HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED by wuyunyi

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									                                                                                                                                                                                                                                                                          Preliminary Placement Document
                                                                                                                                                                                                                                                                                        Not for Circulation
                                                                                                                                                                                                                                                                                         Serial Number [●]
                                                                                                                                                                                                                                                                                    Dated August 17, 2009




                                                                                                                                                  HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED
                                                                                                                                                                                  (Incorporated in the Republic of India with limited liability under the Companies Act, 1956)

                                                                                                                                             Housing Development Finance Corporation Limited (the “Company” or the “Issuer” or “HDFC”) is issuing up to [●] zero per cent. secured redeemable non-
                                                                                                                                             convertible debentures of the face value of Rs. 1,000,000 each due August 2011 (the “0% August 2011 NCDs”) for cash aggregating to Rs. [●] million and [●]
                                                                                                                                             zero per cent. secured redeemable non-convertible debentures of the face value of Rs. 1,000,000 each due August 2012 (the “0% August 2012 NCDs” and
The information in the Preliminary Placement Document is not complete and may be changed. The Placement is mean only for QIBs on a private




                                                                                                                                             together with the 0% August 2011 NCDs, the “NCDs”) for cash aggregating to Rs. [●] along with [●] warrants, each of which entitles the holder to 1 Equity
                                                                                                                                             Share (as defined below) (the “Warrants”, together with the NCDs, the “Securities”) at a Warrant Issue Price of Rs. [●] per Warrant (the “Issue”). The Issue
                                                                                                                                             of the 0% August 2011 NCDs at the 0% August 2011 NCD Issue Price, the 0% August 2012 NCDs at the 0% August 2012 NCD Issue Price and the Warrants
                                                                                                                                             at the Warrants Issue Price will aggregate to Rs. [•] million assuming no conversion of Warrants into Equity Shares and to Rs. [•] million assuming full
                                                                                                                                             conversion of Warrants into Equity Shares during the Warrant Exercise Period at the Warrant Exercise Price.

                                                                                                                                               ISSUE IN RELIANCE ON CHAPTER XIII-A OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (DISCLOSURE AND INVESTOR
                                                                                                                                                                                        PROTECTION) GUIDELINES, 2000

                                                                                                                                             THIS ISSUE AND THE DISTRIBUTION OF THIS PRELIMINARY PLACEMENT DOCUMENT IS BEING DONE IN RELIANCE ON CHAPTER
                                                                                                                     t




                                                                                                                                             XIII-A OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, 2000, AS
                                                                                                                                             AMENDED (THE “SEBI GUIDELINES”). THIS PRELIMINARY PLACEMENT DOCUMENT IS PERSONAL TO EACH PROSPECTIVE
                               placement basis and is not an offer to the public or to any other class of investors.




                                                                                                                                             INVESTOR AND DOES NOT CONSTITUTE AN OFFER OR INVITATION OR SOLICITATION OF AN OFFER TO THE PUBLIC OR TO ANY
                                                                                                                                             OTHER PERSON OR CLASS OF INVESTORS.

                                                                                                                                             Invitations, offers and sales of the Securities shall only be made pursuant to this Preliminary Placement Document, the Application Form and the Confirmation
                                                                                                                                             of Allocation Note. See “Issue Procedure”. The distribution of this Preliminary Placement Document or the disclosure of its contents without prior consent of
                                                                                                                                             the Company, to any person, other than Qualified Institutional Buyers (“QIBs”) as defined in the SEBI Guidelines and persons retained by QIBs to advise them
                                                                                                                                             with respect to their purchase of the Securities, is unauthorized and prohibited. Each prospective investor, by accepting delivery of this Preliminary Placement
                                                                                                                                             Document agrees to observe the foregoing restrictions, and to make no copies of this Preliminary Placement Document or any documents referred to in this
                                                                                                                                             Preliminary Placement Document.

                                                                                                                                             This Preliminary Placement Document has not been reviewed by the Securities and Exchange Board of India (the “SEBI”), the Reserve Bank of India (the
                                                                                                                                             “RBI”), the National Stock Exchange of India Limited (the “NSE”), the Bombay Stock Exchange Limited (the “BSE”, and together with NSE, the “Stock
                                                                                                                                             Exchanges”) or any other regulatory or listing authority and is intended only for use by QIBs. This Preliminary Placement Document has not been and will not
                                                                                                                                             be registered as a prospectus with the Registrar of Companies (“RoC”) in India, and will not be circulated or distributed to the public in India or any other
                                                                                                                                             jurisdiction and will not constitute a public offer in India or any other jurisdiction.

                                                                                                                                             Investments in the Securities involve a degree of risk and prospective investors should not invest any funds in this Issue unless they are prepared to
                                                                                                                                             take the risk of losing all or part of their investment. Prospective investors are advised to read the risk factors carefully before taking an investment
                                                                                                                                             decision in this Issue. Each prospective investor is advised to consult its advisers about the particular consequences to it of an investment in the
                                                                                                                                             Securities being issued pursuant to this Preliminary Placement Document.

                                                                                                                                             The information on the Company’s website or any website directly or indirectly linked to the Company’s website does not form part of this Preliminary
                                                                                                                                             Placement Document and prospective investors should not rely on such information contained in, or available through, such websites.

                                                                                                                                             All of the Company’s outstanding Equity Shares are listed on the NSE and the BSE. All of the Company’s outstanding secured redeemable non-convertible
                                                                                                                                             debentures are listed on the Wholesale Debt Market (the “WDM”) segment of the NSE. Applications have been made to the NSE and the BSE for in-principle
                                                                                                                                             approval for listing and admission of the 0% August 2011 NCDs, the 0% August 2012 NCDs and the Warrants for trading on the NSE and the BSE. The Stock
                                                                                                                                             Exchanges assume no responsibility for the correctness of any statements made, opinions expressed or reports contained herein. Admission of the Equity Shares
                                                                                                                                             to trading on the Stock Exchanges should not be taken as an indication of the merits of the Company or the Equity Shares. YOU MAY NOT BE AND ARE
                                                                                                                                             NOT AUTHORIZED TO (1) DELIVER THIS PRELIMINARY PLACEMENT DOCUMENT TO ANY OTHER PERSON; OR (2) REPRODUCE THIS
                                                                                                                                             PRELIMINARY PLACEMENT DOCUMENT IN ANY MANNER WHATSOEVER. ANY DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT
                                                                                                                                             IN WHOLE OR IN PART IS UNAUTHORIZED. FAILURE TO COMPLY WITH THIS INSTRUCTION MAY RESULT IN A VIOLATION OF THE SEBI
                                                                                                                                             GUIDELINES OR OTHER APPLICABLE LAWS OF INDIA AND OTHER JURISDICTIONS.

                                                                                                                                             The NCDs being offered through this Preliminary Placement Document have been rated by ICRA as “LAAA” indicating highest-credit-quality rating and by
                                                                                                                                             CRISIL as “AAA” indicating highest degree of safety with regard to timely payment of interest and principal on the instrument. The ratings are not a
                                                                                                                                             recommendation to buy, sell or hold securities and investors should take their own decision. The ratings may be subject to revision or withdrawal at any time by
                                                                                                                                             the assigning rating agencies on the basis of new information and each rating should be evaluated independently of any other rating.

                                                                                                                                             A copy of this Preliminary Placement Document has been delivered to the Stock Exchanges. A copy of the Placement Document will be filed with the Stock
                                                                                                                                             Exchanges. A copy of the Placement Document will also be delivered to SEBI for record purposes.

                                                                                                                                             THIS PRELIMINARY PLACEMENT DOCUMENT HAS BEEN PREPARED BY THE COMPANY SOLELY FOR PROVIDING INFORMATION IN
                                                                                                                                             CONNECTION WITH THE PROPOSED ISSUE OF THE SECURITIES DESCRIBED IN THIS PRELIMINARY PLACEMENT DOCUMENT.

                                                                                                                                             The Securities will be offered only to persons resident in India and will not in any circumstance be offered to investors in any jurisdiction outside India.

                                                                                                                                             None of the NCDs, the Warrants or the Equity Shares to be issued upon exercise of the Warrants have been or will be registered under the U.S. Securities Act,
                                                                                                                                             1933, as amended (the “U.S. Securities Act”) or the securities laws of any other jurisdiction. The NCDs and the Warrants are being offered and sold outside the
                                                                                                                                             United States in reliance on Regulation S under the U.S. Securities Act.

                                                                                                                                             This Preliminary Placement Document is dated August 17, 2009.
                                                                                                                                                                                                         Book Running Lead Managers


                                                                                                                                             Advisors to the Issuer: Citigroup Global Markets India Private Limited and Goldman Sachs (India) Securities Private Limited
                                                           TABLE OF CONTENTS


PRESENTATION OF FINANCIAL AND OTHER INFORMATION .............................................................. i
FORWARD-LOOKING STATEMENTS......................................................................................................... iii
CERTAIN DEFINITIONS AND ABBREVIATIONS ..................................................................................... iv
SUMMARY OF BUSINESS .......................................................................................................................... viii
SUMMARY OF THE ISSUE............................................................................................................................. x
SELECTED FINANCIAL INFORMATION OF THE COMPANY .............................................................. xiv
RISK FACTORS .............................................................................................................................................. 18
USE OF PROCEEDS ....................................................................................................................................... 27
CAPITALIZATION ......................................................................................................................................... 28
MARKET PRICE INFORMATION ................................................................................................................ 31
DIVIDEND POLICY ....................................................................................................................................... 34
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ................................................................................................................................................. 36
INDUSTRY OVERVIEW................................................................................................................................ 52
BUSINESS ....................................................................................................................................................... 56
REGULATIONS AND POLICIES .................................................................................................................. 73
DIRECTORS AND MANAGEMENT............................................................................................................. 79
ORGANISATIONAL STRUCTURE, PRINCIPAL SHAREHOLDERS AND DEBENTURE HOLDERS .. 89
TERMS AND CONDITIONS OF THE 0% AUGUST 2011 NON-CONVERTIBLE DEBENTURES ......... 92
TERMS AND CONDITIONS OF THE 0% AUGUST 2012 NON-CONVERTIBLE DEBENTURES ......... 99
TERMS AND CONDITIONS OF THE WARRANTS.................................................................................. 106
ISSUE PROCEDURE .................................................................................................................................... 123
PLACEMENT ................................................................................................................................................ 132
DESCRIPTION OF THE SECURITIES........................................................................................................ 133
SELLING RESTRICTIONS .......................................................................................................................... 141
TAXATION ................................................................................................................................................... 142
LEGAL PROCEEDINGS .............................................................................................................................. 149
GENERAL INFORMATION......................................................................................................................... 150
FINANCIAL STATEMENTS........................................................................................................................ 152
DECLARATION............................................................................................................................................ 281
                                        NOTICE TO INVESTORS

The Company accepts responsibility for the information contained in this Preliminary Placement Document
and to the best of its knowledge and belief, having made all reasonable enquiries, confirms that this
Preliminary Placement Document contains all information with respect to the Company and the Securities,
which is material in the context of this Issue. The statements contained in this Preliminary Placement
Document relating to the Company and the Securities are, in all material respects, true and accurate and not
misleading, the opinions and intentions expressed in this Preliminary Placement Document with regard to
the Company and the Securities are honestly held, have been reached after considering all relevant
circumstances, are based on information presently available to the Company and are based on reasonable
assumptions. There are no other facts in relation to the Company and the Securities, the omission of which
would, in the context of the Issue, make any statement in this Preliminary Placement Document misleading
in any material respect. Further, all reasonable enquiries have been made by the Company to ascertain such
facts and to verify the accuracy of all such information and statements. The Book Running Lead Managers
have not separately verified the information contained in this Preliminary Placement Document (financial,
legal or otherwise). Accordingly, neither the Book Running Lead Managers nor any of their respective
members, employees, counsel, officers, directors, representatives, agents or affiliates makes any express or
implied representation, warranty or undertaking, and no responsibility or liability is accepted, by the Book
Running Lead Managers, as to the accuracy or completeness of the information contained in this
Preliminary Placement Document or any other information supplied in connection with the Securities. Each
person receiving this Preliminary Placement Document acknowledges that such person has neither relied on
the Book Running Lead Managers nor on any person affiliated with the Book Running Lead Managers in
connection with its investigation of the accuracy of such information or its investment decision, and each
such person must rely on its own examination of the Company and the merits and risks involved in
investing in the Securities issued pursuant to the Issue.

No person is authorized to give any information or to make any representation not contained in this
Preliminary Placement Document and any information or representation not so contained must not be relied
upon as having been authorized by or on behalf of the Company or the Book Running Lead Managers. The
delivery of this Preliminary Placement Document at any time does not imply that the information contained
in it is correct as at any time subsequent to its date.

The Securities have not been approved, disapproved or recommended by any regulatory authority in
any jurisdiction. No authority has passed on or endorsed the merits of this Issue or the accuracy or
adequacy of this Preliminary Placement Document.

The distribution of this Preliminary Placement Document and the issue of the Securities in certain
jurisdictions may be restricted by law. As such, this Preliminary Placement Document does not constitute,
and may not be used for or in connection with, an offer or solicitation by anyone in any jurisdiction in
which such offer or solicitation is not authorized or to any person to whom it is unlawful to make such offer
or solicitation. In particular, no action has been taken by the Company and the Book Running Lead
Managers which would permit an Issue of the Securities or distribution of this Preliminary Placement
Document in any jurisdiction, other than India. Accordingly, the Securities may not be offered or sold,
directly or indirectly, and neither this Preliminary Placement Document nor any Issue materials in
connection with the Securities may be distributed or published in or from any country or jurisdiction.

In making an investment decision, investors must rely on their own examination of the Company and the
terms of this Issue, including the merits and risks involved. Investors should not construe the contents of
this Preliminary Placement Document as legal, tax, accounting or investment advice. Investors should
consult their own counsel and advisors as to business, legal, tax, accounting and related matters concerning
this Issue. In addition, neither the Company nor the Book Running Lead Managers is making any
representation to any offeree or purchaser of the Securities regarding the legality of an investment in the
Securities by such offeree or purchaser under applicable legal, investment or similar laws or regulations.
Each purchaser of the Securities in this Issue is deemed to have acknowledged, represented and agreed that
it is eligible to invest in India and in the Company under Chapter XIII-A of the SEBI Guidelines and is not
prohibited by SEBI or any other regulatory authority from buying, selling or dealing in securities.

This Preliminary Placement Document contains summaries of certain terms of certain documents, subject
to applicable confidentiality restrictions, which summaries are qualified in their entirety by the terms and
conditions of such documents.

