‘Related Party Disclosures’ issued by the Institute of Chartered Accountants of
    India, the related parties are as follows :
    A) Associate Companies
         HDFC Bank Ltd.                                 Credit Information Bureau (India) Ltd.
         Intelenet Global Services Ltd.                 HDFC Securities Ltd.
         GW Capital Pvt. Ltd.                           Rockfort Estate Developers Ltd.
         Indian Association of Savings and Credit
    B) Investing Party and its Group Companies
         Chubb Global Financial Services Corporation
         Chubb Pacific Underwriting Management Services Pte. Ltd.
         Federal Insurance Company
         Standard Life Assurance Company
         Standard Life Investments Ltd.
    C) Key Management Personnel (of the companies referred to in Note 1(i) and 1(ii))
         Mr. Deepak S. Parekh                           Ms. Renu S. Karnad
         Mr. Keki M. Mistry                             Mr. Milind Barve
         Mr. Deepak M. Satwalekar                       Mr. Sudhin Choksey
         Mr. R. V. S. Rao                               Mr. Shrirang V. Samant
    The nature and volume of transactions during the year with the above related parties were as follows :
                                                                                                                      Rupees in crores
                                                                       Investing Party and its
       Particulars                      Associate Companies              Group Companies               Key Management Personnel
                                       Current Year   Previous Year   Current Year   Previous Year     Current Year   Previous Year

       INCOME
          Dividend                         20.66           17.22              Nil                Nil           Nil             Nil
          Interest                          2.39            2.06            2.26                 Nil         0.01            0.01
          Consultancy and
             Other Fees                      8.10            0.20             Nil                Nil            Nil             Nil
          Rent                               0.84            0.90             Nil                Nil            Nil             Nil
          Profit on Sale of
             Investments                       Nil             Nil        32.00           47.50                 Nil             Nil
          Reinsurance                          Nil             Nil         0.33            0.02                 Nil             Nil
          Miscellaneous Services             0.08            0.77          0.82            0.36                 Nil             Nil
       EXPENDITURE
          Interest                           2.18            3.05             Nil             Nil            0.08            0.07
          Bank and Other Charges             2.41            0.75           3.66            0.31               Nil             Nil
          Remuneration                         Nil             Nil            Nil             Nil            6.30            4.82
          Reinsurance                          Nil             Nil          3.20            0.57               Nil             Nil
          Preference Dividend                  Nil             Nil          1.96              Nil              Nil             Nil
          Miscellanenous Expenditure           Nil             Nil          0.01            0.04               Nil             Nil
       ASSETS
          Investments                     263.47          252.35              Nil                Nil           Nil             Nil
          Loans                               Nil          22.50              Nil                Nil         0.09            0.31
          Deposits                         39.55           18.16              Nil                Nil           Nil             Nil
          Bank Balance                     26.15              Nil             Nil                Nil           Nil             Nil
          Others                           29.54            0.18            1.88                 Nil           Nil             Nil
       LIABILITIES
          Term Loan                           Nil          37.50              Nil            Nil               Nil             Nil
          Deposits                         12.59            0.21            4.94          26.26              0.71            0.61
          Proposed Equity Dividend            Nil             Nil           5.02             Nil               Nil             Nil
          Others                            8.91              Nil             Nil            Nil               Nil             Nil

  96
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Schedule 14 (Continued)
NOTES FORMING PART OF THE ACCOUNTS
20. In accordance with the Accounting Standard on ‘Leases’ (AS 19), issued by the Institute of Chartered Accountants of India,
    the following disclosures in respect of Operating and Finance Leases are made :
      (i) Lease Rental Income includes Rs. 27.31 crores (Previous Year Rs. 26.77 crores) – including Rs. 1.30 crores (Previous Year
          Rs. 1.41 crores) towards contingent rent – in respect of properties leased out under Operating Leases. Out of the
          above, in respect of the non-cancellable leases, the future minimum lease payments are as follows :
                                                                                                                                Rupees in crores
                                                                                                      Current Year                  Previous Year

             Not later than one year                                                                         3.40                          1.79
             Later than one year but not later than five years                                               4.33                          1.27
      (ii) a)       Certain motor cars have been acquired under a Finance Lease for an aggregate fair value of Rs. 0.65 crores. The
                    total minimum lease payments (MLP) in respect thereof and the present value of the future lease payments,
                    discounted at the interest rate implicit in the lease are :
                                                                                                                                Rupees in crores
                                Period                                       Total MLP                Interest                 Principal
                                                                        Current      Previous   Current        Previous   Current      Previous
                                                                           Year          Year      Year            Year      Year          Year

                    Not later than one year                              0.22          0.22      0.04            0.07      0.18          0.15
                    Later than one year but not later than five years 0.16             0.38      0.02            0.05      0.14          0.33
                    Total                                                0.38          0.60      0.06            0.12      0.32          0.48


             b) The Company (HDFC Standard Life Insurance Company Limited) has taken motor vehicles on operating lease for a
                period of 4 years. In respect of these operating leases, the lease payments debited to the Revenue Account are Rs.
                0.34 crores (Previous Year Rs. 0.25 crores). The minimum future lease payments payable for specified duration in
                respect of such lease amount to the following :
                                                                                                                                Rupees in crores
                                Period                                                                Current Year                  Previous Year

                    Not later than one year                                                                  0.29                          0.26
                    Later than one year but not later than five years                                        0.04                          0.25
                    Total                                                                                    0.33                          0.51
      (iii) Properties under non-cancellable operating leases have been acquired, both for commercial and residential purposes.
            The total minimum lease payments for the current year, in respect thereof, included under Rent, amount to Rs.11.58
            crores (Previous Year Rs. 3.58 crores).
             The future lease payments in respect of the above are as follows:
                                                                                                                                Rupees in crores
                                                                                                      Current Year                  Previous Year

             Not later than one year                                                                       12.51                          5.35
             Later than one year but not later than five years                                             27.44                         10.77
             Later than five years                                                                          2.64                          3.81

                                                                                                                                           97
Schedule 14 (Continued)
NOTES FORMING PART OF THE ACCOUNTS

21. In accordance with the Accounting Standard 20 on ‘Earnings Per Share’ issued by the Institute of Chartered Accountants of
    India :
    (i) In calculating the Basic Earnings Per Share the Net Profit After Tax of Rs. 947.04 crores (Previous year Rs.738.09 crores) has
         been adjusted for amounts utilised out of Shelter Assistance Reserve of Rs. 3.96 crores (Previous Year Rs.2.94 crores).
         Accordingly the Basic Earnings per Share have been calculated based on the adjusted Net Profit After Tax of Rs. 943.08
         crores (Previous Year Rs. 735.15 crores) and the average number of shares during the year of 24,49,21,466 (Previous
         Year 24,38,53,554).
    (ii) The reconciliation between the Basic and the Diluted Earnings Per Share is as follows :
                                                                                                                                               Rupees
                                                                                                   Current Year                           Previous Year
          Basic Earnings Per Share                                                               38.51                          30.14
          Effect of Outstanding Stock Options                                                   (0.46)                          (0.23)
          Diluted Earnings Per Share                                                             38.05                          29.91
    (iii) The Basic Earnings Per Share have been computed by dividing the adjusted Net Profit After Tax by the weighted average
          number of equity shares for the respective periods; whereas the Diluted Earnings Per Share have been computed by
          dividing the adjusted Net Profit After Tax by the weighted average number of equity shares, after giving dilutive effect of
          the outstanding Stock Options for the respective periods. The relevant details as described above are as follows :

                                                                                                   Current Year                           Previous Year
         Weighted average number of shares for computation of
            Basic Earnings Per Share                                                       24,49,21,466                       24,38,53,554
         Diluted effect of outstanding Stock Options                                           29,36,494                         19,47,082
         Weighted average number of shares for
            computation of Diluted Earnings Per Share                                      24,78,57,960                       24,58,00,636
22. In compliance with the Accounting Standard 22 on ‘Accounting for Taxes on Income’ issued by the Institute of Chartered
    Accountants of India, Rs. 8.55 crores (Previous Year credit has been taken for Rs. 12.18 crores towards deferred tax asset
    (net)) has been provided in the Profit and Loss Account for the year ended March 31, 2004 towards deferred tax liability
    (net) for the year, arising on account of timing differences. The revision in deferred tax liability (net), as a result of change in
    tax status, in respect of a subsidiary, upto March 31, 2004 amounting to Rs. 1.58 crores has been adjusted against the
    opening balance of General Reserve and an amount of Rs. 0.74 crores has been adjusted through the Profit and Loss
    Account. (Previous Year Rs. 2.11 crores has been adjusted against the opening balance of Reserve for Contingencies).
    Major components of deferred tax assets and liabilities arising on account of timing differences are :
                                                                                                                                       Rupees in crores
                                                                          Assets                                         Liabilities
                                                           Current Year            Previous Year          Current Year                  Previous Year
       a) Depreciation                                       (36.60)                  (30.19)                   0.65                           0.54
       b) Provision for Contingencies                          99.41                  100.36                  (2.96)                         (2.21)
       c) Lease Adjustments                                   (6.42)                   (6.67)                     —                              —
       d) Accrued Redemption Loss (net)                         2.88                     2.43                 (0.08)                             —
       e) Sale of Home Loans                                      —                        —                    3.88                           5.33
       f) Others (net)                                        (3.22)                     0.90                   0.54                           0.60
       Total                                                   56.05                    66.83                   2.03                           4.26
23. Figures for the previous year have been regrouped wherever necessary.