                                 REPRESENTATIONS BY INVESTORS

By subscribing to any Securities under the Issue, you are deemed to have acknowledged and agreed as
follows:

·        You are a QIB as defined in clause 1.2.1 (xxiv a) of the SEBI Guidelines and undertake to acquire,
         hold, manage or dispose of any Securities that are allocated to you for the purposes of your
         business in accordance with Chapter XIII-A of the SEBI Guidelines. In addition, you are deemed
         to have acknowledged that you are a person resident in India as defined in the FEMA and are
         eligible to invest in the Securities under applicable law;

·        if you are Allotted Securities pursuant to the Issue, you shall not, for a period of one year from the
         date of Allotment, sell the Securities so acquired except on the floor of the Stock Exchanges;

·        you are aware that the Securities have not been and will not be registered under the SEBI
         regulations or under any other law in force in India. The Preliminary Placement Document has not
         been verified or affirmed by the SEBI or the Stock Exchanges and will not be filed with the
         Registrar of Companies in India. The Preliminary Placement Document has been filed with the
         Stock Exchanges for record purposes only and has been displayed on the websites of the Company
         and the Stock Exchanges;

·        you are entitled to subscribe for the Securities under the laws of all relevant jurisdictions which
         apply to you and that you have fully observed such laws and obtained all such governmental and
         other consents in each case which may be required thereunder and complied with all necessary
         formalities;

·        you are entitled to acquire the Securities under the laws of all relevant jurisdictions and that you
         have all necessary capacity and have obtained all necessary consents and authorities to enable you
         to commit to this participation in the Issue and to perform your obligations in relation thereto
         (including, without limitation, in the case of any person on whose behalf you are acting, all
         necessary consents and authorities to agree to the terms set out or referred to in the Preliminary
         Placement Document) and will honor such obligations;

·        neither the Company nor the Book Running Lead Managers are making any recommendations to
         you, advising you regarding the suitability of any transactions it may enter into in connection with
         the Issue and that participation in the Issue is on the basis that you are not and will not be a client
         of the Book Running Lead Managers and that the Book Running Lead Managers has no duties or
         responsibilities to you for providing the protection afforded to their clients or customers or for
         providing advice in relation to the Issue;

·        all statements other than statements of historical fact included in the Preliminary Placement
         Document, including, without limitation, those regarding the Company’s financial position,
         business strategy, plans and objectives of management for future operations (including
         development plans and objectives relating to the Company’s business), are forward-looking
         statements. Such forward-looking statements involve known and unknown risks, uncertainties and
         other important factors that could cause actual results to be materially different from future results,
         performance or achievements expressed or implied by such forward-looking statements. Such
         forward-looking statements are based on numerous assumptions regarding the Company’s present
    and future business strategies and environment in which the Company will operate in the future.
    You should not place undue reliance on forward-looking statements, which speak only as at the
    date of Preliminary Placement Document. The Company assumes no responsibility to update any
    of the forward-looking statements contained in the Preliminary Placement Document;

·   you are aware and understand that the Securities are being offered only to QIBs and are not being
    offered to the general public and the Allotment of the same shall be on a discretionary basis;

·   you have been provided a serially numbered copy of the Preliminary Placement Document and
    Placement Document and have read them in their entirety, including, in particular, “Risk Factors”;

·   that in making your investment decision, (i) you have relied on your own examination of the
    Company and the terms of the Issue, including the merits and risks involved, (ii) you have made
    your own assessment of the Company, the Securities and the terms of the Issue based on such
    information as is publicly available, (iii) you have consulted your own independent advisors or
    otherwise have satisfied yourself concerning without limitation, the effects of local laws, (iv) you
    have relied solely on the information contained in the Preliminary Placement Document and no
    other disclosure or representation by the Company or any other party and (v) you have received all
    information that you believe is necessary or appropriate in order to make an investment decision in
    respect of the Company and the Securities;

·   you have such knowledge and experience in financial and business matters as to be capable of
    evaluating the merits and risks of the investment in the Securities and you and any accounts for
    which you are subscribing the Securities (i) are each able to bear the economic risk of the
    investment in the Securities, (ii) will not look to the Company and/or the Book Running Lead
    Manager for all or part of any such loss or losses that may be suffered, (iii) are able to sustain a
    complete loss on the investment in the Securities, (iv) have no need for liquidity with respect to
    the investment in the Securities, and (v) have no reason to anticipate any change in your or their
    circumstances, financial or otherwise, which may cause or require any sale or distribution by you
    or them of all or any part of the Securities;

·   that where you are acquiring the Securities for one or more managed accounts, you represent and
    warrant that you are authorized in writing, by each such managed account to acquire the Securities
    for each managed account;

·   you are not a promoter of the Company and are not a person related to the promoter of the
    Company, either directly or indirectly and your Bid does not directly or indirectly represent the
    promoters or promoter group or person related to a promoter/ promoter group of the Company;

·   you have no rights under a shareholders agreement or voting agreement with the promoters or
    persons related to the promoters, no veto rights or right to appoint any nominee director on the
    Board of Directors of the Company other than the acquired in the capacity of a lender which shall
    not be deemed to be a person related to the promoter;

·   you have no right to withdraw your Bid after the Bid Closing Date;

·   you are eligible to apply for and hold Securities so Allotted and together with any Securities held
    by you prior to the Issue. You further confirm that your holding upon the issue of the Securities
    shall not exceed the level permissible as per any applicable regulation;

·   the Bid submitted by you would not eventually (including upon exercise of the Warrants that may
    be Allotted to you) result in triggering a tender offer under the SEBI (Substantial Acquisition of
    Shares and Takeovers) Regulations, 1997, as amended (the “Takeover Code”);

·   to the best of your knowledge and belief together with other QIBs in the Issue that belong to the
    same group or are under common control as you, the Allotment under the Issue shall not exceed
    50 per cent of the Issue. For the purposes of this representation:

    a.   the expression ‘belongs to the same group’ shall derive meaning from the concept of
         ‘companies under the same group’ as provided in sub-section (11) of Section 372 of the
         Companies Act.

    b.   ‘control’ shall have the same meaning as is assigned to it by clause I of Regulation 2 of the
         Takeover Code.

·   you shall not undertake any trade in the Securities credited to your Depository Participant account
    until such time that the final listing and trading approval for the Securities is issued by the Stock
    Exchanges;

·   you are aware that applications have been made to the Stock Exchanges for in-principle approval
    for listing and admission of the NCDs and the Warrants for trading on the Stock Exchanges;

·   you are aware and understand that the Book Running Lead Managers will have entered into a
    placement agreement with the Company whereby the Book Running Lead Managers have, subject
    to the satisfaction of certain conditions set out therein, severally and not jointly undertaken to
    procure subscription for the Securities to the extent of their respective commitments set forth
    therein;

·   that the contents of this Preliminary Placement Document are exclusively the responsibility of the
    Company and that neither the Book Running Lead Managers nor any person acting on their behalf
    has or shall have any liability for any information, representation or statement contained in this
    Preliminary Placement Document or any information previously published by or on behalf of the
    Company and will not be liable for your decision to participate in the Issue based on any
    information, representation or statement contained in this Preliminary Placement Document or
    otherwise. By accepting a participation in this Issue, you agree to the same and confirm that you
    have neither received nor relied on any other information, representation, warranty or statement
    made by or on behalf of the Book Running Lead Managers or the Company or any other person
    and neither of the Book Running Lead Managers nor the Company nor any other person will be
    liable for your decision to participate in the Issue based on any other information, representation,
    warranty or statement that you may have obtained or received;

·   that the only information you are entitled to rely on, and on which you have relied in committing
    yourself to acquire and subscribe to the Securities is contained in this Preliminary Placement
    Document, such information being all that you deem necessary to make an investment decision in
    respect of the Securities and that you have neither received nor relied on any other information
    given or representations, warranties or statements made by any of the Book Running Lead
    Managers or the Company and neither the Book Running Lead Managers nor the Company will be
    liable for your decision to accept an invitation to participate in the Issue based on any other
    information, representation, warranty or statement;

·   you agree to indemnify and hold the Company and the Book Running Lead Managers harmless
    from any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising
    out of or in connection with any breach of the representations and warranties in this paragraph.
    You agree that the indemnity set forth in this paragraph shall survive the resale of the Securities by
    or on behalf of the managed accounts;

·   that the Company, the Book Running Lead Managers and others will rely on the truth and
    accuracy of the foregoing representations, warranties, acknowledgements and undertakings which
    are given to the Book Running Lead Managers on their own behalf and on behalf of the Company
    and are irrevocable;
·        that you are a sophisticated investor who is seeking to purchase the Securities for your own
         investment and not with a view to distribution.

                       OFFSHORE DERIVATIVE INSTRUMENTS (P-NOTES)

Subject to compliance with all applicable Indian laws, rules, regulations, guidelines and approvals in terms
of Regulation 15A(1) of the SEBI (Foreign Institutional Investors) Regulations, 1995, as amended (the
“FII Regulations”), an FII may issue or otherwise deal in offshore derivative instruments such as
participatory notes, equity-linked notes or any other similar instruments against underlying securities (all
such offshore derivative instruments are referred to herein as “P-Notes”) listed or proposed to be listed on
any stock exchange in India only in favour of those entities which are regulated by any relevant regulatory
authorities in the countries of their incorporation or establishment subject to compliance of “know your
client” requirements. An FII shall also ensure that no further issue or transfer of any instrument referred to
above is made to any person other than a regulated entity. P-Notes have not been and are not being offered
or sold pursuant to this Preliminary Placement Document. This Preliminary Placement Document does not
contain any information concerning P-Notes, including, without limitation, any information regarding any
risk factors relating thereto. In terms of the FII Regulations, as amended, with effect from May 22, 2008, no
sub-account of an FII is permitted to, directly or indirectly, issue P-Notes.

Any P-Notes that may be issued are not securities of the Company and do not constitute any obligation of,
claims on or interests in the Company. The Company has not participated in any offer of any P-Notes, or in
the establishment of the terms of any P-Notes, or in the preparation of any disclosure related to the P-Notes.
Any P-Notes that may be offered are issued by, and are the sole obligations of, third parties that are
unrelated to the Company. The Company does not make any recommendation as to any investment in P-
Notes and does not accept any responsibility whatsoever in connection with the P-Notes. Any P-Notes that
may be issued are not securities of the Book Running Lead Managers and do not constitute any obligations
or claims on the Book Running Lead Managers. FII affiliates of the Book Running Lead Managers may
purchase, to the extent permissible under law, Securities in the Issue, and may issue P-Notes in respect
thereof.

Prospective investors interested in purchasing any P-Notes have the responsibility to obtain adequate
disclosures as to the issuer(s) of such P-Notes and the terms and conditions of any such P-Notes.
Neither SEBI nor any other regulatory authority has reviewed or approved any P-Notes or any
disclosure related thereto. Prospective investors are urged to consult with their own financial, legal,
accounting and tax advisors regarding any contemplated investment in P-Notes, including whether
P-Notes are issued in compliance with applicable laws and regulations.

                       DISCLAIMER CLAUSE OF THE STOCK EXCHANGES

As required, a copy of this Preliminary Placement Document has been submitted to the Stock Exchanges.
The Stock Exchanges do not in any manner:

1.       warrant, certify or endorse the correctness or completeness of any of the contents of the
         Preliminary Placement Document;

2.       warrant that the Securities will be listed or will continue to be listed on the Stock Exchanges; or

3.       take any responsibility for the financial or other soundness of the Company, its management or
         any scheme of the Company;

and it should not for any reason be deemed or construed to mean that the Preliminary Placement Document
has been cleared or approved by the Stock Exchanges. Every person who desires to apply for or otherwise
acquire any Securities of the Company may do so pursuant to an independent inquiry, investigation and
analysis and shall not have any claim against the Stock Exchanges whatsoever by reason of any loss which
may be suffered by such person consequent to or in connection with such subscription/acquisition whether
by reason of anything stated or omitted to be stated herein or for any other reason whatsoever.
                    PRESENTATION OF FINANCIAL AND OTHER INFORMATION

The Company’s financial statements included in this Preliminary Placement Document have been prepared
in accordance with Indian GAAP. Indian GAAP differs in certain significant respects from International
Financial Reporting Standards (“IFRS”) and U.S. GAAP. The Company does not provide a reconciliation
of its financial statements to IFRS or U.S. GAAP. In this Preliminary Placement Document, certain
monetary amounts have been subject to rounding adjustments; accordingly, figures shown as totals in
certain tables may not be an arithmetic aggregation of figures which precede them.

For financial statement reporting purposes, the Company has reported both audited unconsolidated
financial statements as at and for the years ended March 31, 2007, 2008 and 2009 and audited consolidated
financial statements as at and for the years ended March 31, 2007, 2008 and 2009.

The Company’s audited unconsolidated financial statements as at and for the years ended March 31, 2007,
2008 and 2009 report the financial statements and results of operations relating to the principal business
segments of the Company and its subsidiaries (the “Group”), comprising the Group’s mortgage lending
business, which includes the main business of providing loans for the purchase, construction, development
and repair of houses, apartments and commercial property in India. The Company’s audited consolidated
financial statements as at and for the years ended March 31, 2007, 2008 and 2009 report the financial
statements and results of operations relating to the Group’s five segments comprising Housing, Life
Insurance, General Insurance, Asset Management and others (which includes project management,
investment consultancy and property related services).

In accordance with the Company’s previous practice of announcing and analysing its financial statements
on an unconsolidated basis, the financial data in this Preliminary Placement Document, unless otherwise
stated, relates to the Company’s unconsolidated financial statements as at and for the years ended March
31, 2007, 2008 and 2009.

The Company’s audited unconsolidated financial statements as at and for the years ended March 31, 2007,
2008 and 2009 and certain selected financial information relating to the profit and loss account of the
Company for the three months ended June 30, 2009 which is prepared in conformity with Clause 41 of the
equity listing agreements with the Stock Exchanges and which has been subjected to limited review, is
included elsewhere in this Preliminary Placement Document. The Company’s audited consolidated
financial statements as at and for the years ended March 31, 2007, 2008 and 2009 is also included
elsewhere in this Preliminary Placement Document.

All references to “us”, “we”, “our Company” are to Housing Development Finance Corporation Limited
only and does not include the Group, unless otherwise stated.

Unless stated otherwise, the financial data in this Preliminary Placement Document is derived from the
Company’s standalone financial statements prepared in accordance with Indian GAAP. The Company’s
fiscal year commences on April 1 of each year and ends on March 31 of the succeeding year, so all
references to a particular fiscal year of the Company are to the twelve-month period ended on March 31 of
that year.

All references to “you” “offeree,” “purchaser,” “subscriber,” “recipient,” “investors” and “potential
investor” are to prospective investors in this Issue. References in this Preliminary Placement Document to
“India” are to the Republic of India and the “Government” are to the governments in India, central or state,
as applicable.

The Company prepares and publishes its financial statements in Rupees. All references to “Rupees” and
“Rs.” are to Indian Rupees and all references to “US Dollars” and “US$” are to United States Dollars.




                                                     i
                                     INDUSTRY AND MARKET DATA

Market data and certain industry forecasts used throughout this Preliminary Placement Document have
been obtained from market research, publicly available information and industry publications. Industry
publications generally state that the information that they contain has been obtained from sources believed
to be reliable but that the accuracy and completeness of that information is not guaranteed. Similarly,
internal surveys, industry forecasts and market research, while believed to be reliable, have not been
independently verified and neither the Company nor the Book Running Lead Managers make any
representation as to the accuracy of that information.