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Schedule 15
SIGNIFICANT ACCOUNTING POLICIES
1. SUBSIDIARIES
    The financial statements of the Corporation and its subsidiaries (the ‘Group’) have been consolidated on a line by line basis,
    to the extent possible and after eliminating all significant inter-company transactions in accordance with the Accounting
    Standard 21 on ‘Consolidated Financial Statements’ issued by the Institute of Chartered Accountants of India.
2. ASSOCIATES
    The Corporation’s investments in associates are accounted for under the equity method and its share of pre-acquisition
    losses is reflected as goodwill in the carrying value of investments in accordance with the Accounting Standard 23 on
    ‘Accounting for Investments in Associates in Consolidated Financial Statements’ issued by the Institute of Chartered
    Accountants of India.
3. SYSTEM OF ACCOUNTING
    The Group adopts the accrual concept in the preparation of the accounts.
    The Balance Sheet and the Profit and Loss Account of the Group are prepared in accordance with the provisions contained
    in Section 211 of the Companies Act, read with Schedule VI thereto to the extent possible (except the insurance
    subsidiaries), and the approvals granted under the Section by the Company Law Board.
4. INFLATION
    Assets and liabilities are recorded at historical cost to the Group. These costs are not adjusted to reflect the changing value in
    the purchasing power of money.
5. INTEREST ON HOUSING LOANS
    Repayment of housing loans is generally by way of Equated Monthly Instalments (EMIs) comprising principal and interest.
    Interest is calculated each year on the outstanding balance at the beginning of the financial year. EMIs commence once the
    entire loan is disbursed. Pending commencement of EMIs, pre-EMI interest is payable every month. Interest on loans is
    computed either on an annual or on a monthly rest basis.
6. INCOME FROM LEASED ASSETS
    Lease rental income in respect of finance leases is recognised on the basis of the implicit rate of return, in accordance with
    the Accounting Standard 19 on ‘Leases’ issued by the Institute of Chartered Accountants of India.
7. INCOME FROM INVESTMENTS
    In respect of Investments in schemes of Unit Trust of India and other Mutual Funds with assured returns, the income is
    accounted on an accrual basis.
    The gain / loss on account of Investments in Preference Shares, Debentures / Bonds and Government Securities held as
    long-term investments and acquired at a discount / premium, is recognised over the life of the security on a pro-rata basis.
8. BROKERAGE ON DEPOSITS
    Brokerage on deposits, other than incentive brokerage, is amortised over the period of the deposit except in respect of
    brokerage paid by one of the subsidiary companies. Incentive brokerage, which is payable to agents who achieve certain
    collection targets, is charged to the Profit and Loss Account.
9. TRANSLATION OF FOREIGN CURRENCY
    Assets and liabilities in foreign currencies are converted at the rates of exchange prevailing at the year-end.
10. INVESTMENTS
    (i) OTHER THAN INSURANCE COMPANIES
         Investments are capitalised at cost inclusive of brokerage and stamp charges and are classified into two categories, viz.
         Current or Long-term. Provision for diminution in the value of investments is made in accordance with the guidelines
         issued by the National Housing Bank and the Accounting Standard 13 on ‘Accounting for Investments’ issued by the
         Institute of Chartered Accountants of India, and is recognised through the Provision for Contingencies Account.
    (ii) INSURANCE COMPANIES
         Investments are made in accordance with the Insurance Act, 1938, the Insurance Regulatory and Development Authority
         (Investment) Regulations, 2000, the Insurance Regulatory and Development Authority (Investment) (Amendment)
         Regulations, 2001 and various other circulars / notifications issued by the Insurance Regulatory and Development
         Authority in this context from time to time.
         Investments are recorded at cost, which include brokerage, stamp duty and excludes broken period interest.
         Investments maturing within twelve months from the balance sheet date and investment made with the specific intention

                                                                                                                                 99
Schedule 15 (Continued)
SIGNIFICANT ACCOUNTING POLICIES
            to dispose of within twelve months from the balance sheet date are classified as short-term investments.
            All debt securities are considered as “held to maturity” and accordingly stated at historical cost subject to amortisation
            of premium or accretion of discount on constant yield to maturity basis in the revenue account and the profit and loss
            account over the period of maturity / holding.
            All mutual fund investments are valued at realisable net asset value.
            Equity shares are valued at fair value being the lower of the last quoted closing prices on the National stock Exchange
            (NSE) and The Mumbai Stock Exchange (BSE).
11.   FIXED ASSETS
      Fixed Assets are capitalised at cost inclusive of legal and / or installation expenses. Assets acquired under Finance Leases are
      accounted in accordance with the Accounting Standard 19 on ‘Leases’ issued by the Institute of Chartered Accountants of
      India.
12.   DEPRECIATION
      Depreciation on all Fixed Assets other than Leased Assets and Leasehold Improvements, is provided for the full year in
      respect of assets acquired during the year. No depreciation is provided in the year of sale.
      In respect of Leased Assets and Leasehold Improvements, depreciation is provided on a pro-rata basis from the date of
      installation / acquisition.
      Depreciation on Buildings, Computers, Leased Assets and Leasehold Improvements is calculated as per the straight line
      method; and on other assets as per the reducing balance method. All assets except Computers and Leased Assets are
      depreciated at rates specified by the Companies Act, 1956. Depreciation on Computers is calculated at the rate of 25 per
      cent per annum. Depreciation in respect of finance leases is provided on the straight line method over the primary period of
      lease or over the specified period, as defined under Section 205(5)(a) of the Companies Act, 1956, whichever is shorter.
13.   STOCK IN TRADE
      Stock in trade is valued at lower of cost on net realisable value.
14.   PROVISION FOR CONTINGENCIES
      It is ensured that the balance in Provision for Contingencies Account is adequate to cover the total principal amount
      outstanding in respect of all non-performing assets, as also all other contingencies. All loans and other credit exposures
      where the instalments are past due for more than six months are classified as non-performing assets in accordance with the
      prudential norms prescribed by the National Housing Bank.
15.   RETIREMENT BENEFITS
      There are various schemes of retirement benefits, such as Provident Fund, Superannuation Fund and Gratuity Fund. All these
      funds and the schemes thereunder are recognised by the Income-tax authorities and are administered by various trustees.
      The contributions to these funds are charged to the Profit and Loss Account every year. The contribution to the Gratuity Fund
      is made, based on the actuarial valuation determined each year, except in the case of Dubai branch of HDFC Ltd. where the
      provision for gratuity is made in accordance with the prevalent local laws.
      There is also a scheme which enables employees to encash the accumulated privilege leave on retirement. The Group’s
      liability in respect of this leave encashment scheme is also determined on the basis of actuarial valuation, and the same is
      charged to the Profit and Loss Account.
16.   INCOME-TAX
      The accounting treatment for Income-tax is based on the Accounting Standard 22 on ‘Accounting for Taxes on Income’
      issued by the Institute of Chartered Accountants of India. The provision made for Income-tax in the Accounts comprises
      both, the current tax and the deferred tax. The deferred tax assets and liabilities for the year, arising on account of timing
      differences, are recognised in the Profit and Loss Account; and the cumulative effect thereof is reflected in the Balance Sheet.
      The major components of the respective balances of deferred tax assets and liabilities are disclosed in the Accounts.
17.   POLICY LIABILITIES
      These are determined by the Company’s (HDFC Standard Life Insurance Co. Ltd.) appointed Actuary following his annual
      investigation of the Company’s insurance policies.
18.   MISCELLANEOUS EXPENDITURE
      (i) Preliminary Expenses are being written off over a period of 5 years in accordance with the provisions of Section 35D of
            the Income-tax Act, 1961.
      (ii) Deferred revenue expenditure comprises of brokerage paid on sale of units of Mutual Funds which is amortised over a
            period of 12 months or the period of investment, whichever is earlier.

 100
Social Initiatives
Today, besides generating profits and          structure a mechanism so as to cater to        present an opportunity to these
employment, the corporate sector is            their evolving needs and concerns.             youngsters from low-income
expected to stretch beyond commercial          Our approach has been one of socially          backgrounds to come into an
motives and address a wide range of            responsive actions without ruling out the      environment that is alien to them. To help
social concerns. There is an ever-             importance of profits. The relationship        them explore themselves, to learn
increasing necessity for business              between a corporation and the society          essential life skills, evaluate their career
enterprises to be responsible towards          within which it operates is synergistic,       options and thereby to try and develop
social issues such as education,               based on mutually beneficial ties and          a desire to improve upon their
healthcare, child development,                 therefore needs to be encouraged and           circumstances. This experiment has seen
livelihood support, housing and natural        sustained for a better tomorrow.               Sana, Tehsheen, Neil and Ravi become
environment among other emerging                                                              part of the HDFC family and several more
needs. At HDFC, this responsibility was
                                               Shelter Assistance Reserve                     are expected to join in with the
embraced in its nascent years and has          The Shelter Assistance Reserve has             beginning of the academic year in
since grown to encompass a variety of          matured into being one of HDFC’s key           June 2004.
initiatives.                                   development financing mechanisms. The          A typical weekly session would
                                               cumulative utilisation over the course of      comprise of discussions on a pre-
HDFC was incorporated, with the prime
                                               the past 16 years, stood at Rs. 293            decided topic the children come
objective of promoting home-
                                               million. During the year, the support          prepared for, games, debates, current
ownership. Our mainstream financial
                                               offered has benefited over 120 NGOs,           affairs, and snacks. Some of the children
services including housing loans and
                                               resulting in an overall utilisation of         are currently in Std. X and our HDFC
deposit schemes have catered
                                               Rs. 39.6 million.                              volunteers had the privilege of
substantially to low-income households
of India. In addition, HDFC has made           HDFC has always endeavoured to build           celebrating their Std. IX results with them.
consistent efforts towards economic            strong relationships with the recipient        This strange yet fulfilling experience has
and social upliftment of the weaker            NGOs and partner organisations. Some           been as much a learning time for the
sections of society by maintaining an          of the non-profits also undertake              mentees as for the mentors. Our effort at
active development finance portfolio.          activities requiring volunteers. In            HDFC would be to give the mentees a
                                               response, a few HDFC employees have            platform to explore their capabilities,
Over the years, society has contributed
                                               offered their skills as well as time on a      recognize their skills and allow them to
to our progress in significant ways and it
                                               voluntary basis – the activity being           slowly discover the outside world, and
is only fair that we reciprocate in equal
                                               facilitated jointly by the NGO involved        all this while we are having lots of fun.
measure. Managing the corporate social
                                               and HDFC. Such initiatives among others        The idea is to learn and have fun while
environment is like managing any other
                                               are cited below in the form of brief           you’re at it.
environment; it needs to be integrated
                                               cases, though in no specific order.            Relief to Mumbai’s Bomb-Blast Victims
into the philosophy of the organisation.
Studies suggest that corporate social          Akanksha Mentor Programme                      On August 25, 2003, the people of
environment is a wide array of factors,        “Mera naam Sana hai and I like sweets, so      Mumbai saw terror ripping the peaceful
not just philanthropy. It is equated with      you can call me Sweet Sana”                    fabric of the metropolis, when two
increasing and enhancing value for the         Bright yellow T-shirts with a picture of the   powerful bomb-blasts brought death to
stakeholder, which goes beyond the             sunrise on it and even brighter faces          over 50 innocent citizens and caused
traditional shareholder or supplier. They      wearing those T-shirts filled in Ramon         injury to several more. The Government
include customers, employees and               House one Thursday evening to interact         of Maharashtra promptly set up a ‘Relief
communities along with the society at large.   with apprehensive yet equally excited          and Rehabilitation Committee‘ to provide
At HDFC, “Corporate Social                     HDFC volunteers as part of the Akanksha        relief assistance to the injured victims and
Responsibility” has always been an             Mentor Programme. This programme               the next of kin of the deceased. The
evolving concept, akin to our ‘learning by     facilitates interaction during after office-   committee was granted a six-month
doing’ philosophy. It is essentially a sense   hours between students from Municipal          tenure to carry out its mandate, and it
of shared values and beliefs that have         schools, typically belonging to Standards      decided to engage the Bombay
enabled us to take on development              VIII, IX and X, and volunteers from HDFC       Community Public Trust (BCPT), a Mumbai
oriented work in addition to our core          who act as their mentors. For the HDFC         based NGO, as the principal
competencies. Each intervention is             staff participating in the programme, this     intermediary to undertake the relief and
perceived as a new, fresh experience           was the first experience of its kind. This     rehabilitation activities.
that progressively adds on to our              unique association with The Akanksha           HDFC was assigned the responsibility to
understanding of how NGOs work, what           Foundation took shape when the                 channel the voluntary contributions from
their clients need, and how best to            Foundation suggested to HDFC to                the citizens and corporate houses and

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manage the financial resources on behalf                          was able to participate in ‘Debates’ and       handicapped individuals for setting up
of the committee. The funds were raised                           ‘Essay Writing’ competitions collecting        any small income generation activity,
in the form of grants, which included a                           information from the internet facility         thereby enabling them to gain economic
contribution from HDFC along with other                           available at her school. Master Iqbal          independence.
corporate donations. The BCPT carried                             Hussain who has participated in a              Special Olympics Bharat
out a detailed survey of the families of                          community based learning programme
the deceased and those who had                                    called “I-earn” through the internet, felt     “Let me win. But if I cannot win, let me
                                                                                                                 be brave in the attempt”
sustained serious and minor injuries,                             that computers had helped him gain
while also collating the findings of other                        insights on relevant international issues.                           –Special Olympics Oath
NGOs. After reviewing the relief                                  Sparsh is a Mumbai based NGO offering          This was the message on the face of
assistance provided by the Government                             computer education programmes to               every one of the 7,500 participants from
of Maharashtra, the committee felt that                           economically disadvantaged children            200 countries at the World Summer
some additional compensation to the                               and adults thereby aiding them to find         Special Olympic Games held in Dublin,
next of kin of the deceased and the                               employment. HDFC teamed up with                Ireland. They came, they saw and they
injured was needed.                                               Sparsh to provide free computer                conquered – Special Olympics athletes
The BCPT undertook the task of                                    education in 15 Municipal schools of           took Ireland and the world by storm
contacting individual victims and their                           Mumbai. The financial support from HDFC        earning a standing ovation at the
families, assessing their specific needs,                         has enabled Sparsh to sponsor the              opening ceremonies at the Croke Park,
ensuring effective allocation of funds and                        hardware and software costs for the            Dublin in the ceremonial parade of
disbursing the grants to those who were                           schools and partly cover the                   athletes. The Indian delegation
entitled. HDFC administered the financial                         expenditure for training the teaching staff.   consisting of 83 athletes proved their
transactions by operating a ‘Relief &                                                                            mettle at the Games and won 34 Gold,
                                                                  Livelihood Support to the Physically           36 Silver and 40 Bronze medals
Rehabilitation Account’ at the HDFC Bank.                         Impaired
In certain cases the committee                                                                                   taking the tally to an astounding
                                                                  The rise in road accidents, diseases, land     110 Medals by participating in 11
recommended special assistance in the                             mines and other hazards have seen a
form of livelihood opportunities, medical                                                                        Olympic-type sports.
                                                                  growing number of new cases being
aid, educational scholarships and                                 added to the population of amputees            Special Olympics is an international
counseling from professional                                      every year. 75-year-old Mr. Ram Chandra        sports programme for the mentally
psychotherapists.                                                 Sharma has impacted the lives of               challenged offering training and
IT education for Students of Municipal                            thousands of physically handicapped            competition opportunities to
schools                                                           individuals all over the world.                handicapped individuals around the
“Keyboard, Monitor, Printer, MS–Word,                             Mr. Chandra is known to be a kind of           world. Special Olympics Bharat, a
Power Point” – these are some of the                              Pygmalion - he can put life into the           national level sports programme for the
words that have now become a ‘mantra’                             lifeless. Born into a family of artisans, he   mentally challenged, aims to reach out to
for every child. Not to be left behind, are                       quickly established himself as one of          five lac differently abled individuals in
our Municipal schools at Mumbai, who                              Jaipur’s finest sculptors. He is the           India through the world of sport. HDFC is
have tied up with SPARSH to bring                                 founder of the rubber-based foot               proud to have supported the
computer education to their students.                             known today as Jaipur Foot, which can          Maharashtra Delegation comprising nine
The collaboration saw computers                                   be fitted in 45 minutes, and lasts for         athletes at the Games, which not only
become a part of the regular curriculum                           more than 5 years.                             offered them an opportunity to
in these schools and a marked                                                                                    compete at an international level but also
                                                                  The Bhagwan Mahaveer Viklang Sahayata
improvement in the hardware material                                                                             a sense of accomplishment in
                                                                  Samiti is an NGO in Jaipur, which has          representing their nation.
and the software content, making                                  been providing artificial limbs, calipers
information technology (IT) more exciting                         and other rehabilitation aids to               Primary Health-care in the Hills of
for the children as a learning tool. At an                        amputees, polio-affected and other             Uttaranchal
IT competition organised by Sparsh                                physically disabled individuals for the        The Corbett Foundation was set up in
among all Municipal schools of Mumbai                             past 28 years. The organisation also has a     1994, and it derives its name from the
in December 2003, the participants                                separate provision for the purchase and        hunter turned conservationist Jim
were made aware of the importance of                              fitting of various aids and appliances to      Corbett, who earned the respect and
computer education and nine winners                               the disabled individuals who cannot            admiration of Indians for his pioneering
won themselves brand new PCs as prizes.                           afford to pay for the services. HDFC           efforts in wildlife conservation in India.
Ms. Chanchal Singh (Std. X, Guru Nanak                            partnered with the Samiti by providing         HDFC has been supporting The Corbett
English High School, Mumbai) says she                             financial assistance to the poor               Foundation in its aim at preserving,

                                                                                                                                                      103
                                                                                                          southern India, in which HDFC holds
       Shelter Assistance Reserve: Utilisation (%) - 2003-04                                              50% equity, continued to register
                                                                                                          impressive growth in its direct lending
                                              7
                                                                                                          to women constituted self-help groups.
                                                                                                          IASC’s income from operations and
                                                                  14