                                                    ii
                                   FORWARD-LOOKING STATEMENTS

All statements contained in this Preliminary Placement Document that are not statements of historical fact
constitute “forward-looking statements.” Investors can generally identify forward-looking statements by
terminology such as “aim”, “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”,
“may”, “objective”, “plan”, “potential”, “project”, “pursue”, “shall”, “should”, “will”, “would”, or other
words or phrases of similar import.

All statements regarding the Company’s expected financial condition and results of operations and business
plans and prospects are forward-looking statements. These forward-looking statements include statements
as to the Company’s business strategy, revenue and profitability and other matters discussed in this
Preliminary Placement Document that are not historical facts. These forward-looking statements and any
other projections contained in this Preliminary Placement Document (whether made by the Company or
any third party) are predictions and involve known and unknown risks, uncertainties, assumptions and other
factors that may cause the Company’s actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or implied by such forward-
looking statements or other projections. Important factors that could cause actual results, performance or
achievements to differ materially include, but are not limited to, those discussed under “Risk Factors”,
“Business” and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations”.

The forward-looking statements contained in this Preliminary Placement Document are based on the beliefs
of management, as well as the assumptions made by and information currently available to management.
Although the Company believes that the expectations reflected in such forward-looking statements are
reasonable at this time, it cannot assure investors that such expectations will prove to be correct. Given
these uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements.
If any of these risks and uncertainties materialize, or if any of the Company’s underlying assumptions
prove to be incorrect, the Company’s actual results of operations or financial condition could differ
materially from that described herein as anticipated, believed, estimated or expected. All subsequent
forward-looking statements attributable to the Company are expressly qualified in their entirety by
reference to these cautionary statements.




                                                     iii
                            CERTAIN DEFINITIONS AND ABBREVIATIONS

Definitions of certain capitalized terms used in this Preliminary Placement Document are set forth below:

           Term                                                     Description
“Company” or “the Issuer”      Housing Development Finance Corporation Limited, a public limited company
or “HDFC” or “we” or “us”      incorporated under the Companies Act and having its registered office at Ramon
or “our Company”               House, H.T. Parekh Marg, 169 Backbay Reclamation, Churchgate, Mumbai 400 020
0% August 2011 NCDs            Secured redeemable non-convertible debentures of face value of Rs. 1,000,000 each
                               that will be, unless previously redeemed in accordance with the provisions of the
                               Terms and Conditions of the 0% August 2011 NCDs, redeemed at [●] per cent. of
                               their principal amount on [●]
0% August 2012 NCDs            Secured redeemable non-convertible debentures of face value of Rs. 1,000,000 each
                               that will be, unless previously redeemed in accordance with the provisions of the
                               Terms and Conditions of the 0% August 2012 NCDs, redeemed at [●] per cent. of
                               their principal amount on [●]
AGM                            Annual General Meeting
Allocated /Allocation          The allocation of the NCDs and/ or the Warrants, as the case may be, following the
                               determination of the final terms of the 0% August 2011 NCDs, the 0% August 2012
                               NCDs or the Warrant Issue Price, as the case may be, to QIBs on the basis of
                               Application Forms submitted by them, in consultation with the Book Running Lead
                               Managers in compliance with Chapter XIII-A of the SEBI Guidelines
Allotment/Allotted             Unless the context otherwise requires, the allotment of the 0% August 2011 NCDs,
                               0% August 2012 NCDs and/ or the Warrants, as the case may be, pursuant to this
                               Issue
Allottees                      QIBs to whom any of the Securities are Allotted pursuant to the Issue
Application Form               The form (including any revisions thereof) pursuant to which a QIB shall submit a
                               Bid in the Issue, including, the NCD Application Form and the Warrant Application
                               Form
Articles/Articles of           The Article of Association of the Company
Association
AS                             Accounting Standards issued by the Institute of Chartered Accountants of India
Auditors                       M/s Deloitte Haskins and Sells, Chartered Accountants, the statutory auditors of the
                               Company
Bid                            An indication of QIBs’ interest, including all revisions and modifications of interest,
                               as provided in the Application Form, to subscribe for the NCDs and/ or the
                               Warrants, as the case may be, under this Issue
Bid Closing Date               [●]
Bid Opening Date               [●]
Bidding Period                 The period between the Bid Opening Date and Bid Closing Date inclusive of both
                               dates during which prospective QIBs can submit their Bids
Board/ Board of Directors      The board of directors of the Company or committees constituted thereof
Book Running Lead              Book Running Lead Managers to the Issue, in this case being Axis Bank Limited,
Managers                       Citigroup Global Markets India Private Limited, Goldman Sachs (India) Securities
                               Private Limited, The Hongkong and Shanghai Banking Corporation Limited, JM
                               Financial Consultants Private Limited, Kotak Mahindra Capital Company Limited
                               and Nomura Financial Advisory and Securities (India) Private Limited
BSE                            Bombay Stock Exchange Limited
CAGR                           Compounded Annual Growth Rate
CAN/Confirmation of            Note or advice or intimation to not more than 49 QIBs confirming the Allocation of
Allocation Note                the Securities to such QIBs after determination of the final terms of NCDs and
                               discovery of the Warrant Issue Price
CDSL                           Central Depository Services (India) Limited
CIN                            Corporate Identification Number
Civil Code                     The Code of Civil Procedure, 1908
Companies Act                  The Companies Act, 1956, as amended from time to time
CRISIL                         CRISIL Limited
Warrant Cut-off Price          The Warrant Issue Price which shall be finalized by the Company in consultation
                               with the Book Running Lead Managers
Debenture Trustee              IDBI Trusteeship Services Limited



                                                       iv
           Term                                                   Description
Debenture Trust Deed        The Debenture Trust Deed dated on or about the Closing Date in terms of which the
                            the principal amount of the NCDs, the redemption premium (as applicable) and all
                            other monies payable in respect of the NCDs are secured by a mortgage in favour of
                            the Debenture Trustee
Depositories Act            Depositories Act, 1996, as amended, from time to time
Depository                  A depository registered with SEBI under the SEBI (Depositories and Participant)
                            Regulations, 1996
DER                         Debt Equity Ratio
DP ID                       Depository Participant Identity
DP/Depository Participant   A depository participant as defined under the Depositories Act
EBITDA                      Earnings Before Interest, Tax, Depreciation and Amortisation
ECS                         Electronic Clearing Service
EGM                         Extraordinary General Meeting
EPS                         Earnings Per Equity Share, i.e., profit after tax for a Fiscal year divided by the
                            weighted average outstanding number of equity shares during that Fiscal year
Equity Shares               Equity shares of the Company of face value Rs. 10 each
Escrow Bank                 HDFC Bank Limited having its address at i-Think Techno Campus, Level O-3, Next
                            to Kanjurmarg Railway Station, Opp.Crompton Greaves, Kanjurmarg (East),
                            Mumbai - 400 042
Escrow Bank Accounts        Special accounts into which payment of application money shall be made by the
                            QIBs
ESOS 2002                   HDFC Employee Stock Option Scheme 2002
ESOS 2005                   HDFC Employee Stock Option Scheme 2005
ESOS 2007                   HDFC Employee Stock Option Scheme 2007
ESOS 2008                   HDFC Employee Stock Option Scheme 2008
Exercise Right              The right of the Warrantholder to subscribe, at the option of the Warrantholder by
                            way of exercise of the Warrant at any time during the Warrant Exercise Period at the
                            Warrant Exericise Price, in the manner set forth in, and on the terms and conditions
                            of, the Terms and Conditions of the Warrants, to one (1) fully paid Equity Share
FDI                         Foreign Direct Investment
FEMA                        The Foreign Exchange Management Act, 1999 read with rules and regulations
                            thereunder and amendments thereto
FII Regulations             Securities and Exchange Board of India (Foreign Institutional Investors) Regulations
                            1995, as amended, from time to time
FII(s)                      Foreign Institutional Investor (as defined under the Securities and Exchange Board
                            of India (Foreign Institutional Investors) Regulations, 1995) registered with SEBI
                            under applicable laws in India
Fiscal/ fiscal              Period of twelve months ended March 31 of that particular year
FIPB                        Foreign Investment Promotion Board
Floor Price                 The floor price of Rs. 2,391.91 for the Warrants, which has been calculated in
                            accordance with Chapter XIII-A of the SEBI Guidelines. In terms of the SEBI
                            Guidelines, the sum of the Warrant Issue Price and the Warrant Exercise Price
                            cannot be lower than the Floor Price
GDP                         Gross Domestic Product
ICAI                        Institute of Chartered Accountants of India
ICRA                        ICRA Limited
IFRS                        International Financial Reporting Standards
India                       The Republic of India
Indian GAAP                 Generally accepted accounting principles followed in India
Stock Exchanges             The NSE and the BSE
ISIN                        International Securities Identification Number
Issue                       The offer, issue and allotment of [●]0% August 2011 NCDs, [•] 0% August 2012
                            NCDs along with [●] Warrants to QIBs, pursuant to Chapter XIII-A of the SEBI
                            Guidelines
IT                          Information technology
IT Act                      Indian Income Tax Act, 1961, as amended from time to time
Memorandum or               The Memorandum of Association of the Company
Memorandum of Association
Mn/Million                  Million



                                                   v
          Term                                                  Description
Mutual Fund                A mutual fund registered with SEBI under the SEBI (Mutual Funds) Regulations,
                           1996, as amended from time to time
NCD Application Form       The form (including any revisions thereof) pursuant to which a QIB shall submit a
                           Bid for 0% August 2011 NCDs and 0% August 2012 NCDs in the Issue
NCD Issue Price            Rs. [•] per NCD
NCD Issue Size             The issue of [•] NCDs aggregating to Rs. [•] million
NCDs                       0% August 2011 NCDs and 0% August 2012 NCDs, unless specified otherwise
NHB                        National Housing Bank
NSDL                       National Securities Depository Limited
NSE                        National Stock Exchange of India Limited
p.a.                       per annum
P/E Ratio                  Price/Earnings Ratio
PAN                        Permanent Account Number
PAT                        Profit After Tax
Pay-in Date                Last date specified in the CAN sent to QIBs for payment of the NCD Issue Price or
                           the Warrant Issue Price, as the case may be
PBT                        Profit Before Tax
Placement Document         The Placement Document to be issued in accordance with Chapter XIII-A of the
                           SEBI Guidelines
Preliminary Placement      This Preliminary Placement Document dated August 17, 2009 issued in accordance
Document                   with Chapter XIII-A of the SEBI Guidelines
QIBs or Qualified          Qualified Institutional Buyer as defined under clause 1.2.1 (xxiv a) of the SEBI
Institutional Buyers       Guidelines
QIP                        Qualified Institutions Placement under chapter XIII-A of the SEBI Guidelines
Registrar                  The Investor Services Department of the Company, which is registered with SEBI as
                           a Catergory – II In-house Share Transfer Agent
RBI                        The Reserve Bank of India
RBI Act                    The Reserve Bank of India Act, 1934, as amended
Registered Office          The registered office of the Company at Ramon House, H.T. Parekh Marg, 169
                           Backbay Reclamation, Churchgate, Mumbai 400 020, India
Registration Act           The Indian Registration Act, 1908, as amended
RoC                        Registrar of Companies, Maharashtra
Rs. or Rupees              Rupees, being the lawful currency for the time being of India
SCB                        Scheduled Commercial Bank
SCRA                       Securities Contracts (Regulation) Act, 1956, as amended from time to time
SCRR                       Securities Contracts (Regulation) Rules, 1957, as amended from time to time
SEBI                       The Securities and Exchange Board of India constituted under the SEBI Act
SEBI Act                   Securities and Exchange Board of India Act 1992, as amended from time to time
SEBI Guidelines            The SEBI (Disclosure and Investor Protection) Guidelines, 2000 as amended from
                           time to time
Securities                 The NCDs and the Warrants being offered pursuant to this Issue
SICA                       Sick Industrial Companies (Special Provisions) Act, 1985, as amended from time to
                           time
Stamp Act                  The Indian Stamp Act, 1899, as amended from time to time
STT                        Securities Transaction Tax as amended from time to time
Takeover Code              SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, as
                           amended from time to time
TP Act                     The Transfer of Property Act, 1882, as amended from time to time
UIN                        Unique Identification Number
U.S. Securities Act        the US Securities Act of 1933, as amended
US GAAP                    Generally Accepted Accounting Principles in the United States of America
US$ or US Dollars          US dollars, the lawful currency for the time being of the USA
Warrant Application Form   The form (including any revisions thereof) pursuant to which a QIB shall submit a
                           Bid for Warrants in the Issue
Warrant Exercise Form      The form pursuant to which a Warrantholder shall submit an exercise notice to
                           exercise the Exercise Right
Warrant Exercise Price     Rs. [•]
Warrant Issue Price        Rs. [•]



                                                 vi
           Term                                          Description
Warrants              Warrants being offered in this Issue, unless specified otherwise, which are
                      exchangeable for, 1 (one) Equity Share for every Warrant during the Warrant
                      Exercise Period at the Warrant Exercise Price
Warrants Issue Size   The issue of [•] Warrants aggregating to Rs. [•] million assuming all the Warrants
                      are converted into Equity Shares during the Warrant Exercise Period at the Warrant
                      Exercise Price




                                             vii
                                           SUMMARY OF BUSINESS

The following summary is qualified in its entirety by, and should be read in conjunction with, the more
detailed information and financial statements appearing elsewhere in this Preliminary Placement
Document. In addition to this summary, the Company urges you to read the entire Preliminary Placement
Document carefully, especially the risks of investing in the Securities discussed under “Risk Factors”
before deciding whether to buy any of the Securities.

Introduction

Overview

HDFC is the largest housing finance company in India in terms of total assets and mortgage lending. As of
June 30, 2009, the Company’s outstanding mortgage loan portfolio amounted to Rs. 883,538.3 million and
total assets were Rs. 974,787.6 million. Our principal business is providing finance to individuals,
corporates, developers and co-operative societies for the purchase, construction, development and repair of
houses, apartments and commercial property in India.

As of June 30, 2009, our distribution network comprised of 269 outlets, which include 58 offices of our
wholly owned distribution company, HDFC Sales Private Limited. As of June 30, 2009, we have financed
over 3.3 million housing units with cumulative loan approvals amounting to Rs. 2,497,090 million and
cumulative loan disbursements amounting to more than Rs. 2,004,940 million. In addition, we have also
serviced approximately 1 million depositors and 25,000 deposit agents.

HDFC was the first private sector retail housing finance company to be set up in India and we were
incorporated as a public limited company on October 17, 1977.

Our initial public offering was in 1978. Our Equity Shares are listed on the BSE and the NSE. The closing
price of the Equity Shares on August 14, 2009 on the NSE was Rs. 2,316.00 per Equity Share and on the
BSE was Rs. 2,310.80. As of the same date, our market capitalisation on the NSE was Rs. 659,042 million.