                          10                                                                              profitability has doubled in FY04 thereby
                                                                                                          augmenting the organisation’s financial
               6                                                                    11                    self-sufficiency. IASC is now serving over
                                                                                                          10,000 active clients with operations
                                                                                                          expanding to ten offices across six districts.
             10
                                                                                                          Slum Resettlement at Madurai through
                                                                                    10                    Women’s Federation
                     6                                                                                    Madurai Vattara Kalanjiam is a federation
                                                                                                          of women self-help groups (SHGs)
                                         12                            14                                 promoted by the DHAN Foundation.
                                                                                                          Comprising of almost 3000 women
   Education (14%)                        Infrastructure / IT Support (11%)   Physical Impairment (10%)   members who belong to 42 slums of
   Community Development (14%)            Health / Medical Services (12%)     Sports / Arts (6%)          Madurai city, the federation has been
   Research / Policy Initiatives (10%)    Calamities / Disaster Relief (6%)   Child Welfare (10%)         active in finding housing and livelihood
   Heritage / Environment (7%)                                                                            solutions by offering basic financial services.
protecting and conserving the unique                    including urban slum housing and                  As a part of the Vaigai river reclamation
ecosystem of the Corbett National Park                  extending loans for economic activities           project two slums were evicted in the
in the foothills of Kumaon and Garhwal                  under the Micro-enterprise Finance                Teppakulam area of Madurai. The
hills of Uttaranchal. The foundation is                 Facility (MFF). The cumulative                    Kalanjiam stepped in to locate an
also active in providing primary health                 disbursements under the housing and               alternate site as a permanent settlement
care and arranging awareness                            MFF components stood at Rs. 344 million           for the affected members. They
programmes for the local communities.                   as at March 31, 2004. The cumulative              purchased a plot of over 10 acres and
They have done remarkable work in                       loan approvals in the housing                     approached HDFC for a loan of Rs. 16.8
conserving the flora and fauna in the                   component were Rs. 303 million                    million to undertake housing
Kumaon region and it is because of this                 towards 49 projects, against Rs. 438              construction. By way of efficient
dedication that the poaching of wildlife                million available under the line. Out of          utilisation of the loan funding, being
and timber is under check. In 1998, the                 the balance amount of Rs. 282 million             disbursed out of the KfW line at HDFC,
foundation set up an ecological                         reserved for the MFF, the cumulative loan         the Kalanjiam has managed to construct
research centre in Kutch. One of their                  approvals stood at Rs. 218 million                quality housing at lower costs.
initiatives of constructively engaging the              covering 58 loans. During the year, HDFC          In January 2004, the first phase of the
local hill folk has been with the                       has approved 16 new projects in                   project was inaugurated by Mr. Leubke
provision of basic medical facilities.                  respect of both the components.                   from the German Ministry of Economic
Weaker-section Housing and                              HDFC has also effected an upward                  Co-operation and Development (BMZ),
Micro-finance                                           revision in the income ceiling that               accompanied with Mr. Henke, Regional
Supporting rural housing projects with                  determines the eligibility of EWS clients         Director, KfW.
loan funds and extending micro-financial                in the housing and MFF projects. From
services to low-income households has                   FY05 onwards, the income ceiling has              Private Financing of Community
been a natural extension of HDFC’s core                 been increased from Rs. 2500 per                  Infrastructure Projects
business activities. By way of operating                month as gross household income to                In a workshop organised by the World
the KfW lines, HDFC has delivered credit                Rs. 3400 per month in the rural sector            Bank on “Sustainable Private Financing of
to over 140,000 EWS families with                       and Rs. 4100 per month in urban and               Community Infrastructure in India,” an
cumulative approvals exceeding                          metropolitan areas.                               Approach Paper was presented to
Rs. 1400 million of which Rs. 1250                      Indian Association for Savings and                enable the preparation of a Policy Note
million stood disbursed.                                                                                  on strategic options to deal with this
                                                        Credit
The third foreign currency line from KfW                                                                  issue. HDFC had contributed two case
of Rs. 720 million has been utilised                    The Indian Association for Savings and            studies from the experience in EWS
towards low-income housing projects                     Credit (IASC), a micro-finance venture in         housing projects that were included in

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this Paper. HDFC also participated in a                           Completion of Earthquake                    professional support was recruited by
panel discussion on scaling up slum                               Rehabilitation Projects                     the implementing NGOs besides
improvement in India.                                             The rehabilitation and rebuilding           continuous skills upgrading of the site
                                                                  measures initiated by HDFC in response      engineers and supervisors by way of
IInd International BASIN Conference                               to the destruction caused by the Gujarat    ongoing training / workshops
The “building advisory service and                                earthquake of January 2001, are now         conducted by the project consultants.
information network”, BASIN, was set up                           nearing completion as per the originally    Under the IPA, the professional staff of
in 1988 to provide information and                                planned schedule. The KfW grant of          the NGOs, were encouraged to explain
advice on appropriate building                                    Rs. 480 million structured as the fourth    their actions and the features of
technologies and to create links with                             line to HDFC, has been utilised for         earthquake safe construction to the
‘know-how’ resources at a global level.                           reconstructing destroyed houses and         house-owners in order to obtain
The second international conference of                            social infrastructure targeting poor        their understanding as well as
the BASIN network was organised at                                communities in the earthquake affected      co-operation.
New Delhi in March 2004, by                                       areas of rural Gujarat.                     The on-site activities of site supervisors
Development Alternatives, a Delhi based                                                                       and engineers have taken into
                                                                  At the project formulation stage, HDFC
NGO and the only Indian member of                                                                             consideration the specific needs of the
                                                                  decided to engage local NGOs, which
the BASIN network. The conference saw                             were selected carefully, based on their     users. The designs are therefore flexible
participation from over twenty countries                                                                      in order to allow for adaptations to the
                                                                  capabilities, outreach potential and
comprising building professionals, NGO                                                                        requirements of a specific site. The actual
                                                                  genuine interest to involve themselves in
representatives, government officials,                            the long-term rehabilitation activities.    site development took place only after a
research students and donor agencies.                                                                         simple ‘master-plan’ outlining the site’s
                                                                  Construction of seismic and cyclone safe
HDFC made a paper presentation on                                                                             future development had been drawn by
                                                                  houses and use of appropriate low-cost
“Debt-funding for Low-income Housing                              building technology within the              the beneficiary, with the assistance of a
and Livelihood activities – Learnings and                                                                     qualified engineer. Such a site sketch
                                                                  framework of community / owner
Linkages.” This theme was later steered                                                                       considered, proposed new
                                                                  participation were defined as non-
by HDFC as it elaborated into a working                           negotiables in the programme. The           constructions, possible future
group exercise on financing issues.                                                                           extensions, and the planning of layouts in
                                                                  project approach has aimed to minimise
                                                                  the likelihood of increasing an aid-        such a manner as to maximise the
Vision Mumbai – Sub-group on Housing
Issues                                                            dependency attitude by insisting on         potential use of open spaces.
                                                                  contributions from the house-owners in      This led to an owner-driven
Responding to the deteriorating living                                                                        reconstruction process that gave villagers
conditions in the metropolis of Mumbai,                           one or several of the following forms -
                                                                  by investing the cash compensation          a choice between different design
the Bombay First, an NGO active on city                                                                       options, allowing for individual solutions
                                                                  made by the government of Gujarat,
issues and McKinsey & Co.                                                                                     within the available budget.
commissioned a study on “Transforming                             complete debris removal on the site,
                                                                  deploying reusable building materials       While procuring the building materials,
Mumbai into a World-Class City.” The                                                                          the NGO kept the owner informed on
                                                                  and arranging for masons and unskilled
Government of Maharashtra used the                                                                            the payments made and materials
findings of this study as a reference                             labourers wherever possible.
                                                                                                              purchased on his / her behalf.
point and constituted a high level Task                           Intensified Participatory Approach
                                                                                                              Traditional and local building
Force for drafting an agenda for the                              During FYO4, HDFC introduced an
effective revival of the city. The                                                                            methods promoting the use of locally
                                                                  Intensified Participatory Approach (IPA)    available building materials were
members of this Task Force also lead                              that applied to all the housing projects,
                                                                                                              specially encouraged. The programme
focussed sub-groups to carry out                                  so as to further augment the owners’
detailed action planning on six specific                                                                      also facilitated research on
                                                                  involvement in the construction             cost-effective building technologies,
issues, including ‘housing.’ HDFC                                 process. A participatory methodology
                                                                                                              which were shared among the
coordinated the housing sub-group                                 has been the basis of the project
meetings to assimilate views of the                                                                           NGOs through a newsletter brought out
                                                                  concept and was considered an all-          from the office of the project
stake-holders involved viz. local                                 important guiding principle. The IPA
                                                                                                              consultants.
authorities, NGOs, real estate                                    envisaged improving the participation of
developers and housing experts. A set                             the house-owners as early as possible       Updated Project Status and related
of recommendations including those                                in the design stage and ensuring regular    Outcomes
that could be implemented in the short                            interaction with the technical staff        During the year, HDFC made
term, have accordingly been presented                             before and during the construction          disbursements of over Rs. 170 million in
to the Task Force.                                                process. To achieve this, appropriate       respect of the various housing projects

                                                                                                                                                   105
   No.     NGO - Name of Implementing Agency                                               Type of Housing                         No. Units
    1      Self Employed Womens’ Association (SEWA)                                        Core Permanent Shelter                   3,310
           (Kutch, Patan and Surendranagar districts)                                      Semi-Permanent Shelter                    503
    2      Kutch Nav Nirman Abhiyan (KNNA)
           (An NGO Network working across Kutch district)
           (a) Vivekanand Research and Training Institute (VRTI)                           Core Permanent Shelter                   1,508
                                                                                           Seismic-safe Retrofitting                 700
           (b) Other NGOs viz. SSS, RARDS, YUVA and KYS                                    Core Permanent Shelter                    324
           (c) KNNA Shelter Division                                                       Seismic-safe Retrofitting                 947
           (d) KNNA / Hunnar Shala                                                         Housing for Urban poor                     70
           (e) Gram Swaraj Sangh (GSS)                                                     Housing for BPL families                 1,300
           (f) Kutch Mahila Vikas Sangathan (KMVS)                                         School Teacher Quarters                    38
    3      BAIF Development Research Foundation                                            Core Permanent Shelter                    500
           (Bachau and Bhuj taluka at Kutch district)
    4      Aga Khan Planning and Building Services (AKPBS,I)                               Temporary Shelter                         300
           (Anjar taluka at Kutch District)                                                Core Permanent Shelter                     58
    5      Ashadeep Human Development Centre (AHDC)                                        Core Permanent Shelter                    500
           (Maliya taluka at Rajkot district)
           TOTAL NO. OF UNITS CONSTRUCTED - ALL NGOs                                                                                10,058
*Most core permanent shelters include the provision of toilet-cum-bath facilities.


outlined in the table. The total cumulative             Beyond the perceived assistance to             building materials and techniques and
grants released by HDFC stood at                        thousands of earthquake affected               develop housing that would be of high
Rs. 366 million towards projects being                  households in their hour of need, this         quality, yet affordable. During the year,
managed by 13 NGOs, which are in all                    project has also succeeded in building         HDFC extended support to Hunnar
constructing 10,058 houses across 5                     and enhancing the capacities of the local      Shala’s management by playing an
districts. Whereas the total funds utilised             NGOs - in managing bigger projects,            advisory role.
including consulting / training costs and               administering larger funds and creating
other programme expenditure                             skill sets that may be put to use in
                                                                                                       Loan Component
exceeded Rs. 400 million as at                          different directions in the years to come.     Besides the grant funding, KfW had also
March 31, 2004.                                         One such instance is of the Kutch Nav          provided HDFC with a foreign currency
                                                        Nirman Abhiyan who have expanded               loan of Rs. 811 million meant for refinancing
In addition to the above-mentioned                      upon the strong research and innovation        retail home loans and social infrastructure
projects, HDFC has also funded the                      skills developed by their shelter division     financing by HDFC in the earthquake-
reconstruction of social infrastructure in              by launching “Hunnar Shala – Foundation        affected areas of Gujarat. During the year,
the form of community facilities at rural               for Building Technology and Innovations”       HDFC availed of the second and third
Anjar (Kutch) by the AKPBS and a hostel                 now registered as a section 25                 tranches from KfW amounting to Rs. 278
facility at village Gundi, Dholka Taluka                company. The company has                       million, thereby drawing the loan in full. The
being built by the Bhal Nalkantha Prayogik              commenced its operations in 2003-04,           loan allows HDFC, a moratorium on
Sangh for the benefit of girl students                  aiming to work with and further the            principal of two years, so that the principal
from nearby villages in the southern                    interests of the building artisans and their   repayment to KfW shall commence from
Ahmedabad district.                                     craft, promote eco-friendly, low-energy        June 2005 onwards.

While HDFC is an urban financing institution for housing, it has been my very strong feeling that rural housing and
its development must go side by side, if not ahead of urban housing. Unless the quality of life in villages
improves, there cannot be real progress.
                                                                                                                             – Shri H. T. Parekh, 1985

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Compliance Report
The Board of Directors
HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED
We have examined the registers,                                   Directors including the Managing            Dealing Code on the lines of model
records, books and papers of Housing                              Director, Executive Directors have been     code prescribed under the SEBI
Development Finance Corporation                                   made in accordance with the                 (Prohibition of Insider Trading)
Limited. (HDFC) (the Company) having its                          requirement of the Act.                     Regulations, 1992 as amended and the
registered office at Ramon House, H T                             5. The Directors of the Company have        same has been implemented during the
Parekh Marg, 169, Backbay Reclamation,                            made all the required disclosures under     year under review. Mr. Susir Kumar,
Churchgate, Mumbai 400 020 and                                    Section 299 and 274(1)(g) of the Act.       Company Secretary acts as the
having registration No 19916 as required                          The Company has also complied with          Compliance Officer.
to be maintained under the Companies                              the requirements in pursuance of the        12. The Company has complied with
Act, 1956, (the Act) and the rules made                           disclosure made by its Directors.           the disclosure requirements of SEBI
thereunder and also the provisions                                                                            (Substantial Acquisition of Shares and
                                                                  6. The issue of capital and securities is
contained in the Memorandum and                                                                               Takeovers) Regulations, 1997 and SEBI
                                                                  in conformity with the requirement of
Articles of Association of the Company                                                                        (Prohibition of Insider Trading)
                                                                  the Act. The issues of share certificate
for the period from April 1, 2003 to                                                                          Regulations, 1992.
                                                                  and the transfer and transmission thereof
March 31, 2004. In our opinion and to
                                                                  have been registered properly.              13. During the year under review, the
the best of our information and
                                                                  7. The Company has obtained all the         Company has complied with the norms
according to the examinations carried
                                                                  necessary approvals of Directors,           prescribed by National Housing Bank for
out by us and explanations furnished to
                                                                  Shareholders and other authorities as       Housing Finance Companies.
us by the Company, its officers and
agents, we certify that in respect of the                         required under the Act.                     14. The Company is registered with the
aforesaid financial year:                                         8. The Company has complied with all        Securities and Exchange Board of India
                                                                  the provisions of the listing agreements    (SEBI) as Share Transfer Agent –
1. The Company has kept and
                                                                  with The Stock Exchange, Mumbai and         Category II and has connectivity with
maintained all registers and records as
                                                                  National Stock Exchange of India            National Securities Depository Limited
required under the provisions of the Act
                                                                  Limited.                                    (NSDL) and Central Depository Services
and the Rules made thereunder and the
                                                                                                              (India) Limited (CDSL). The Company has
entries therein have been duly recorded.                          9. The Company has transferred the          complied with SEBI (Registrars to the
2. The Company has duly filed the                                 dividend declared on July 18, 2003 to       issue and Share Transfer Agents)
forms, returns and documents with the                             separate dividend account on July 19,       Regulations, 1993.
Registrar of Companies, Maharashtra and                           2003 and all the unpaid / unclaimed
                                                                                                              15. The Company has complied with
other authorities as required under the                           dividend accounts has been reconciled.
                                                                                                              the provisions of SEBI (Employees Stock
Act and Rules made thereunder.                                    10. During the year under review, the       Option Scheme and Employees Stock
3. All the requirements relating to the                           Company has transferred to Investor         Purchase Scheme) Guidelines, 1999
meetings of Directors, Committee of                               Education and Protection Fund,              during the year under review.
Directors and Shareholders as well as                             dividend amounting to Rs. 8,22,709/-
relating to the minutes of the                                    that have not been claimed by the
proceedings thereat have been                                     shareholders for the financial year 1995-                 For N L Bhatia & Associates
complied with.                                                    96 in accordance with the provisions of
4. The Board of Directors of the                                  the Act.                                                                 N L BHATIA
Company is duly constituted and                                   11. The Company has framed an insider       MUMBAI                   Company Secretary
appointment / re-appointment of                                   trading code called HDFC – Share            May 3, 2004               FCS 1176 CP 422




                                                                                                                                                  107
Shareholders’ Information

 This section inter alia offers information to the shareholders pertaining to the Corporation, its shareholding pattern, means of
 dissemination of information, service standards, share price movements and other information as required under the
 provisions of the Listing Agreements.

Annual General Meeting
Day/Date : Monday, July 19, 2004
Time     : 3.30 p.m.
Venue    : Birla Matushri Sabhagar, 19, Marine Lines, Mumbai 400 020
The Corporation had vide letter dated May 10, 2004, also intimated the shareholders the day, date, time and venue of the
27th annual general meeting, to enable them to plan in advance to attend their meeting. With the said letter the audited
financial results of the Corporation for the financial year ended March 31, 2004, as published in the newspapers was also sent.
Book Closure
The register of members and share transfer books of the Corporation will remain closed from Tuesday, July 6, 2004 to Monday,
July 19, 2004, both days inclusive.
Payment of Dividend
The Board of Directors of the Corporation has recommended payment of dividend of 135% (Rs. 13.50 per share), for the
financial year ended March 31, 2004, for approval of the shareholders at the annual general meeting. [Previous year 110%
(Rs. 11 per share)].
Dividend entitlement is as follows —-
(i) For shares held in physical form: shareholders whose names appear on the register of members of the Corporation as on
    Monday, July 5, 2004.
(ii) For shares held in electronic form: beneficial owners whose names appear in the statements of beneficial position
     furnished by NSDL and CDSL as at the close of business hours on Monday, July 5, 2004.
As is the practice, the payment of dividend declared at the annual general meeting will commence from the day after the
annual general meeting.
Financial Calendar – 2004-05
The tentative schedule for holding meetings of the Audit Committee / Board of Directors and the 28th annual general meeting
is as under:

 Nature of meeting                       Purpose                                                         Probable date
 Audit Committee / Board Meeting         To review and approve the financial results for the             July 19, 2004
                                         quarter ending June 30, 2004
 Audit Committee / Board Meeting         To review and approve the financial results for the             By October 15, 2004
                                         quarter / half-year ending September 30, 2004
 Audit Committee / Board Meeting         To review and approve the financial results for the             By January 14, 2005
                                         quarter ending December 31, 2004
 Audit Committee / Board Meeting         To review and approve the financial results for the             By May 13, 2005
                                         year ending March 31, 2005
 28th Annual General Meeting             Adoption of annual accounts, declaration of dividend,           By July 30, 2005
                                         appointment of auditors etc.