As of June 30, 2009, HDFC’s capital adequacy ratio was 15 per cent. as against a minimum regulatory
requirement of 12 per cent. and our Tier I capital was 13.7 per cent., as against a minimum requirement of
6 per cent.

Strategy

Our primary objective is to enhance the residential housing stock in India through the provision of housing
finance on a systematic and professional basis and to promote home ownership throughout India. We have
contributed to increasing the flow of resources to the housing sector through the integration of the housing
finance sector with the overall domestic financial markets in India.

Our primary goals are to:

·        maintain our position as the leading housing finance institution in India;

·        develop close relationships with individual households and enhance our customer relationships;

·        transform ideas for housing finance into viable and creative solutions;

·        provide consistently high returns to shareholders; and

·        grow through diversification by leveraging off our existing client base.

Our primary growth strategies are to:



                                                     viii
·   increase the return on equity in order to maximise shareholder value: As of March 31, 2009, our
    return on equity (on the closing balance of shareholder’s equity) excluding exceptional items stood
    at 17.4 per cent. as against 16.3 per cent. as of March 31, 2008;

·   minimise gross non-performing assets: Our gross non-performing loans stood at 0.81 per cent. of
    our loan portfolio as of March 31, 2009, compared to 0.84 per cent. as of March31, 2008. Non-
    performing loans overdue for a period of more than six months, stood at 0.56 per cent. of the loan
    portfolio as of March 31, 2009, as against 0.68 per cent. in the previous year;

·   minimise cost to income ratio: for fiscal 2009 our cost to income ratio stood at 8.8 per cent., as
    against 9.2 per cent. in fiscal 2008. We believe our cost to income ratio continues to be among the
    lowest in the financial sector in Asia; and

·   grow loan approvals and disbursements at sustainable levels: Our loan approvals and
    disbursements have grown by 16 per cent. and 21 per cent. respectively in fiscal 2009.




                                                ix
                                          SUMMARY OF THE ISSUE

The following is a general summary of the terms of the Issue. :

Zero per cent. Secured Redeemable Non-Convertible Debentures due August 2011

Issuer                       Housing Development Finance Corporation Limited

Instrument                   Secured Redeemable Non-Convertible Debentures of the face value of Rs.
                             1,000,000 each due August 2011 (the “0% August 2011 NCDs”) for cash

Face Value                   Rs. 1,000,000 per 0% August 2011 NCD

0% August 2011               Rs. [•] per 0% August 2011 NCD
NCD Issue Price
0% August 2011               The issue of [•] 0% August 2011NCDs aggregating to Rs. [•] million
NCD Issue Size
Eligible investors for       QIBs as defined in clause 1.2.1 (xxiv a) of the SEBI Guidelines, other than
0% August 2011               QIBs that are persons resident outside India, will be eligible to subscribe to
NCDs                         0% August 2011 NCDs. See “Issue Procedure - Qualified Institutional
                             Buyers”.

Minimum                      1 0% August 2011 NCD or in multiples thereof
Subscription
Redemption Date              [•]

Redemption Price             [•]

Tenor                        2 years

Security                     The principal amount of the 0% August 2011 NCDs, redemption premium and
                             any other monies payable by the Issuer in respect of the 0% August 2011
                             NCDs will be secured by a negative lien on the assets of the Issuer and
                             mortgage of the immovable property of the Issuer as identified in the
                             Debenture Trust Deed.

Coupon                       Zero per cent
Yield to Maturity            [•]

Status and Ranking           The 0% August 2011 NCDs constitute direct and secured obligations of the
                             Company and shall rank pari passu and without any preference or priority
                             among themselves. Subject to any obligations preferred by mandatory
                             provisions of the law prevailing from time to time, the 0% August 2011 NCDs
                             shall also, as regard the principal amount of the 0% August 2011 NCDs, all
                             interest, redemption premium (as applicable) and all other monies secured in
                             respect of 0% August 2011 NCDs, rank pari passu with all other present direct
                             and secured obligations of the Company.

Events of Default            See Condition 7 of the “Terms and Conditions of the 0% August 2011 Non-
                             Convertible Debentures”.
Debenture Trustee            IDBI Trusteeship Services Limited
Credit Rating                 “LAAA” by ICRA and “AAA” by CRISIL
Governing Law                Indian law
Form of Issuance             The issuance of 0% August 2011 NCDs shall only be in a dematerialized
                             form. See Condition 2 in the “Terms and Conditions of the 0% August 2011
                             Non-Convertible Debentures”.


                                                     x
Listing                  The Company has made applications to the NSE and the BSE to obtain in-
                         principle approval for the listing of the 0% August 2011 NCDs on the WDM
                         segments of the NSE and the BSE, respectively.
Trading                  The trading of the 0% August 2011 NCDs would be in dematerialized form
                         only for all QIBs in the WDM segments of the NSE and the BSE,
                         respectively.
Depositories             NSDL and CDSL
Transfer Restrictions    The 0% August 2011 NCDs being Allotted pursuant to this Issue shall not be
                         sold for a period of one year from the date of Allotment except on the floor of
                         the Stock Exchanges.
Use of Proceeds          See “Use of Proceeds”.
Pay-in Date              Last date specified in the CAN sent to QIBs for payment of subscription
                         amounts
Closing                  The Allotment of the 0% August 2011 NCDs is expected to be made on or
                         about [•] (“Closing Date”).
ISIN No.                 [•]

Zero per cent. Secured Redeemable Non-Convertible Debentures due August 2012

Issuer                   Housing Development Finance Corporation Limited

Instrument               Secured Redeemable Non-Convertible Debentures of the face value of Rs.
                         1,000,000 each (“NCDs”) for cash

Face Value               Rs. 1,000,000 per 0% August 2012 NCD

0% August 2012           Rs. [•] per 0% August 2012 NCD
NCD Issue Price
0% August 2012           The issue of [•] 0% August 2012 NCDs aggregating to Rs. [•] million
NCD Issue Size
Eligible investors for   QIBs as defined in clause 1.2.1 (xxiv a) of the SEBI Guidelines, other than
0% August 2012           QIBs that are persons resident outside India, will be eligible to subscribe to
NCDs                     0% August 2012 NCDs. See “Issue Procedure - Qualified Institutional
                         Buyers”.

Minimum                  1 0% August 2012 NCD or in multiples thereof
Subscription
Redemption Date          [•]

Redemption Price         [•]

Tenor                    3 years

Security                 The principal amount of the 0% August 2012 NCDs, redemption premium and
                         any other monies payable by the Issuer in respect of the 0% August 2012
                         NCDs will be secured by a negative lien on the assets of the Issuer and
                         mortgage of the immovable property of the Issuer as identified in the
                         Debenture Trust Deed.

Coupon                   Zero per cent
Yield to Maturity        [•]

Status and Ranking       The 0% August 2012 NCDs constitute direct and secured obligations of the
                         Company and shall rank pari passu and without any preference or priority
                         among themselves. Subject to any obligations preferred by mandatory
                         provisions of the law prevailing from time to time, the 0% August 2012 NCDs


                                                 xi
                         shall also, as regard the principal amount of the 0% August 2012 NCDs, all
                         interest, redemption premium (as applicable) and all other monies secured in
                         respect of 0% August 2012 NCDs, rank pari passu with all other present direct
                         and secured obligations of the Company.

Events of Default        See Condition 7 of the “Terms and Conditions of the 0% August 2012 Non-
                         Convertible Debentures”.
Debenture Trustee        IDBI Trusteeship Services Limited
Credit Rating             “LAAA” by ICRA and “AAA” by CRISIL
Governing Law            Indian law
Form of Issuance         The issuance of 0% August 2012 NCDs shall only be in a dematerialized
                         form. See Condition 2 in the “Terms and Conditions of the 0% August 2012
                         Non-Convertible Debentures”.
Listing                  The Company has made applications to the NSE and the BSE to obtain in-
                         principle approval for the listing of the 0% August 2012 NCDs on the WDM
                         segments of the NSE and the BSE, respectively.
Trading                  The trading of the 0% August 2012 NCDs would be in dematerialized form
                         only for all QIBs in the WDM segments of the NSE and the BSE,
                         respectively.
Depositories             NSDL and CDSL
Transfer Restrictions    The 0% August 2012 NCDs being Allotted pursuant to this Issue shall not be
                         sold for a period of one year from the date of Allotment except on the floor of
                         the Stock Exchanges.
Use of Proceeds          See “Use of Proceeds”.
Pay-in Date              Last date specified in the CAN sent to QIBs for payment of subscription
                         amounts
Closing                  The Allotment of the 0% August 2012 NCDs is expected to be made on or
                         about [•] (“Closing Date”).
ISIN No.                 [•]

Warrants

Issuer                   Housing Development Finance Corporation Limited
Instrument               Warrants of the Issuer that entitle the Warrantholder to subscribe for [1]
                         Equity Share for each Warrant held at the Warrant Exercise Price at any time
                         during the Warrant Exercise Period
Warrant Issue Price      Rs. [●]. Investors must note that the Warrant Issue Price will not be adjusted
                         towards the Warrant Exercise Price, if a Warrant is exercised and will stand
                         forfeited, if a Warrant lapses.

Warrant Exercise         Rs. [●]
Price
Warrant Exercise         1 (one) Equity Share for each Warrant
Ratio
Warrant Issue Size       The issue of [•] Warrants aggregating to Rs. [•] million assuming all the
                         Warrants are exchanged into Equity Shares at the Warrant Exercise Price
                         during the Warrant Exercise Period
Eligible investors for   QIBs as defined in clause 1.2.1 (xxiv a) of the SEBI Guidelines will be
Warrants                 eligible to subscribe to Warrants. See “Issue Procedure - Qualified
                         Institutional Buyers”.

Minimum                  1 Warrant or in multiples thereof
Subscription
Warrant Exercise         The Warrants may be exercised at any time during normal business hours on
Period                   and after [●]up to 5:00 p.m. in Mumbai on [●]



                                                xii
Adjustments to                    See, Condition 6 in the “Terms and Conditions of the Warrants”
Warrant Exercise
Price
Floor Price                       Rs. 2,391.91. In terms of the SEBI Guidelines, the sum of the Warrant Issue
                                  Price and the Warrant Exercise Price cannot be lower than the Floor Price
Equity Shares issued              284,603,604 Equity Shares, aggregating Rs. 2,846,036,040
and outstanding
immediately prior to
the Issue
Equity Shares to be               Upto 10,953,706 Equity Shares of face value of Rs. 10 each
issued on Exercise of
Warrants*
Equity Shares issued
and outstanding
immediately
pursuant to exercise
of Warrants during
the Warrant Exercise
Period*
Ranking                           The Equity Shares to be issued upon exercise of Warrants shall be subject to
                                  the provisions of the Company’s Memorandum and Articles of Association
                                  and shall rank pari passu in all respects with the existing Equity Shares
                                  including rights in respect of dividends.
Form of Issuance                  The issuance of Warrants in this Issue shall only be in a dematerialized form.
                                  See Condition 2 in the “Terms and Conditions of the Warrants”.
Listing                           The Company has made applications to the NSE and the BSE to obtain in-
                                  principle approval for the listing of the Warrants on these Stock Exchanges.
Trading                           The trading of the Warrants would be in dematerialized form only for all QIBs
                                  in the cash segments of the Stock Exchanges
Depositories                      NSDL and CDSL
Transfer Restrictions             The Warrants being Allotted pursuant to this Issue shall not be sold for a
                                  period of one year from the date of Allotment except on the floor of the Stock
                                  Exchanges
Use of Proceeds                   See “Use of Proceeds”.
Pay-in Date                       Last date specified in the CAN sent to QIBs for payment of subscription
                                  amounts
Closing                           The Allotment of the Warrants offered pursuant to this Issue is expected to be
                                  made on or about [•] (“Closing Date”).
Governing Law                     Indian law
ISIN No.                          [•]
*Assuming that all Warrants held by eligible investors have been exercised during the Warrant Exercise Period at Warrant Exercise
Price and no other Equity Shares are issued by the Company during the Warrant Exercise Period, including on account of conversion
of FCCBs or pursuant to the ESOS.




                                                               xiii
                     SELECTED FINANCIAL INFORMATION OF THE COMPANY

                                    BALANCE SHEET

                                                                 As at
                                            March 31,
                                             2007           March 31, 2008     March 31, 2009
                                                            (Rs. In Million)
SOURCES OF FUNDS
SHAREHOLDERS' FUNDS:
Share Capital                                     2,530.0           2,840.3           2,844.5

Reserve and Surplus                              52,983.9         116,633.1         128,529.4

LOAN FUNDS                                      571,930.3         691,512.2         838,560.8

                                                627,444.2         810,985.6         969,934.7

APPLICATION OF FUNDS

LOANS                                           569,043.6         733,277.8         851,981.1

INVESTMENTS                                      36,662.3          69,150.1         104,687.5

Deferred tax asset                                1,231.0           1,466.4           2,158.2

CURRENT ASSETS, LOANS AND                        46,645.5          38,226.1          55,708.3
ADVANCES
Less : CURRENT LIABILITIES AND                   28,268.9          33,219.7          46,634.5
PROVISIONS
NET CURRENT ASSETS                               18,376.6           5,006.4           9,073.8

FIXED ASSETS
Gross Block                                       4,931.0           4,885.7           4,938.5
Less : Depreciation                               2,800.3           2,800.8           2,904.4
Net Block                                         2,130.7           2,084.9           2,034.1

                                                627,444.2         810,985.6         969,934.7




                                          xiv
                HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED
                            PROFIT AND LOSS ACCOUNT

                                                                          For the year ended
                                                              March 31,      March 31,      March 31,
                                                               2007             2008          2009
                                                                           (Rs. In Million)
INCOME
Operating Income                                                54,816.4        79,798.7     108,546.2
Fees and Other Charges                                             685.7           632.2       1,149.4
Profit on Sale of Investments                                    2,923.0         1,332.6         252.3
Other Income                                                       207.6           197.1         228.7
                                                                58,632.7        81,960.6     110,176.6
EXPENDITURE AND CHARGES
Interest and Other Charges                                      36,668.5        51,428.8      74,324.5
Staff Expenses                                                     912.7         1,177.9       1,386.1
Establishment Expenses                                             257.5           303.1         359.6
Other Expenses                                                   1,021.5         1,192.4       1,241.4
Depreciation and Amortisation                                      174.5           166.0         174.6
Provision for Contingencies                                        250.0           320.0         500.0
                                                                39,284.7        54,588.2      77,986.2
PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS                         19,348.0        27,372.4      32,190.4
Exceptional Items                                                  329.8         6,362.6             -
PROFIT BEFORE TAX                                               19,677.8        33,735.0      32,190.4
Less : Provision for Tax                                         3,950.0         9,350.0       9,340.0
Less : Provision for Fringe Benefit Tax                             24.0            22.5          25.0
PROFIT AFTER TAX AVAILABLE FOR                                  15,703.8        24,362.5      22,825.4
APPROPRIATION
APPROPRIATIONS :
Special Reserve No. II                                           4,660.0         3,550.0       4,000.0
General Reserve                                                  3,681.7         9,994.7       5,530.4
Additional Reserve (u/s 29 C of the NHB Act )                      800.0         2,450.0       3,420.0
Shelter Assistance Reserve                                          50.0            60.0          70.0
Proposed Dividend                                                5,566.1         7,101.0       8,533.6
[Rs. 22, Rs. 25 and Rs. 30 per share for the years ended on
March 31, 2007, 2008 and 2009, respectively.]
Additional Tax on Proposed Dividend                               946.0          1,206.8       1,406.9
Additional Tax on Dividend 2007-08 - Credit taken                     -                -       (140.5)
Dividend pertaining to :
FY 2007-08 paid during FY 2008-09                                      -               -           5.0
                                                                15,703.8        24,362.5      22,825.4
EARNINGS PER SHARE (Face Value Rs. 10)
- Basic                                                            62.7            89.9           80.1
- Diluted                                                          58.2            85.3           78.7