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Listing on Stock Exchanges
HDFC’s equity shares are listed on the following stock exchanges and are tradable on all recognised stock exchanges in India:
The Stock Exchange, Mumbai (BSE)                                     National Stock Exchange of India Ltd. (NSE)
Rotunda Building,                                                    Exchange Plaza,
P. J. Towers,                                                        Bandra-Kurla Complex,
Dalal Street, Fort,                                                  Bandra (East),
Mumbai 400 001.                                                      Mumbai 400 051.
Telephone : 022-2272 1233/34                                         Telephone : 022-2659 8100
Facsimile : 022-2272 1072/3121                                       Facsimile : 022-2659 8120
Email        : listing@bseindia.com                                  Email       : cmlist@nse.co.in
Website      : www.bseindia.com                                      Website     : www.nseindia.com
  Stock Exchange Codes
  BSE Code: 500010                                                                      Reuters Code: BSE – HDFC.BO, NSE – HDFC.NS
  NSE Code: HDFC EQ                                                                     Bloomberg Code: BSE – HDFC, NSE – NHDFC
Listing Fees
The listing fees for the financial year 2004-05 have been paid to both the stock exchanges within the prescribed time limit.
Registered Office                                                      Share Department
Ramon House,                                                           Tel Rasayan Bhavan,
H. T. Parekh Marg,                                                     Gr. Floor, Tilak Road Extn.,
169, Backbay Reclamation,                                              Opp. BEST Workshop Gate No. 4, Dadar T.T.,
Churchgate, Mumbai 400 020.                                            Mumbai - 400 014.
Telephone : 022-2283 6255, 2282 0282                                   Telephone : 022-2414 6267/68
Facsimile : 022-2204 6758, 2204 6834                                   Facsimile : 022-2414 7301
Email         : info@hdfc.com                                          Email         : securities@hdfc.com
Share Department
“It is our endeavor to engage the best talent, adopt the best practices and make use of the best available technology for the
benefit of our valued stakeholders.”
HDFC’s in-house share department is registered with Securities and Exchange Board of India (SEBI) as a Share Transfer
Agent – Category II and has VSAT connectivity with both the Depositories viz. National Securities Depository Ltd. (NSDL) and
Central Depository Services (India) Ltd. (CDSL). The department is headed by Mr. Susir Kumar M, Company Secretary &
General Manager – Recoveries and supported by a team of well-experienced personnel including three qualified company
secretaries. The share department functions as an Investor Service Centre, catering to the needs of approximately ninety-three
thousand shareholders with a market capitalisation of Rs. 16,054 crores and debenture portfolio of Rs. 4,772 crores (as on
March 31, 2004).
The share department offers services pertaining to share transfers, transmissions, dematerialisation of shares, issue of duplicate/
re-validated dividend warrants, issue of duplicate/replaced share certificates, change of address and other related matters
apart from providing various value added services like remittance of dividend through Electronic Clearing Service (ECS) and
Direct Credit Service (DCS), periodic reminders for encashment of unclaimed dividends and sub-division of old share
certificates.
Contact persons
Shareholders requiring specific clarifications or having any grievance, are requested to contact the following personnel:
Mr. Girish V. Koliyote                                            Mr. Dayanand V. Shetty               Mr. Ajay Agarwal
Telephone: 022-5631 6209                                          Telephone: 022-5631 6286             Telephone: 022-2410 1765
Email: girishk@hdfc.com                                           Email: dayanands@hdfc.com            Email: ajaya@hdfc.com

                                                                                                                                     109
Service Standards
HDFC is committed to provide its investors with effective and prompt service. Listed below are the investor service standards
voluntarily adopted by the Corporation. A committee comprising senior executives of the Corporation has been entrusted with
the responsibility of ensuring that services are rendered within the adopted service standards.

 Nature of Service**                                  For requests received through post*           Over the counter
 Transfer of shares                                                 5 days                             15 mins
 Transmission of shares                                             5 days                             15 mins
 Issue of duplicate share certificates                              21 days                               —
 Dematerialisation of share certificates                            10 days                               —
 Issue of duplicate dividend warrants                               3 days                             20 mins
 Issue of revalidated dividend warrants                             3 days                             20 mins
 Sub-division of share certificates                                 3 days                             15 mins
 Change of address                                                  3 days                             20 mins
 Registration of nomination                                         3 days                             10 mins

* days refers to working days
** subject to submission of valid documents

Investors’ Grievances
During the year under review, the Corporation received 6,128 correspondence from shareholders regarding change of
address, bank account particulars, non-receipt of dividend, revalidation of dividend warrants, non-receipt of annual reports /
bonus shares etc. The details of correspondence in the nature of complaints received and redressed during the last three
financial years are as under:

 Received from / type of correspondence                                                                            No. of
 in the nature of complaint                                          Number of Complaints received               complaints
                                                                                                               pending as on
                                                                2001-02          2002-03         2003-04       March 31, 2004

 Stock exchanges and SEBI                                          20              22               10                Nil
 NHB, RBI, DCA and others                                          Nil             Nil               6                Nil

 Directly received from shareholders / investors relating to:

 1. Non-receipt of share certificates                              82               2               Nil               Nil
 2. Non-receipt of sub-divided shares                              118              6               Nil               Nil

 3. Delay in dematerialisation of shares                           22              Nil               2                Nil

 4. Non-receipt of dividend warrants                               352             12                1                Nil
 5. Non-receipt of annual reports                                  11               4               Nil               Nil

 6. Non-receipt of bonus shares                                    NA               3               Nil               Nil
The Corporation has redressed all the investors’ correspondence / complaints within the adopted service standards and no
correspondence in the nature of complaint was pending as on March 31, 2004. The correspondence received in the nature
of complaint accounted for 0.02% of the total number of shareholders.

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Legal Proceedings
Presently, the Corporation is defending three cases and is not in agreement with the contention of the shareholders. There are
no litigations against the Corporation whose outcome will have a material adverse effect on the operations of the Corporation.
There is also no outstanding litigation launched against the Corporation or any of its directors as at March 31, 2004, for
any of the alleged offences under the enactments specified in Paragraph I of Part I of Schedule XIII to the Companies
Act, 1956.

Statutory Compliance
During the year under review, the Corporation has complied with all applicable provisions, filed all relevant returns / forms and
furnished all the relevant particulars as required under the Companies Act, 1956 and allied acts and rules, the Regulations and
Guidelines issued by SEBI and the listing agreements. The Corporation voluntarily obtained a certificate of compliance from
Messrs N. L. Bhatia and Associates, Company Secretaries, Mumbai.

Control of Corporation
The Corporation is neither owned nor controlled, directly or indirectly, by any person, entity or government and also does not
owe allegiance to any promoter or promoter group. The Corporation does not know of any arrangement, the operation of
which might result in change in control of the Corporation.

Voting Rights
All the shares issued by the Corporation carry equal voting rights. Generally, matters at the general meetings are decided by a
show of hands in the first instance. Voting by show of hands operates on the principle of “One Member-One Vote”. If majority
of shareholders raise their hands in favour of a particular resolution, it is taken as passed, unless a poll is demanded.
Since the fundamental voting principle in a company is “One Share-One Vote”, if demanded, voting takes place by a poll.
On a poll being taken, the decision arrived by poll is final, overruling any decision taken on a show of hands. No poll has
been demanded in any general meeting of the Corporation till date. No business has been transacted at any general meeting,
requiring postal ballot.




                           Book Value Per Share                                                        Earnings Per Share
                                     (Rupees)                                                                    (Rupees)


             250                                            244
                                                                                            40

                                                                                                                                        35
             200                                                                            35
                                            181
                           169                                                              30                        28
             150                                      138
                                                                                            25        24

                     111
                                      125
                                                                     Figures adjusted for
             100                                                     bonus shares in the    20

                                                                     ratio of 1:1           15

              50                                                                            10

                                                                                             5
               0
                       2002            2003             2004
                                                                                             0
                                                                                                     2002            2003               2004
                       Book Value Per Share
                       Book Value Per Share including appreciation
                       in the value of investments                                               Face value : Rs. 10 per equity share
                       Face value : Rs. 10 per equity share



                                                                                                                                               111
Website
Online/real time information regarding the Corporation can be accessed at HDFC’s website, www.hdfc.com. An ‘Investors’
Desk’ on the website provides information pertinent to shareholders and also includes information required to be provided
under the listing agreements. Currently, the ‘Investors’ Desk’ contains the following information:
•   Quarterly / Half-yearly / Annual Financial Results;
•   Shareholding pattern for the last three months in addition to quarterly patterns;
•   Frequently Asked Questions (FAQs);
•   Important Forms.
All disclosures made and notices sent to stock exchanges under the listing agreements are posted on the website. Press
releases and presentations made by the management to analysts, fund managers and investors, from time to time are also
posted on the said website.
Links to BSE and NSE sites have been provided on the website to enable shareholders to view the current market price of
HDFC shares at these stock exchanges.