                                                     xv
                HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED
                             CASH FLOW STATEMENT

                                                                         For the Year ended
                                                                  March 31, March 31, March 31,
                                                                   2007          2008       2009
                                                                           (Rs. In Million)
A]   CASH FLOW FROM OPERATING ACTIVITIES

     Profit before tax                                              19,677.8       33,735.0      32,190.4
     Adjustments for:
     Depreciation and Amortisation                                     249.0          166.0         174.6
     Provision for Contingencies                                       250.0          320.0         500.0
     Translation loss on foreign currency monetary assets and
     liabilities and mark to market loss on derivatives                      -             -      2,611.6
     Employee Stock Option Expense (Net of options
     exercised)                                                          (2.2)             -             -
     Provision for Employee Benefits                                    116.0          135.2         111.0
     Profit on Sale of Investments                                  (3,160.1)      (7,695.2)       (252.3)
     Profit on Sale of Freehold land and Properties acquired in
     satisfaction of debts.                                            (92.7)          (9.3)              -
     Profit on Sale of Properties acquired and leased                  (15.5)              -              -
     Surplus from deployment in Cash Management Schemes
     of Mutual Funds                                                 (387.6)       (1,117.8)     (1,579.7)
     (Profit) / Loss on Sale of Fixed Assets                          (42.6)             1.7          (5.9)
     Operating Profit before Working Capital changes                16,592.1        25,535.6      33,749.7
     Adjustments for:
     Current Assets                                                     470.8      (1,249.5)     (2,821.8)
     Current Liabilities                                              3,647.6        4,233.8       6,653.0
     Cash generated from operations                                  20,710.5       28,519.9      37,580.9
     Advance tax paid                                               (4,290.5)      (9,511.8)     (9,781.6)
     Net cash from operating activities                              16,420.0       19,008.1      27,799.3

B]   CASH FLOW FROM INVESTING ACTIVITIES

     Purchase of Fixed Assets                                         (259.9)        (157.4)       (123.5)
     Sale of Fixed Assets                                               381.4           67.7          31.9
                                                                        121.5         (89.7)        (91.6)
     Consideration received towards protection of expected loss
     on shares                                                              -          147.9             -
     Investments in Subsidiaries                                    (2,112.4)      (5,823.7)     (4,155.0)
     Investment in Cash Management Schemes of Mutual
     Funds                                                        (401,450.0)    (576,600.0)   (870,590.0)
     Other Investments                                              (3,523.2)     (22,119.0)    (10,707.0)
     Sale proceeds of Properties acquired and leased                    144.0              -             -
     Sale proceeds of Investments :
       - in subsidiary companies                                        56.6         4,737.4             -
       - in Cash Management Schemes of Mutual Funds                405,567.6       566,907.8     848,904.3
       - in other companies                                          7,020.3         9,038.1       2,493.1
     Net cash from / (used in) investing activities                  5,824.4      (23,801.2)    (34,146.2)

C]   CASH FLOW FROM FINANCING ACTIVITIES

     Share Capital - Equity                                              34.4         310.3            4.2


                                                    xvi
                                                                     For the Year ended
                                                            March 31, March 31, March 31,
                                                               2007          2008        2009
Securities Premium                                              2,889.3      46,889.0       510.9
Premium paid on FRNs and FCCBs                                   (24.0)       (741.9)           -
Borrowings (Net)                                               98,387.7    120,939.6   138,530.1
Loans disbursed (Net)                                       (115,300.6) (165,062.3) (117,632.0)
Corporate Deposits (Net)                                        (845.7)       3,138.8     2,336.7
Dividend paid - Equity Shares                                 (4,991.3)     (5,566.1)   (7,106.0)
Tax paid on Dividend                                            (700.0)       (946.0)   (1,066.3)
Shelter Assistance Reserve - utilisation                         (46.8)        (54.3)      (52.2)
Net cash (used in) / from financing activities               (20,597.0)     (1,092.9)    15,525.4
Net Increase / (Decrease) in cash and cash equivalents          1,647.4     (5,886.0)     9,178.5

Cash and cash equivalents as at the beginning of the year     12,016.2     13,663.6       7,777.6

Cash and cash equivalents as at the end of the year           13,663.6      7,777.6     16,956.1

                                                               1,647.4     (5,886.0)      9,178.5




                                               xvii
                                                 RISK FACTORS

Prior to making an investment decision with respect to the NCDs and/or the Warrants offered hereby, all
prospective investors and purchasers should carefully consider all of the information contained in this
Preliminary Placement Document, including the risk factors set out below and the financial statements and
related notes thereto. The occurrence of any of the following events could have a material adverse effect on
our Company’s business, results of operations, financial condition and future prospects and cause the
market price of the NCDs, the Warrants and the Equity Shares to fall significantly. Any potential investor
in, and purchaser of, the NCDs or the Warrants should pay particular attention to the fact that we are an
Indian company and is subject to a legal and regulatory environment which in some respects may be
different from that which prevails in other countries.

Risks relating to our Company

The Indian housing finance industry is competitive and increasing competition may result in
declining margins if we are unable to compete effectively

Our Company’s principal business is the provision of housing finance in India.
Historically, the housing finance industry in India was dominated by housing finance companies (“HFCs”).
We now face increasing competition from commercial banks, which have focused on growing their retail
portfolios in recent years. Interest rate deregulation and other liberalisation measures affecting the housing
finance industry, together with increased demand for home finance, have increased our exposure to
competition. The demand for housing loans has also increased due to relatively lower and affordable
interest rates, stable property prices, higher disposable incomes and increased fiscal incentives for
borrowers. All of these factors have resulted in HFCs, including our Company, facing increased
competition from other lenders in the retail housing market, including commercial banks. Unlike
commercial banks, our Company does not have access to funding from savings and current deposits of
customers. Instead, we are reliant on higher-cost term loans and debentures for our funding requirements,
which may reduce our margins compared to competitors. Our ability to compete effectively with
commercial banks will depend, to some extent, on our ability to raise low-cost funding in the future. If we
are unable to compete effectively with other participants in the housing finance industry, our business,
future financial performance and the trading price of the NCDs, the Warrants and the Shares may be
adversely affected.

Furthermore, as a result of increased competition in the housing finance industry, home loans are becoming
increasingly standardised and terms such as floating rate interest options, lower processing fees and
monthly rest periods are becoming increasingly common in the housing finance industry in India. In
addition, banks and HFCs, including our Company, have begun to include the cost of registration, stamp
duty and other associated costs as part of the loan disbursement, which has increased affordability for
purchasing a house. There can be no assurance that our Company will be able to react effectively to these
or other market developments or compete effectively with new and existing players in the increasingly
competitive housing finance industry. Increasing competition may have an adverse effect on our net interest
margin and other income, and, if we are unable to compete successfully, our market share may decline as
the origination of new loans declines.

Due to difficult conditions in the global capital markets and the economy generally, we may be
unable to secure funding at competitive rates

Since the second half of 2007, the global credit markets have experienced, and may continue to experience,
significant dislocations and liquidity disruptions, which have originated from the liquidity disruptions in the
United States and the European Union credit and sub-prime residential mortgage markets. These and other
related events, such as the recent collapse of a number of financial institutions, have had, and continue to
have, a significant adverse impact on the availability of credit and the confidence of the financial markets,
globally as well as in India. The deterioration in the financial markets may cause a serious recession in
many countries, which may lead to significant declines in employment, household wealth, consumer
demand and lending, and as a result may adversely affect economic growth in India and elsewhere.


                                                      18
Liquidity risk is the risk that we either do not have sufficient financial resources available to meet all our
obligations and commitments as they fall due, or can access them only at excessive cost. This risk is
inherent in mortgage-lending operations and can be heightened by a number of these factors mentioned
above.

Although we believe that the sub-prime crisis will not have a major impact on our business for a number of
reasons: the fact that the typical borrower is a first-time borrower buying a house for self-occupation; the
low loan-to-value ratios used; the prevalence of prepayments and the early pre-emptive actions taken by the
Reserve Bank of India (“RBI”), there can be no assurance that the sub-prime crisis will not have a
materially negative impact on our business.

Due to prevailing conditions in the global and Indian credit markets, it is expected that the buyers of
property will remain cautious. Consumer sentiment and market spending are expected to turn more cautious
in the near term and as a result levels of mortgage lending may remain lower than anticipated or forecast by
us.

Our Company’s funding consists principally of domestic term loans, bonds and debentures, deposits and
international borrowings. Our Company does not have a banking licence and, like other HFCs, we do not
have access to savings and current deposits. Funding from domestic term loans has played an increasingly
important part in our funding in recent years, representing 28 per cent. and 29 per cent. of the total funding
in fiscal 2009 and 2008, respectively. There can be no assurance that we will be able to continue securing
increased funding from banks or funding at current rates. In particular, banks that currently lend to us may
reach industry or borrower concentration limits and be unable to advance further funds.

Furthermore, our cost of funds from banks and the domestic and international debt capital markets and our
retail deposits are influenced by our credit rating from the domestic credit rating agencies, being “AAA”
from CRISIL Limited (“CRISIL”) and “LAAA” from ICRA Limited (“ICRA”). There can be no guarantee
that we will not be subject to downgrades to our credit ratings. Any downgrade in such ratings would result
in an increase in the cost of our funding and could reduce our sources of funding.

Our business is vulnerable to volatility in interest rates

Over the last several years, the Indian Government has substantially deregulated the financial sector. As a
result, interest rates are now primarily determined by the market, which has increased the interest rate risk
exposure of all banks and financial intermediaries in India, including our Company.

Our results of operations are substantially dependent upon the level of our net interest margins. Interest
rates are sensitive to many factors beyond our control, including the RBI’s monetary policies, domestic and
international economic and political conditions and other factors. Our policy is to attempt to balance the
proportion of our interest-earning assets and interest-bearing liabilities which bear interest at floating rates.
However, there can be no assurance that we will be able to adequately manage our interest rate risk in the
future and be able effectively to balance floating rate loan assets and liabilities in the future. Further,
despite this balancing, changes in interest rates could affect the interest rates charged on interest-earning
assets and the interest rates paid on interest-bearing liabilities in different ways. Thus, our results of
operations could be affected by changes in interest rates and the timing of any re pricing of our liabilities
compared with the re-pricing of our assets.

There can be no assurance that we will be able adequately to manage our interest rate risk in the future and,
if we are unable to do so, this would have an adverse effect on our net interest margin.

We are exposed to large loan concentrations with several borrowers and default by any one of them
would adversely affect our business

As of June 30, 2009, aggregate loans to our ten largest borrowers amounted to Rs. 51,199.1 million,
representing approximately 6 per cent. of our total loans outstanding as of such date. Our single largest
borrower on such date had an outstanding balance of Rs. 10,133.7 million, representing 1 per cent. of our


                                                       19
total loans outstanding as of such date. Any deterioration in the credit quality of these assets could have a
significant adverse effect on our business, prospects, financial condition and results of operations.

We may not be able to successfully sustain our growth strategy

In recent years, we have experienced substantial growth. In fiscal 2009, our loan approvals and loan
disbursements grew by 16 per cent. and 21 per cent. respectively. In fiscal 2009, our loan book grew by 16
per cent. to stand at Rs. 851,981.1 million. The growth in the loan book would have been higher at 22 per
cent. if the loans sold were included in the loan book. Our total assets also grew 20 per cent. from Rs.
810,985.6 million as at March 31, 2008 to Rs. 969,934.7 million as at March 31, 2009, maintaining our
position as the largest housing finance company in India. Our growth strategy includes growing our loan
book and expanding the range of products and services offered to our customers. There can be no assurance
that we will be able to sustain our growth strategy successfully or that we will be able to expand further or
diversify our loan book.

Furthermore, there may not be sufficient demand for such services and products, and they may not generate
sufficient revenues relative to the costs associated with developing and introducing such services and
products. Even if we were able to introduce new products and services successfully, there can be no
assurance that we will be able to achieve our intended return on such investments.

In addition, our expansion into these new lines of business is relatively recent, and we have not fully
completed the implementation of comprehensive systems to manage the risks associated with these new
business lines. If our Company grows our loan book too rapidly or fails to make proper assessments of
credit risks associated with new borrowers or new businesses, a higher percentage of our loans may become
non-performing, which would have a negative impact on the quality of our assets and our financial
condition.

We also face a number of operational risks in executing our growth strategy. We will need to recruit new
employees, who will have to be trained and integrated into our operations. We will also have to train
existing employees to adhere properly to new internal controls and risk management procedures. Failure to
train properly and integrate employees may increase employee attrition rates, require additional hiring,
erode the quality of customer service, divert management resources, increase our exposure to high-risk
credit and impose significant costs on us.

We may not be in compliance with certain regulations concerning exposure to capital market
investments

Pursuant to the Housing Finance Companies (NHB) Directions, 2001, and directions thereunder, our
Company, being an HFC, is not permitted to have an aggregate exposure to capital markets (both fund and
non-fund based) in excess of 40 per cent. of our net worth as of March 31, of the previous year. Within the
overall ceiling, direct investments in shares, convertible bonds/debentures, units of equity-oriented mutual
funds and all exposures to venture capital funds should not exceed 20 per cent. of our net worth.

We expect that our total capital markets investment will remain in excess of this ceiling, principally as a
result of our investments in HDFC Bank Limited (“HDFC Bank”) as we are a promoter of HDFC Bank.
The National Housing Bank (“NHB”) has granted us time for such compliance concerning our exposure to
capital market investments. However, there can be no assurance that such time extensions or exemptions
will be granted in the future. If an exemption is not granted, this could have a material adverse effect on our
business, our future financial performance and the price of the NCDs, the Warrants and the Shares.

A decline in our capital adequacy ratio could restrict our future business growth

NHB regulations require HFCs to maintain a capital adequacy ratio of at least 12 per cent. of their
risk-weighted assets, with the minimum requirement of Tier I capital being 6 per cent. Our capital adequacy
ratio was 15.0 per cent. as of June 30, 2009, with Tier I capital comprising 13.7 per cent.