Distribution of shareholding as of May 7, 2004
Shares held by different categories of shareholders and according to the size of holdings as also city-wise distribution of
shareholding, as of May 7, 2004, are given below:


According to Category :
 Category                   No. of          Shares            Shares             Total               Shareholding Pattern
                            Share-         held in            held in          no. of       % to
                           holders   material form        demateria-      shares held     capital
                                                          lised form
 Resident
 Individuals               90,409     1,08,94,800     2,38,76,250        3,47,71,050      14.10
 Foreign Institutional
 Investors (FIIs)             266               0    15,38,70,899       15,38,70,899      62.39
 Foreign Direct
 Investment                    11               0     3,58,99,065        3,58,99,065      14.56
 Insurance
 Companies                      7             100     1,23,27,843        1,23,27,943       5.00
 Domestic
 Companies                  1,109        5,48,561         46,61,737       52,10,298        2.11     Category                                  (%)
 Mutual Funds                  56           1,400         36,92,160       36,93,560        1.50     Resident Individuals                     14.10

 Banks                         61           5,440          4,93,592        4,99,032        0.20     Foreign Institutional Investors (Flls)   62.39
                                                                                                    Foreign Direct Investment                14.56
 Non-Resident                                                                                       Insurance Companies                       5.00
 Indians (NRIs) &                                                                                   Domestic Companies                        2.11
 Overseas Corporate                                                                                 Mutual Funds                              1.50
 Bodies (OCBs)                370         16,330           2,77,822         2,94,152       0.12     Banks                                     0.20

 Clearing Members                                                                                   Non-Resident Indians (NRIs) &
                                                                                                    Overseas Corporate Bodies (OCBs)          0.12
 (in the depository)         123               0       51,122       51,122                 0.02     Clearing Members (in the depository)      0.02
 TOTAL                    92,412     1,14,66,631 23,51,50,490 24,66,17,121               100.00




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According to Size :
                                                    Shares held in                      Shares held in
                                                    material form                    dematerialised form                                         Total
  No. of                                           No. of             No. of            No. of           No. of                No. of                 No.                % to
  shares held                                shareholders             shares      shareholders            shares         shareholders            of shares             capital
  Upto 100                                          8,303          5,54,971            18,188         10,45,202               26,491            16,00,173                0.65
  101 – 500                                        23,240         68,14,365            30,522         87,59,223               53,762          1,55,73,588                6.31
  501-1,000                                         3,011         20,97,770              5,117        36,80,699                 8,128           57,78,469                2.34
  1,001-2,500                                         621          9,26,890              1,903        29,00,620                 2,524           38,27,510                1.55
  2,501-5,000                                          77          2,73,305                556        19,39,514                   633           22,12,819                0.90
  5,001-10,000                                         34          2,16,480                302        21,49,792                   336           23,66,272                0.96
  10,001-50,000                                        16          3,54,850                255        53,06,970                   271           56,61,820                2.30
  50,001-1,00,000                                       0                  0                77        54,52,129                    77           54,52,129                2.21
  1,00,001 and above                                    2          2,28,000                188     20,39,16,341                   190        20,41,44,341               82.78
  TOTAL                                           35,304        1,14,66,631            57,108     23,51,50,490                92,412         24,66,17,121              100.00
According to Location :
  City*                                                           No. of shareholders        % to total shareholders           No. of shares held                 % to capital
  Mumbai                                                                       30,771                         33.30                 22,06,32,847                        89.47
  Pune                                                                          5,677                           6.14                   21,97,419                         0.89
  Ahmedabad                                                                     4,936                           5.34                   16,74,313                         0.68
  New Delhi                                                                     4,712                           5.10                   19,82,058                         0.80
  Chennai                                                                       4,017                           4.35                   29,09,732                         1.18
  Bangalore                                                                     3,911                           4.23                   23,53,518                         0.95
  Kolkata                                                                       3,634                           3.93                   34,93,476                         1.42
  Vadodara                                                                      3,148                           3.41                   10,06,599                         0.41
  Hyderabad                                                                     1,636                           1.77                     5,98,249                        0.24
  Rajkot                                                                          879                           0.95                     2,26,104                        0.09
  Other cities                                                                 29,091                         31.48                    95,42,806                         3.87
  TOTAL                                                                       92,412                         100.00                24,66,17,121                       100.00
* In case of FIIs, NRIs, OCBs & Foreign Investors who have invested directly under the FDI route, their address, in India has been considered.

Major Shareholders (as on May 7, 2004)
Details of shareholders holding more than 1% of the paid-up capital of the Corporation as on May 7, 2004 are given below:
 Sr. No. Name of the Shareholder                                                                                                                             No. of     % to
          shares                                                                                                                                             capital
    1     SLAC-Mauritius Holding Ltd.                                                                                                                    3,55,06,541   14.40
    2     Emerging Markets Growth Fund Inc.                                                                                                              1,74,82,906     7.09
    3     Capital Research and Management Company A/c Europacific Growth Fund                                                                            1,16,07,500     4.71
    4     Fidelity Management and Research Company A/c Fidelity Investment Trust - fidelity Diversified International Fund                                48,35,850      1.96
    5     Merrill Lynch Capital Markets Espana S.A. SVB                                                                                                   44,94,719      1.82
    6     Capital International Emerging Markets Fund                                                                                                     41,20,540      1.67
    7     Life Insurance Corporation of India                                                                                                             40,56,135      1.64
    8     UBS Securities Asia Ltd. A/c Swiss Finance Corporation (Mauritius) Ltd.                                                                         33,83,711      1.37
    9     Templeton Investment Counsel, LLC A/c Templeton Foreign Equity Series (A Series of Templeton Institutional Fund, Inc.)                          33,68,410      1.37
  10      Templeton Global Advisors Ltd. A/c Templeton World Fund (A Series of Templeton Funds, Inc.)                                                     31,88,190      1.29
  11      Janus Overseas Fund                                                                                                                             31,86,791      1.29
  12      Unit Trust of India (inclusive of all funds and schemes)                                                                                        29,85,230      1.21
  13      Janus Worldwide Fund                                                                                                                            29,42,800      1.19
  14      General Insurance Corporation of India                                                                                                          28,82,554      1.17
  15      Putnam International Equity Fund                                                                                                                25,68,006      1.04
  16      Fidelity Management and Research Company A/c Fidelity Devonshire Trust - Fidelity Equity - Income Fund                                          25,57,300      1.04


                                                                                                                                                                        113
Stock Market Data
The monthly high and low prices and the volume of shares traded on the BSE and NSE during the financial year 2003-04, are
as under:
                                      Share Price on the BSE                              Share Price on the NSE
    Month                       Highest          Lowest      Volume of              Highest           Lowest     Volume of
                                   (Rs.)            (Rs.) Shares traded                (Rs.)            (Rs.) Shares traded
                                                                  at BSE                                             at NSE
    Apr-03                      352.90            295.00      20,80,001             374.00            293.20      41,15,903
    May-03                      378.00            322.00      95,54,898             380.00            322.50      46,59,303
    Jun-03                      415.05            363.00      33,09,595             470.00            360.00      53,29,601
    Jul-03                      431.00            382.05      76,90,370             435.00            384.00      47,18,603
    Aug-03                      518.00            406.10      26,57,609             521.00            409.05      62,03,538
    Sep-03                      509.95            449.00      68,46,316             514.50            465.00      46,29,771
    Oct-03                      564.00            491.00      81,11,069             565.00            490.00      63,38,655
    Nov-03                      556.20            506.50      28,76,285             558.00            505.05      37,31,811
    Dec-03                      699.95            540.05      32,90,963             700.00            476.95      48,70,570
    Jan-04                      682.00            605.30      36,57,509             682.00            565.00      70,19,957
    Feb-04                      683.85            605.00      15,15,732             686.80            582.70      52,27,153
    Mar-04                      650.95            582.00      16,96,961             650.45            575.00      49,84,541

Capital appreciation
The table given below shows the opening price of HDFC equity share as quoted on the BSE, on the first day of trading for
every financial year since 1995 (adjusted to the face value of Rs. 10 per share and issue of bonus shares in the ratio of 1:1)
and BSE – Sensex and NSE – Nifty on the said dates.

    Date                HDFC Share Price            % of      BSE – Sensex             % of        NSE - Nifty             % of
                                   (Rs.)     appreciation                       appreciation                        appreciation
    April   1,   1995           102.50           529.27          3,287.84             70.30            990.24             78.89
    April   1,   1996           161.00           300.62          3,376.64             65.82            988.33             79.24
    April   1,   1997           139.00           364.03          3,339.47             67.66            931.95             90.08
    April   1,   1998           161.50           299.38          3,901.44             43.51          1,117.15             58.57
    April   1,   1999           114.70           462.34          3,750.22             49.30          1,082.55             63.64
    April   1,   2000           205.95           213.18          5,070.50             10.43          1,528.70             15.88
    April   1,   2001           266.50           142.03          3,491.41             60.37          1,148.10             54.29
    April   1,   2002           342.50            88.32          3,482.94             60.76          1,129.85             56.79
    April   1,   2003           330.50            95.16          3,037.54             84.33            977.40             81.24
    April   1,   2004           645.00                           5,599.12                            1,771.45

From the above table it can be deduced that:
•      Price of HDFC share has appreciated by 529%, compared to appreciation of 70% in BSE – Sensex and 79% in
       NSE – Nifty;
•      An investment of Rs. 2,050 made on April 2, 1995 in the equity share of HDFC has appreciated to Rs. 12,900 on April 2,
       2004. Further the investor has earned Rs. 1,059 by way of dividend on the said investment.