                                                      20
If our Company continues to grow our loan portfolio and asset base, we will be required to raise additional
Tier I and Tier II capital in order to continue to meet applicable capital adequacy ratios with respect to our
principal business of housing finance. In addition, if our insurance businesses continue to expand rapidly,
we will be required to raise additional capital to match the growth of our insurance assets. There can be no
assurance that we will be able to raise adequate additional capital in the future on terms favourable to it. If
the contribution of capital required by our insurance businesses leads to our capital adequacy ratio
declining, the growth of all our businesses, including our core housing finance business, could be
materially restricted.

Furthermore, the risk weighting required to be applied by us to individual mortgages ranges from 50 per
cent. to 100 per cent. based on the loan to value ratio and size of the loan. Commercial banks, however, are
required to maintain a minimum capital adequacy ratio of 9 per cent. as opposed to HFCs’ 12 per cent. If
risk weights are increased, our capital adequacy ratio would be reduced and we may be required to raise
additional capital to maintain our capital adequacy ratio.

Increased levels of non-performing loans would adversely affect our results of operations

Our gross non-performing loans represented 0.81 per cent. of our portfolio as of March 31, 2009 as against
0.84 per cent. in the previous year. On the basis of a 180-day default period, our non-performing loans were
0.56 per cent. as of March 31, 2009 and 0.68 per cent. as of March 31, 2008.

As of March 31, 2009, our provision for contingencies stood at Rs. 6,215.2 million or 0.73 per cent. of the
loan portfolio as compared to 0.64 per cent. as of March 31, 2008. There can be no assurance that our
provisions will be adequate to cover any further increase in the amount of non-performing loans or any
deterioration in our non-performing loan portfolio.

A number of factors which are not within our control could affect our ability to control and reduce
non-performing loans. These factors include developments in the Indian economy and the real estate
scenario, movements in global markets, global competition, changes in interest rates and exchange rates
and changes in regulations. If we continue to expand at our current rate, we may in the future reach a point
where we cannot continue to grow at the same rate without causing our non-performing loans to increase
and the overall quality of our loan portfolio to deteriorate. If our non-performing loans increase, we may be
unable to execute our business plan as expected and that could adversely affect the price of the NCDs, the
Warrants and the Shares.

Certain of our subsidiaries have incurred losses

Certain of our subsidiaries, particularly our insurance businesses, have incurred losses in recent years. This
is essentially due to the accounting norms for insurance companies in India wherein the commission
expenses are charged upfront in the year in which they are incurred while the corresponding income is
recognised over the entire life of the policies’ issue. The mismatch between the expenses and income has
the effect of magnifying losses of these companies. Furthermore, any adverse impact on the business and
revenue of our subsidiaries would affect our profitability on a consolidated basis and could place the capital
invested by us in such subsidiaries at risk.

We have subscribed to certain warrants convertible into Equity Shares of HDFC Bank. Failure to
exercise these warrants by us will lead to forfeiture of funds paid by us to HDFC Bank

HDFC Bank, as part of the merger scheme with Centurion Bank of Punjab (“CBOP”), issued 26,200,220
warrants on 3 June 2008, representing an entitlement to 26,200,220 Equity Shares, on a preferential basis to
us at a price of Rs. 1,530.13 per warrant amounting to around Rs. 40,000 million, of which Rs. 4009.2
million, being 10 per cent. of the total consideration was paid upfront by us in accordance with preferential
allotment guidelines issued by Securities and Exchange Board of India (“SEBI”). These warrants are
currently outstanding and can be exercised up to 2 December 2009. We decided to subscribe to these
warrants in order to maintain our ownership level in HDFC Bank at or around 23 per cent. and offset the
possible dilution in our ownership after the merger with CBOP. Due to volatility in the stock market, HDFC


                                                      21
Bank shares fell to below Rs. 800 in March 2009, but by August 10, 2009 had risen to Rs. 1,380, being
closer to the warrant conversion price of Rs. 1,530. There is no assurance that we will exercise these
warrants, in whole or in part, before the warrants expire. If we do not exercise any warrants, these warrants
shall lapse and the funds paid by us shall stand forfeited and also result in ultimate dilution of our
ownership and level of control in HDFC Bank.

We may be subject to regulations in respect of provisioning for non-performing loans that are less
stringent than in some other countries

NHB guidelines prescribe the provisioning required in respect of our outstanding loan portfolio. These
provisioning requirements may require us to reserve lower amounts than the provisioning requirements
applicable to financial institutions and banks in other countries. The provisioning requirements may also
require the exercise of subjective judgements of management.

The level of our provisions may not be adequate to cover further increases in the amount of our
non-performing loans or the underlying collateral. If such provisions are not sufficient to provide adequate
cover for loan losses that may occur, or if we are required to increase our provisions, this could have a
material adverse effect on our financial condition, liquidity and results of operations and may require us to
raise additional capital.

We may not be able to recover the full value of collateral or amounts, which are sufficient to cover
the outstanding amounts due under defaulted loans

Our policy is to secure all of our loans by real property and, in some cases, we have also taken further
security by way of personal guarantees and the assignment of benefits under life insurance policies.
However, an economic downturn or sharp downward movement in prices of real estate could result in a fall
in collateral values. Additionally, we may not be able to realise the full value of our collateral, due to,
among other things, defects in the perfection of collateral, delays in taking immediate action in foreclosure
proceedings and fraudulent transfers by borrowers.

Following the introduction of the Securitisation Act in 2002 and the extension of our application to HFCs,
we may now foreclose on collateral after 60 days’ notice to a borrower whose loan has been classified as
non-performing.

However, in a case in the Supreme Court of India in 2004, while the constitutional validity of the
Securitisation Act was affirmed, the right of a defaulting borrower to appeal to the Debt Recovery Tribunal
(the “DRT”) was also affirmed. The DRT has the power to issue a stay order prohibiting the lender from
selling the assets of a defaulted borrower. As a result, there can be no assurance that any foreclosure
proceedings would not be stayed by the DRT. In addition, we may be unable to realise the full value of our
collateral, as a result of factors including delays in foreclosure proceedings, defects in the perfection of
collateral and fraud perpetuated by borrowers. A failure to recover the expected value of collateral security
could expose us to a potential loss. Any such losses could adversely affect our financial condition and
results of operations.

We may have to comply with stricter regulations and guidelines issued by regulatory authorities in
India, including the NHB

We are regulated principally by and have reporting obligations to the NHB. We are also subject to the
corporate, taxation and other laws in effect in India. The regulatory and legal framework governing us
differs in certain material respects from that in effect in other countries and may continue to change as
India’s economy and commercial and financial markets evolve. In recent years, existing rules and
regulations have been modified, new rules and regulations have been enacted and reforms have been
implemented which are intended to provide tighter control and more transparency in India’s housing
finance sector.




                                                     22
Our ability to assess, monitor and manage risks inherent in our business differs from the standards
of some of our counterparts in India and in some developed countries

We are exposed to a variety of risks, including liquidity risk, interest rate risk, credit risk, operational risk
and legal risk. The effectiveness of our risk management is limited by the quality and timeliness of
available data.

Our hedging strategies and other risk management techniques may not be fully effective in mitigating our
risks in all market environments or against all types of risk, including risks that are unidentified or
unanticipated. Some methods of managing risks are based upon observed historical market behaviour. As a
result, these methods may not predict future risk exposures, which could be greater than the historical
measures indicated. Other risk management methods depend upon an evaluation of information regarding
markets, customers or other matters. This information may not in all cases be accurate, complete, up-to-
date or properly evaluated. Management of operational, legal or regulatory risk requires, among other
things, policies and procedures to properly record and verify a number of transactions and events. Although
we have established these policies and procedures, they may not be fully effective.

Our future success will depend, in part, on our ability to respond to new technological advances and
emerging banking and housing finance industry standards and practices on a cost-effective and timely
basis. The development and implementation of such technology entails significant technical and business
risks. There can be no assurance that we will successfully implement new technologies or adapt our
transaction-processing systems to customer requirements or emerging market standards.

Borrowing for the purchase or construction of property may not continue to offer borrowers the
same fiscal benefits it currently offers and the housing sector may not continue to be regarded as a
priority sector by the Government

The rapid growth in the housing finance industry in India in the last decade is in part due to the introduction
of fiscal benefits for homeowners. Since the early 1990s, interest and principal repayments on capital
borrowed for the purchase or construction of housing have been tax deductible up to certain limits and tax
rebates have been available for borrowers of such capital up to specified income levels. There can be no
assurance that the Government will continue to offer such tax benefits to borrowers at the current levels or
at all. In addition, there can be no assurance that the Government will not introduce tax efficient investment
options which are more attractive to borrowers than property investment. The demand for housing and/or
housing finance may be reduced if any of these changes occur.

The RBI has also provided incentives to the housing finance industry by extending priority sector status to
housing loans. In addition, pursuant to Section 36(1)(viii) of the Indian Income Tax Act, 1961, up to 20 per
cent. of profits from the provision of long-term finance for the construction or purchase of housing in India
may be carried to a special reserve and are not subject to income tax. In each of fiscal 2008 and 2009, we
utilised the maximum amount of this allowance. There can be no assurance that the Government will
continue to make this fiscal benefit available to HFCs. If it does not, this may increase the effective tax rate
and hence may have an adverse effect on our net profit.

We are currently in dispute with the Indian tax authorities with respect to certain income tax
demands

We are currently in dispute with the Indian tax authorities with respect to income tax demands amounting
to Rs. 3,151.1 million. These disputes relate, among other things, to the application of tax concessions
provided to Indian housing finance corporations pursuant to Section 36(1)(viii) and Section 14 A of the
Indian Income Tax Act, 1961. See note 21(ii) of schedule 14 of our audited unconsolidated financial
statements included elsewhere in this Preliminary Placement Document.

Our dispute with the Indian tax authorities relates to the computation of the profit derived from the business
of long-term housing finance eligible for this special deduction. The dispute revolves around the correct


                                                       23
classification of eligible incomes and related expenses that constitute the long-term housing finance
business. Based on advice received from our tax advisers, we believe that the dispute will be settled in our
favour. Nonetheless, we have recognised a contingent liability in respect of all the disputed income tax
demands up to March 31, 2009 (inclusive) in the amount of Rs. 3,151.1 million. We have already
paid/adjusted the amount of Rs. 3,151.1 million to the Indian tax authorities and will receive this amount as
a refund if the disputes are resolved in our favour. If the disputes were to be decided in favour of the tax
authorities, although there would be no further payment required by us, the Rs 3,151.1 million would have
to be added as a provision for tax and this would accordingly reduce our profit after tax by a corresponding
amount.

If the corporate undertakings provided by us in our assignment of receivables transactions are
invoked, it may require outflow in respect of these undertakings and adversely affect our net income

We have provided credit enhancement for some of our assignment of receivables. Contingent liability in
respect of corporate undertakings provided by us for assignment of receivables aggregated to Rs. 5,948.5
million in fiscal 2009 as against Rs. 2,201.2 million in fiscal 2008. The outflow would arise in the event of
a shortfall, if any, in the cash flows of the underlying pool of the assigned receivables. If we continue to
provide credit enhancement in our future assignment of receivables, even if it is fully provided for as a
contingent liability, our financial condition and results of operations may be adversely affected in the event
of any shortfall.

We will be subject to a number of new accounting standards that may significantly impact our
financial statements

Our results of operations and financial condition will be affected by certain changes to Indian GAAP, which
are intended to align Indian GAAP further with IFRS. These new accounting standards will change our
methodology for estimating allowances for probable loan losses. New accounting standards may require us
to value our non-performing loans by reference to their market value (if a ready market for such loans
exists), or to calculate the present value of the expected future cashflows realisable from our loans,
including the possible liquidation of collateral (discounted at the loan’s effective interest rate) in estimating
allowances for probable losses. This may result in our recognising higher allowances for probable loan
losses in the future which will adversely affect the results of our operations.

Risks relating to the Warrants

There is no existing market for the Warrants and an active market for the Warrants may not
develop, which may cause the price of the Warrants to fall

The Warrants are a new issue of securities for which there is currently no trading market. No assurance can
be given that an active trading market for the Warrants will develop, or as to the liquidity or sustainability
of any such market. The price of the Warrants also depends on the supply and demand for the Warrants in
the market and the price at which the Warrants is trading at any time may differ from the underlying
valuation of the Warrants because of market inefficiencies. To the extent Warrants are exercised, the
number of Warrants of such issue outstanding will decrease, resulting in a diminished liquidity for the
remaining Warrants of such issue. A decrease in the liquidity of an issue of Warrants may cause, in turn, an
increase in the volatility associated with the price of such issue of Warrants. The more limited the
secondary market is for the Warrants, the more difficult it may be for the holders thereof to realise value for
such Warrants prior to the Expiry Date of the Warrants.

The Warrants can be volatile instruments and may expire worthless

The Warrants are subject to a number of risks, including: (i) sudden and large falls in value; (ii) changes in
the price or market value of the Collateral and/or changes in the circumstances of the obligor under the
Collateral; and (iii) a complete or partial loss of the investment in the Warrants.




                                                       24
The market for the Warrants may be limited and this may adversely impact their value or the ability of a
holder of the Warrants to dispose of them. Neither our Company nor any of the Joint Bookrunning Lead
Managers gives any assurance as to the merits or performance of the Warrants and makes no commitment
to make a market in or to repurchase the Warrants.

Transactions in off-exchange Warrants may involve greater risks than dealing in exchange-traded options.

This Preliminary Placement Document cannot disclose all of the risks and other significant aspects of the
Warrants. No person should deal in the Warrants unless that person understands the terms and conditions of
the Warrants and the extent of that person's exposure to potential loss. Each prospective purchaser of
Warrants should consider carefully whether the Warrants are suitable in the light of our circumstances and
financial position.

Prospective purchasers of Warrants should consult their own professional advisers to assist them in
determining the suitability of the Warrants for them as an investment.

Future issues or sales of the Shares may significantly affect the trading price of the Warrants and
such issues or sales may not result in an adjustment to the conversion price provisions in the
Conditions and the Trust Deed

A future issue of Shares by our Company or the disposal of Shares by any of the major shareholders of our
Company, or the perception that such issues or sales may occur, may significantly affect the trading price of
the Warrants or the Shares. Other than the obtaining of consent from some of our lenders prior to altering
our capital structure, there is no restriction on our ability to issue Shares, and there can be no assurance that
our Company will not issue Shares or that such issue will result in an adjustment to the conversion price
provisions in the Conditions and the Trust Deed.

Risks relating to the NCDs

There is no existing market for the NCDs and an active market for the NCDs may not develop, which
may cause the price of the NCDs to fall

The NCDs are a new issue of securities for which there is currently no trading market and represent our
first issuance of debt securities to QIPs under Chapter XIII-A of the SEBI (Disclosure and Investor
Protection) Guidelines, 2000. Before this offering, we have offered non-convertible debentures that have
been listed on the WDM segment of the NSE on a privately placed basis. However, there has been limited
trading of the privately placed debentures from the date of their listing on the WDM segment of NSE. No
assurance can be given that an active trading market for the NCDs will develop, or as to the liquidity or
sustainability of any such market, the ability of holders to sell their NCDs or the price at which holders of
the NCDs will be able to sell their NCDs. If an active market for the NCDs fails to develop or be sustained,
the trading price of the NCDs could fall. If an active trading market were to develop, the NCDs could trade
at prices that may be lower than the initial offering price of the NCDs.

Whether or not the NCDs will trade at lower prices depends on many factors, including: (i) the market for
similar securities; (ii) general economic conditions; and (iii) our financial condition, results of operations
and future prospects.

Changes in interest rates may affect the price of the NCDs

All securities where a fixed rate of interest is offered, such as the NCDs, are subject to price risk. The price
of such securities will vary inversely with changes in prevailing interest rates, i.e. when interest rates rise,
prices of fixed income securities fall and, when interest rates drop, the prices increase. The extent of a fall
or rise in the prices is a function of the existing coupon, days to maturity and the increase or decrease in the
level of prevailing interest rates. Increased rates of interest, which frequently accompany inflation, are
likely to have a negative effect on the price of the NCDs.



                                                       25
Payments made on the NCDs are subordinated to certain tax and other liabilities preferred by law

The NCDs will be subordinated to certain liabilities preferred by law such as to claims of the Government
on account of taxes, and certain liabilities incurred in the ordinary course of our business. In particular, in
the event of bankruptcy, liquidation or winding-up, our assets will be available to pay obligations on the
NCDs only after all of those liabilities that rank senior to these NCDs have been paid. In the event of
bankruptcy, liquidation or winding-up, there may not be sufficient assets remaining, after paying amounts
relating to these proceedings, to pay amounts due on the NCDs.

Any downgrading in credit rating of the NCDs may affect their value

This issue has been rated by ICRA and CRISIL as having an ‘LAAA’ and ‘AAA’ rating respectively for the
issuance of the NCDs for an aggregate amount of Rs. 40,000 million. We cannot guarantee that these
ratings will not be downgraded. Such a downgrade in the above credit ratings may lower the value of the
NCDs.




                                                      26
                                         USE OF PROCEEDS

The total initial proceeds of the Issue will be Rs. [●] million. After deducting the Issue expenses of
approximately Rs. [●] million, the net initial proceeds of the Issue will be approximately Rs. [●] million
assuming no conversion of Warrants into Equity Shares. The aggregate net proceeds of the Issue of NCDs
at the NCD Issue Price and Warrants at the Warrant Issue Price, assuming full conversion of the Warrants
at the Warrant Exercise Price during the Warrant Exercise Period will be approximately Rs. [●] million.
However, the exercise of Warrants is at the option of Warrantholders and the Company cannot assume that
all the Warrantholders will convert the Warrants into Equity Shares by payment of the Warrant Exercise
Price. Non-conversion of some or all of the Warrants would result in the Company not being able to raise
the aggregate net proceeds of the Issue as aforesaid.

Subject to compliance with applicable laws and regulations, the Company intends to use the net proceeds of
the Issue, to augment its long-term resources.




                                                    27
                                                   CAPITALIZATION

The following table sets forth the Company’s capitalization and total debt as of March 31, 2009 on a
standalone basis and as adjusted to give effect to (i) the Issue pursuant to this Preliminary Placement
Document and (ii) the conversion of all the Warrants issued pursuant to this Preliminary Placement
Document into Equity Shares at the Warrant Exercise Price during the Warrant Exercise Period. This table
should be read in conjunction with the Company’s financial statements and the related notes, “Management
Discussion and Analysis of Financial Condition and Results of Operations” and other financial information
contained in “Financial Statements”.

                                                                                                 (Rs. in Million)
                                                             As at March 31, As adjusted for the As adjusted for
                                                                   2009            Issue         Warrants being
                                                                                                     exercised
                                                                                                  (assuming full
                                                                                                    exercise*)
Shareholders’ Funds
Share Capital                                                          2,844.50                          [●]                     [●]
Reserve and Surplus                                                  128,529.38                          [●]                     [●]
Total shareholders’ funds                                            131,373.88                          [●]                     [●]

Loan Funds
Secured Loans
         Loans                                                       226,805.34                          [●]                     [●]
         Bonds                                                         1,046.50                          [●]                     [●]
         Non-Convertible Debentures                                  323,949.00                          [●]                     [●]
Total Secured Loans                                                  551,800.84                          [●]                     [●]
Unsecured Loans
         Foreign Currency Convertible Bonds                            5,575.61                          [●]                     [●]
         Other    than    Foreign     Currency                       281,184.36                          [●]                     [●]
         Convertible Bonds
Total Unsecured Loans                                                286,759.97                          [●]                     [●]
Total debts                                                          838,560.81                          [●]                     [●]

Total Capitalization                                                 969,934.69                          [●]                     [●]
* Assuming that all Warrants held by eligible investors have been exercised during the Warrant Exercise Period at Warrant Exercise
Price and no other Equity Shares are issued by the Company during the Warrant Exercise Period, including on account of conversion
of FCCBs or pursuant to the ESOS.

Employee Stock Option Schemes

a)      Pursuant to a resolution passed by the shareholders of the Company dated July 16, 2008 the
        Company adopted the Employee Stock Option Scheme 2008 (the “ESOS 2008”). The Compensation
        Committee of Directors, at its meeting held on November 25, 2008, approved the grant of 5,790,000
        stock options representing 5,790,000 Equity Shares of the Company, at the market price as defined
        in SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.
        This includes 5,690,000 stock options approved by the shareholders on July 16, 2008 and 100,000
        options lapsed under ESOS 2007. In terms of the ESOS 2008, the options would vest over a
        maximum period of 3 years. The exercise period in respect of such options shall be 5 years from the
        date of vesting. As on date of this Preliminary Placement Document, no options have been vested
        under ESOS 2008.

b)      Pursuant to a resolution passed by the shareholders of the Company dated June 27, 2007, the
        Company adopted the Employee Stock Option Scheme 2007 (the “ESOS 2007”). The Compensation


                                                               28
       Committee of Directors, at its meeting held on September 12, 2007, approved the grant of 5,456,835
       stock options representing 5,456,835 Equity Shares at the market price as defined in SEBI
       (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. This
       represents 5,060,000 stock options approved by the shareholders on June 27, 2007 and 396,835
       options lapsed under earlier schemes. In terms of the ESOS 2007, the options would vest over a
       maximum period of 3 years. The exercise period in respect of such options shall be 5 years from the
       date of vesting. As on June 30, 2009 1,318 stock options have been exercised under ESOS 2007.

c)     Pursuant to a resolution passed by the shareholders of the Company on July 15, 2005, the Company
       adopted the Employee Stock Option Scheme 2005 (the “ESOS 2005”). The Compensation
       Committee of Directors, at its meeting held on October 25, 2005, approved the grant of 7,473,621
       stock options representing 7,473,621 Equity Shares under ESOS 2005 at the market price as defined
       in SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.
       In terms of the ESOS 2005, the options would vest over a maximum period of 3 years. The exercise
       period in respect of such options shall be 5 years from the date of vesting. As on June 30, 2009
       4,411,148 stock options have been exercised under ESOS 2005.

d)     Pursuant to a resolution passed by the shareholders of the Company on July 9, 1999, the Company
       adopted the Employee Stock Option Scheme 2002 (the “ESOS 2002”). The Compensation
       Committee of Directors approved the grant of 2,109,088 stock options representing 2,109,088 Equity
       Shares under ESOS 2002, at the market price as defined in SEBI (Employee Stock Option Scheme
       and Employee Stock Purchase Scheme) Guidelines, 1999. Further, pursuant to the issue of bonus
       Equity Shares in the ratio of 1:1, approved by the shareholders of the Company at the extra-ordinary
       general meeting held on December 2, 2002, the said stock options were proportionately increased.
       As on June 30, 2009 3,992,659 stock options have been exercised under ESOS 2002.

Foreign Currency Convertible Bonds

In September 2005, the Company issued USD 500 million zero coupon Foreign Currency Convertible
Bonds (the “FCCBs”). The FCCBs are convertible into Equity Shares up to July 29, 2010 at the option of
the FCCB holders, at Rs. 1,399 per Equity Share, representing a conversion premium of 50 per cent over
the initial reference share price. Up to June 30, 2009, the Company had allotted 12,211,511 Equity Shares
of Rs. 10 each pursuant to the conversion of the FCCB, representing 78.16 per cent of the FCCBs.

Change in capital structure since incorporation

The table below sets forth the changes in the equity share capital structure of the Company since its
incorporation until June 30, 2009:

                       Particulars                       No. of shares Year / date of issue
                                                             issued
                                                          (of Rs. 10/-
                                                              each)
     Initial Issue                                         10,000,000                  1978
     Public cum Rights Issue                               10,000,000                  1987
     Public cum Rights Issue                               25,000,000                  1990
     Rights Issue of Fully Convertible Debenture           47,250,000                  1992
     Private Placement to Financial Institutions             9,000,000                 1993
     Private Placement to Foreign Investors                17,864,000                  1995
     Allotment under ESOS                                    2,846,713 Between March 2001 and
                                                                       November 2002
     Bonus Issue (1:1)                                    121,960,713 December 30, 2002
     Allotment under ESOS                                    2,695,695 Between January 2003 and March
                                                                       2004



                                                    29
                        Particulars                           No. of shares   Year / date of issue
                                                                  issued
                                                               (of Rs. 10/-
                                                                   each)
    Allotment under ESOS                                          2,503,611   During Financial Year 2004-05
    Allotment under ESOS                                            443,201   During Financial Year 2005-06
    Allotment under ESOS                                          3,442,674   During Financial Year 2006-07
    Allotment on a preferential basis                           15,250,000    July 11, 2007 – CMP Asia Limited
    Allotment on a preferential basis                             2,750,000   July 24, 2007 – Citigroup Strategic
                                                                              Holdings Mauritius Ltd.
    Allotment under ESOS                                         1,097,968    During Financial Year 2007-08
    Allotment pursuant to Conversion of FCCB                    11,933,410    During Financial Year 2007-08
    Allotment under ESOS                                           181,570    During Financial Year 2008-09
    Allotment pursuant to Conversion of FCCB                       234,355    During Financial Year 2008-09
    Allotment pursuant to Conversion of FCCB                        43,746    During April 2009 and June 2009
    Allotment under ESOS                                            62,698    Between April 2009 and June 2009
    Total                                                     2,84,560,354

Note: The equity shares of the Company were sub-divided from face value of Rs. 100 per equity share to
Rs. 10 per equity share on August 25, 1999. Hence, for consistency, the face value of the equity shares
issued prior to the said date is also shown as Rs. 10 each.

Debt Equity Ratio


                 Prior to the Issue                                            After the Issue
              (as on March 31, 2009)
                                                   6.4                                                        [•]

Servicing behaviour on existing debt securities, payment of due interest on due dates on term loans
and debt securities is as under:

Interest on existing debt securities of the Company is paid to the respective holders of the debt securities on
the relevant due dates for payment of such interest, which is fixed in accordance with the terms of the issue
of such debt securities. As on the date of this Preliminary Placement Document, the Company has not
defaulted in its obligations to pay either the interest or principal amount towards its existing debt securities
or term loans.




                                                         30
                                     MARKET PRICE INFORMATION

As of June 30, 2009, 284,560,354 of the equity shares were issued and outstanding. The equity shares are
listed on the Stock Exchanges. As the equity shares are actively traded on the BSE and NSE, the stock
market data has been given separately for each of these Stock Exchanges. The equity shares have been
listed on the BSE since July 3, 1978 and on the NSE since August 5, 1996.

The table set forth below is for the periods that indicate the high and low prices of the Equity Shares and
also the volumes of trading activity. On August 14, 2009, on the NSE was Rs. 2,316.00 per Equity Share
and on the BSE was Rs. 2,310.80 per equity share (equity share of face value Rs. 10 each).

The high, low and average market prices of the equity shares of the Company during the preceding three
years are as under:

                                                     BSE
  Year   Date of High        High     Volume on date Date of Low Low (Rs.) Volume on Date Average (Rs.)
 ending                      (Rs.)       of High                                of low
March 31                              (No. of Equity                        (No. of Equity
                                         Shares)                               Shares)
2007      February 5,        1,817.25          157,136 June 14, 2006 997.10          206,723  1,403.26
          2007
2008      January 9,         3,174.25          135,696 April 3, 2007   1,423.95          176,302      2,299.28
          2008
2009      April 29, 2008     2,881.45          130,279 March 5,        1,149.75        1,766,502      1,948.20
                                                       2009
(Source: www.bseindia.com)


                                                     NSE
  Year   Date of High        High     Volume on date Date of Low Low (Rs.) Volume on Date Average (Rs.)
 ending                      (Rs.)       of High                                of low
March 31                              (No. of Equity                        (No. of Equity
                                         Shares)                               Shares)
2007      February 5,        1,820.35          796,411 June 14, 2006 998.05          884,135  1,403.68
          2007
2008      January 9,         3,180.15          595,144 April 3, 2007   1,426.65          752,410      2,302.48
          2008
2009      April 29, 2008     2,888.80          981,312 March 5,        1,151.25        3,478,939      1,948.44
                                                       2009
(Source: www.nseindia.com)

Notes
         ·    High, low and average prices are of the daily closing prices.
         ·    In case of two days with the same closing price, the date with higher volume has been
              considered.




                                                     31
Monthly high and low prices and trading volumes on the Stock Exchanges for the six months preceding the
date of filing of this Preliminary Placement Document:

                                                            BSE
   Month             Date          High         Volume       Date           Low      Volume          Average      Total
                                   (Rs.)        (No. of                     (Rs.)    (No. of          Price    Volume of
                                                Equity                               Equity           (Rs.)    the Equity
                                                Shares)                              Shares)                     Shares
                                                                                                                 traded
July 2009       July 3, 2009       2,586.25       268,530 July 10,      2,199.15          112,778      2,398.92 3,807,603
                                                          2009
June 2009       June 26, 2009      2,435.50        98,948 June 18,      2,272.85           86,787      2,342.60    2,653,928
                                                          2009
May 2009        May 19, 2009       2,344.30       318,804 May 11,       1,710.30          302,208      2,010.00    4,919,131
                                                          2009
April 2009 April 24,               1,804.60       270,650 April 1,      1,505.80          523,805      1,718.38    4,162,614
           2009                                           2009
March 2009 March 26,               1,635.25       367,040 March 5,      1,149.75         1,766,502     1,379.51 12,761,826
           2009                                           2009
February   February 13,            1,540.65       213,044 February      1,211.65          486,381      1,408.35    6,712,911
2009       2009                                           26, 2009
(Source: www.bseindia.com)

                                                           NSE
  Month            Date          High         Volume       Date        Low          Volume           Average     Total
                                 (Rs.)        (No. of                  (Rs.)        (No. of           (Rs.)    Volume of
                                              Equity                                Equity                      Equity
                                              Shares)                               Shares)                     Shares
                                                                                                                traded
July 2009       July 3, 2009     2,586.30     1,153,545 July 10,       2,198.50      1,080,730        2,400.22 24,767,153
                                                        2009
June 2009  June 26,              2,435.15     1,036,132 June 18,       2,275.20          767,193      2,343.80    20,533,341
           2009                                         2009
May 2009 May 18,                 2,374.20        14,162 May 11,        1,711.15      1,602,460        2,011.52    35,462,035
           2009                                         2009
April 2009 April 27,             1,807.95       882,038 April 1,       1,505.80      2,232,643        1,718.58    23,804,153
           2009                                         2009
March 2009 March 26,             1,656.45     2,262,404 March 5,       1,151.25      3,478,939        1,379.77    47,396,981
           2009                                         2009
February   February              1,540.40       692,808 February 26,   1,212.05      2,698,687        1,408.61    30,017,172
2009       13, 2009                                     2009
(Source: www.nseindia.com)

Notes
            ·    High, low and average prices are of the daily closing prices.
            ·    In case of two days with the same closing price, the date with higher volume has been
                 considered.