 114
Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




                                       Market Capitalisation                                                        Return on Equity
                                               (Rs. in crores)                                                                (%)



                        18000
                                                                          16,054
                        16000
                                                                                                       27
                        14000                                                                                                                   26.5
                                                                                                       26
                        12000
                                                                                                       25
                        10000                                     9,166
                                                     8,337                                                                             24.0
                                                                                                       24
                          8000
                                           6,543
                                                                                                                             22.9
                          6000                                                                         23
                                  4,543
                          4000                                                                         22
                                                                                                                    21.2
                          2000                                                                         21

                              0                                                                             19.8
                                  2000      2001      2002        2003    2004                         20

                                    Paid-up capital Rs. 246.62 crores                                  19
                                                                                                             2000     2001      2002     2003      2004
                                    (24,66,17,121 shares of Rs. 10 each)




Equity History

  Particulars                                                                      No. of shares issued (of Rs. 10/- each)                             Year / date of issue

  Initial Issue                                                                                               1,00,00,000                                            1978
  Public cum Rights Issue                                                                                     1,00,00,000                                            1987

  Public cum Rights Issue                                                                                     2,50,00,000                                            1990

  Rights Issue of Fully Convertible Debenture                                                                 4,72,50,000                                            1992
  Private Placement to Financial Institutions                                                                      90,00,000                                         1993

  Private Placement to Foreign Investors                                                                      1,78,64,000                                            1995

  Allotment under ESOS                                                                                             28,46,713                      Between March 2001
                                                                                                                                                  and November 2002
  Bonus Issue (1:1)                                                                                          12,19,60,713                                    30-12-2002

  Allotment under ESOS                                                                                             26,95,695                     Between January 2003
                                                                                                                                                      and March 2004

  TOTAL                                                                                                     24,66,17,121

Dematerialisation of Shares and liquidity
The equity share of the Corporation is in the list of scrips specified by SEBI to be compulsorily traded in the dematerialised
form. The ISIN allotted to HDFC equity share is INE 001 A01028. As on date 95.35% of the total paid-up equity share capital is
held in dematerialised form. However, the balance 4.65% of the equity share capital is held by 35,304 shareholders
representing 38.20% of total number of shareholders.

                                                                                                                                                                      115
OTHER IMPORTANT INFORMATION

Unclaimed Dividend

Dividends not encashed or claimed, within seven years from the date of its transfer to the unpaid dividend account, will, in
terms of the provisions of Section 205A of the Companies Act, 1956, be transferred to the Investor Education and Protection
Fund (IEPF) established by the Government. In terms of the provisions of Section 205C of the Companies Act, 1956, no claim
shall lie against the Corporation or the said Fund after the said transfer.

The Corporation at regular intervals, has individually intimated the concerned shareholders regarding the non-encashment of
their dividend warrants. Despite these reminders, there are few shareholders who have not yet claimed their dividends. The
due dates for transfer of unclaimed dividend amount to IEPF are as under:

 Particulars                          Unclaimed Dividend      Unclaimed Dividend       Date of declaration      Due for transfer on
                                         as on March 31,             as % to total
                                               2004 (Rs.)                dividend
 Dividend 1996-97                              17,11,395                     0.32          June 24, 1997         August 12, 2004
 Dividend 1997-98                              23,11,640                     0.26           July 10, 1998        August 28, 2005
 Dividend 1998-99                              33,44,807                     0.33            July 9, 1999        August 27, 2006
 Special Millennium (Interim)
 Dividend 1999-2000                            56,58,080                     0.47      February 28, 2000           April 17, 2007
 Interim Dividend 1999-2000                    40,58,459                     0.38            May 8, 2000           June 25, 2007
 Dividend 2000-01                              48,46,392                     0.32           July 17, 2001        August 22, 2008
 Dividend 2001-02                              87,12,305                     0.33           July 25, 2002        August 30, 2009
 Dividend 2002-03                              94,74,828                     0.35           July 18, 2003        August 23, 2010

During the year, the Corporation has transferred Rs. 8,22,709 to IEPF being unclaimed dividend in respect of the financial year
1995-96.
Issue of Duplicate dividend warrants
A duplicate dividend warrant can be issued only after the expiry of the validity period of the original warrant. In case the
original instrument is not tendered to the Corporation, such duplicate warrant will be issued only after the receipt of an
undertaking from the shareholder.
Particulars of Bank Account
Shareholders holding shares in physical form are requested to furnish particulars of their bank account directly to the share
department for incorporation of the same on the dividend warrant in order to prevent fraudulent encashment of warrants.
Shareholders holding shares in electronic form are requested to furnish their bank account particulars to their depository
participants only.
Electronic Clearing Service (ECS)
Under this system of payment of dividend, the shareholders get the credit of dividend directly in their designated bank
account. This ensures direct and immediate credit with no chance of loss of warrant in transit.
Presently, HDFC is able to offer ECS facility to shareholders having bank accounts at any of the bank branches located at
Ahmedabad, Bangalore, Chandigarh, Chennai, Delhi, Hyderabad, Jaipur, Kanpur, Kolhapur, Kolkata, Mumbai, Nagpur, Patna, Pune,
Thiruvananthapuram and Vadodara.
Shareholders holding shares in physical form and desirous of availing ECS facility are requested to furnish particulars of their
bank account (including 9 digit MICR code) to the Corporation and such particulars in respect of shares held in electronic
form should be furnished to their respective depository participants.

 116
Tw e n t y - s e v e n t h A n n u a l Re p o r t 2 0 0 3 - 0 4




ECS in case of shares held in Electronic Form

The statements of beneficial ownership furnished by NSDL and CDSL for the purpose of payment of dividend inter alia includes
the names, addresses, bank account particulars, 9 digit MICR code etc. of the beneficial owners. The Corporation will arrange
to remit the dividend through ECS, to those beneficial owners whose 9 digit MICR code is available and if the said MICR Code
pertains to a bank branch located at any of the cities mentioned above. In view of the above, shareholders holding shares in
electronic form and who wish to avail of the facility of ECS, are requested to inform the 9 digit MICR Code of the bank
account for dividend purpose to their depository participants.

After remittance of dividend amount through ECS, the same will be intimated to the respective shareholders.

Direct Credit System (DCS)

Under DCS, the dividend amount in respect of shareholders maintaining bank account with HDFC Bank Ltd. will be credited
directly to their respective bank accounts. After such credit, the Corporation will intimate the shareholders accordingly.

Sub-Division

Shareholders who have not yet surrendered their old share certificates [Face value - Rs. 100 each] in exchange of the new
shares certificates [Face value - Rs. 10 each] are requested to do so at the earliest and contact the share department.

Nomination Facility

Where shares are held in a single name, in case of an unfortunate death of the shareholder, the process of transmission is
cumbersome as it requires submission of succession certificate / letter of probate / will etc. Such shareholders holding shares
in physical form are requested to submit the prescribed Form 2B (in duplicate) to the share department to avail of the
nomination facility. Shareholders may contact the share department for the said form or download the same from the
Corporation’s website.

Folio Consolidation

Shareholders holding shares under more than one folio are requested to write to the share department to consolidate their
folios. In case of joint holdings even if the order of names are different, shareholders can have them transposed without
payment of stamp duty by sending a request letter duly signed by all the holders. Share certificates in respect of shares held
under a single folio, can also be consolidated into one certificate, which will facilitate safekeeping and save cost of
dematerialisation.


                      Share price movement on the BSE during 2003-04                                                                                                                  Share price movement on the NSE during 2003-04


                   1000                                                                                                               1000                                     1000                                                                                                                1000
                                                                                                                                                                                                                                                                                                                           Volume
                    900                                                                                                               900                                       900                                                                                                                900
                    800                                                                                                               800                                       800                                                                                                                800                     Highest
                                                                                                                                                              Price (Rupees)




                                                                                                                                                                                                                                                                                                          Volume ('0000)
  Price (Rupees)




                                                                                                                                             Volume ('0000)




                    700                                                                                                               700                                       700                                                                                                                700
                                                                                                                                                                                                                                                                                                                           Lowest
                    600                                                                                                               600                                       600                                                                                                                600
                    500                                                                                                               500                                       500                                                                                                                500
                    400                                                                                                               400                                       400                                                                                                                400
                    300                                                                                                               300                                       300                                                                                                                300
                    200                                                                                                               200                                       200                                                                                                                200
                    100                                                                                                               100                                       100                                                                                                                100
                      0                                                                                                               0                                           0                                                                                                                0
                          Apr-03


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                                                                                                                                                                                                                                                                                          Mar-04




                                                                                                                                                                                                                                                                                                                              117
                                                               HDFC share price versus the BSE-Sensex
                        250                                      BSE Sensex rebased to HDFC Price                                                                                                                          BSE-Sensex

                        200                                                                                                                                                                                                HDFC - Share Price
       Price (Rupees)




                        150



                        100



                         50



                          0
                               Apr-03


                                          May-03


                                                      Jun-03


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                                                                                                                                                         Dec-03


                                                                                                                                                                           Jan-04


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                                                                                                                                                                                                               Mar-04
                                                               HDFC share price versus the NSE-Nifty
                        250
                                                                 NSE-Nifty rebased to HDFC Price
                                                                                                                                                                                                                        NSE Nifty
                        200
                                                                                                                                                                                                                        HDFC - Share Price
       Price (Rupees)




                        150



                        100



                         50



                          0
                              Apr-03


                                        May-03


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                                                                                                                                                                                                      Mar-04




Road Ahead

“HDFC is committed to discharge its obligations as a responsible corporate citizen by adherence to the laws of the land,
respect for cultures, compassion towards the aspiration of every Indian citizen by benchmarking and adopting best global
practices in its area of operations.”
                          Mr. Deepak Parekh, Chairman – HDFC, while receiving the ICSI National Award for Excellence in Corporate Governance - 2003

The Corporation has always endeavoured to provide investors with prompt services and also it strives to improve the
standards of its services to investors. The Corporation wishes to upgrade/improve its services based on your expectations,
feedback and guidance, and as part of the said process, we solicit your feedback/suggestions and request you to kindly fill
and return the attached 'Shareholders’ Satisfaction Feedback' form.



 118

				
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