Market price on June 10, 2009, the first working day following the meeting of the Committee of Directors,
duly authorized by the Board, approving the Issue are as under:

         Date                                    BSE                                             NSE
                               Open         High     Low          Close        Open         High     Low            Close
June 10, 2009                  2399.00      2455.00  2336.25      2350.00      2444.00      2445.00  2331.40        2349.65
 Volume on the Date                                               176,131                                           896,477
(Source: www.bseindia.com; www.nseindia.com)




                                                             32
Details of the volume of business transacted during the last six months on the Stock Exchanges are as
under:
                                                                                        (In Rs. million
                                                                                                      )
                    Period                             BSE                          NSE
July 2009                                                     9,429.80                        59,503.18
June 2009                                                     6,223.13                        48,138.01
May 2009                                                      9,759.24                        72,041.34
April 2009                                                    7,044.52                        40,432.53
March 2009                                                   16,523.61                        64,166.52
February 2009                                                 9,011.03                        40,998.94
(Source: www.bseindia.com; www.nseindia.com)




                                                  33
                                          DIVIDEND POLICY

Under the Companies Act, an Indian company pays dividends upon a recommendation by its board of
directors and approval by a majority of the shareholders at the AGM, who have the right to decrease but not
to increase the amount of the dividend recommended by the board of directors. Under the Companies Act,
dividends may be paid out of profits of a company in the year in which the dividend is declared or out of
the undistributed profits or reserves of previous fiscal years or out of both. The Articles of Association of
the Company also gives the discretion to the Board of Directors to declare and pay interim dividends
without shareholder’s approval at an AGM. A listed company in India may declare and disclose the
dividend it issues only on a per share basis.

Warrantholders shall not be entitled to any dividend or any other corporate benefits, which may be
declared or announced by the Company from time to time, until such time that the Warrants are
exercised into the underlying Equity Shares of the Issuer in accordance with these Conditions

The Company does not have any formal dividend policy for the Equity Shares. The declaration and
payment of equity dividend would be governed by the applicable provisions of the Companies Act and
Articles of Association of the Company.

The following table details the dividend paid by the Company on the Equity Shares for fiscal 2005 up to
fiscal 2009:

Fiscal         Interim         Final           Total           Interim         Final            Total
               dividend        dividend        dividend        dividend        dividend         dividend
               per Equity      per Equity      per Equity      (Rs.      in    (Rs.     in      (Rs.     in
               Share (Rs.)     Share (Rs.)     Share (Rs.)     million)        million)         million)
2005                    Nil             17              17              Nil          4,235.05        4,235.05
2006                    Nil             20              20              Nil          4,991.28        4,991.28
2007                    Nil             22              22              Nil          5,566.15        5,566.15
2008                    Nil             25              25              Nil          7,105.25        7,105.25
2009                    Nil               30              30            Nil          8,536.81        8,536.81

The amounts paid as dividends in the past are not necessarily indicative of the dividend policy of the
Company or dividend amounts, if any, in the future.

Any future dividends would be at the discretion of the Board of Directors and would depend on the
financial condition, results of operations, capital requirements, contractual obligations, the terms of our
credit facilities and other financing arrangements of the Company at the time a dividend is considered, and
other relevant factors.

Dividends are payable within 30 days of declaration. When dividends are declared, all the shareholders
whose names appear in the share register as on the “record date” or “book closure date” are entitled to be
paid dividend declared by the Company. Any shareholder who ceases to be a shareholder prior to the
record date, or who becomes a shareholder after the record date, will not be entitled to the dividend
declared by the Company.

Under the current Indian tax laws, dividends are not subject to income tax in India in the hands of the
recipient. However, a company is liable to pay ‘dividend distribution tax’ on dividend distributed. The
dividend distribution tax is currently payable at the rate of 15 per cent (plus surcharge at 10 per cent and
education cess and secondary and higher education cess on dividend distribution tax at the rate of 3 per cent
collectively) on the total amount distributed as dividend. The effective rate of dividend distribution tax is
approximately 17 per cent. Provided that a company is not a subsidiary of any other company and it has
received dividend from its subsidiary companies, such company may be allowed to set off the amount of
dividend received from its susbsidiary companies against the amount of dividend distributed provided that




                                                     34
the subsidiary company has paid dividend distribution tax on such dividend. For further details, see
‘Taxation’.




                                                 35
         MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS

You should read the following discussion in conjunction with our audited unconsolidated financial
statements as at and for the years ended March 31, 2007, 2008 and 2009 and in each case, the notes
thereto, which are prepared in accordance with Indian GAAP and included elsewhere in this Preliminary
Placement Document. For purposes of this discussion, references to “fiscal year” are to the year ended,
and as at, March 31.

Basis of Presentation of Financial Information

For financial statement reporting purposes, we have reported both audited unconsolidated financial
statements as at and for the years ended March 31, 2007, 2008 and 2009 and audited consolidated financial
statements as at and for the years ended March 31, 2007, 2008 and 2009.

Our audited unconsolidated financial statements as at and for the years ended March 31, 2007, 2008 and
2009 report the financial statements and results of operations relating to our principal business segment,
comprising our mortgage lending business, which includes the main business of providing home loans for
the construction of residential houses. Our audited consolidated financial statements as at and for the years
ended March 31, 2007, 2008 and 2009 report the financial statements and results of operations relating to
the Group’s five segments comprising Housing, Life Insurance, General Insurance, Asset Management and
others (which includes project management, investment consultancy and property related services).

In accordance with our previous practice of announcing and analysing our financial statements on an
unconsolidated basis, the discussion in this section, unless otherwise stated, relates to our unconsolidated
financial statements as at and for the years ended March 31, 2007, 2008 and 2009.

Our audited unconsolidated financial statements as at and for the years ended March 31, 2007, 2008 and
2009 and for the three months ended June 30, 2008 and 2009 subject to limited review, is included
elsewhere in this Preliminary Placement Document. Our audited consolidated financial statements as at and
for the years ended March 31, 2007, 2008 and 2009 is included elsewhere in this Preliminary Placement
Document.

Overview

HDFC is the largest housing finance company in India in terms of total assets and mortgage lending. As of
March 31, 2009, our outstanding mortgage loans amounted to Rs. 851,981.1 million and our total assets
were Rs. 969,934.7 million. Our principal business is providing finance to individuals, corporates,
developers and co-operative societies for the purchase, construction, development and repair of houses,
apartments and commercial property in India.

Our income was Rs. 58,632.7 million, Rs. 81,960.6 million and Rs.110,176.6 million in fiscal 2007, 2008
and 2009, respectively and our profit after tax was Rs. 15,703.8 million, Rs. 24,362.5 million and Rs.
22,825.4 million in the same periods, respectively. Our capital adequacy ratio was 12.9 per cent., 16.6 per
cent. and 13.5 per cent. as of March 31, 2007, 2008 and 2009, respectively and our gross non performing
assets were 0.92 per cent., 0.84 per cent., and 0.81 per cent., respectively.

Principal Factors Affecting Our Financial Results and Performance

Our financial results are dependent generally on the performance of the Indian economy and to a lesser
extent global economy and the banking and financial services sector in particular. Our business, prospects,
financial condition and results of operations are subject to various risks and uncertainties including those
disclosed in the section titled “Risk Factors”. The following is a discussion of certain other factors that
have had, and continue to have, a significant effect on our financial results.




                                                     36
Customer Relationships, Approvals and Disbursements: The key drivers of our revenues from retail
operations across our business are to understand the unique requirements of customers. If we are not
successful in developing new customer relationships, or retaining existing customer relationships, our
earnings may be adversely affected. Our ability to service the varied requirements of our customers is
evidenced by the amount of approvals and disbursements of loans and the size our loan book in any period.
The total approvals in fiscal 2009 stood at Rs. 491,660.0 million as against Rs. 425,200.0 million in fiscal
2008, representing a growth of 16 per cent. Disbursements in fiscal 2009 were Rs. 396,500.0 million
against Rs. 328,750.0 million in fiscal 2008 representing a growth of 21 per cent. In fiscal 2009, the
demand for individual home loans continued despite the overall economic slowdown and uncertainty. The
average size of individual loans also increased to Rs. 1.5 million in fiscal 2009 from Rs. 1.1 million in
fiscal 2007.

The following table sets forth the details of our approvals, disbursements and average size of loans in the
periods mentioned:

                                                                           Fiscal
                                                    2007                   2008                    2009
                                                                      (in Rs. million)
Loans approved                                         333,320.0               425,200.0               491,660.0
Disbursement                                           261,780.0               328,750.0               396,500.0
Average size of individual loans                             1.1                      1.4                    1.5

In fiscal 2009, our loan book increased to Rs. 851,981.1 million from Rs. 733,277.8 million in fiscal 2008.
The net increase in the loan book of Rs. 118,703.3 million has been determined after taking into account
loan repayments of Rs. 235,250 million (previous year Rs.158,190 million ) and net loans written off
during the year amounting to Rs. 101.5 million (previous year Rs.184.0 million ). The loan book, net of
loans sold has grown by 16 per cent. in fiscal 2009. The growth in the loan book would have been higher at
22 per cent., if the loans sold were included in the loan book. The following table sets forth a breakdown of
our loan portfolio as at the specified dates:

                                                                     As at March 31,
                                                    2007                   2008                    2009
                                                                     (in Rs. million)
Individuals                                            373,624.5              483,781.4                548,894.4
Corporate Bodies                                       178,585.1              231,017.8                284,165.3
Others                                                  16,834.0               18,478.6                 18,921.4
Total                                                  569,043.6              733,277.8                851,981.1

Capital Adequacy and Non Performing Assets: Our Capital Adequacy ratio was equal to 13.5 per cent. in
fiscal 2009 as against the minimum requirement of 12 per cent. stipulated by the National Housing Bank
(NHB). Our Net Non Performing Loans position was equal to 0.81 per cent. of the total loan portfolio in
fiscal 2009 as compared to 0.84 per cent. in fiscal 2008.

                                                                          As at March 31,
                                                        2007                    2008                    2009
                                                           (in Rs. million except ratios and percentages)
Capital Adequacy Ratio (%)                                  12.9                     16.6                    13.5
Total Loan Portfolio                                   581,955.5               744,340.7               864,893.0
Gross Non Performing Assets                              5,338.2                  6,210.1                 7,016.0
per cent. of NPAs to the total loan portfolio             0.92%                    0.84%                   0.81%

Deposits: As at March 31, 2009, outstanding deposits stood at Rs. 193,746.6 million as against Rs.
112,962.5 million in the previous year, representing a growth of 72 per cent. During the year deposits
accounted for 55 per cent. of our incremental borrowings. The depositor base stood at approximately 1
million depositors. CRISIL and ICRA have for the fourteenth consecutive year in 2009, reaffirmed their
‘AAA’ rating for our deposits. This rating represents ‘highest safety’ as regards timely repayment of


                                                     37
principal and interest. We pay brokerage to agents who mobilise retail deposits. The brokerage is linked to
the amount and the period of deposit and is paid up-front for the full term of the deposit. In addition, agents
who achieve certain collection targets are paid an incentive every year. In line with international accounting
standards, we have been amortising the brokerage, proportionately over the term of the deposit. Incentive
brokerage is being fully charged to the profit and loss account in the year of payment.

Sale of Loans: During the year, we, under the loan assignment route sold Rs. 42,450 million of loans to
HDFC Bank, which qualified as priority sector advances for HDFC Bank. Out of the total loans assigned to
HDFC Bank, approximately half amount was pursuant to the exercise of the buy back option embedded in
the home loan sourcing arrangement between HDFC Bank and us. The loans outstanding in respect of loans
sold under the mortgage backed securities (MBS) and loan assignment route as at March 31, 2009 stood at
Rs. 61,800 million. We continue to service the loans sold. The residual income on loans sold is being
recognised at the time of actual collections, (which is over the life of the underlying loans) and not upfront
on a net present value basis. Where individual loans have been sold, the issues carry a rating indicating the
highest degree of safety. As of March 2009, loans aggregating to Rs. 88,850 million have been sold by us
through the issue of MBS and the loan assignment route.

Changes in Economic Conditions in India: As a company operating in the housing industry with businesses
currently operating in the domestic Indian market, our performance is highly dependent on the overall
economic conditions in India, including the GDP growth rate, the economic cycle and the health of the
securities markets. Any trends or events which have a significant impact on the economic situation in India,
including a rise in interest rates could have an adverse impact on the financial standing and growth plans of
our borrowers and contractual counter parties, and lead to a slowdown in sectors important to our business.
See “Risk Factors ― A slowdown in economic growth in India may adversely affect our business and
results of operations” and “Risk Factors—We may be unable to secure funding at competitive rates”.

Changes in Government Policies and Regulation: The financial services industry including the home loans
business in India is subject to extensive regulation by governmental and self-regulatory organizations,
including the RBI, SEBI, NHB, BSE and NSE. These regulations address issues such as customer
protection, capital adequacy for Housing Finance Companies (“HFCs”), market conduct, margin
requirements, foreign investment and foreign exchange. In recent years, existing rules and regulations have
been modified, new rules and regulations have been enacted and reforms have been implemented. Changes
in government and other regulatory policies affecting the financial services industry could require changes
to our systems and business operations and could involve additional costs and management time. Other
general changes in economic and regulatory policy may also affect our business, as they affect the
businesses, financial condition and investment policies of our customers. India has been charting a course
of economic liberalisation and deregulation in recent years. Some policy changes may be beneficial to our
business, while others may have a negative impact. For example, significant changes in deregulation
policies could adversely affect the competitive position of our borrowers, and this may impact the quality
of our loan portfolio. See “Risk Factors ― A significant change in the central and state governments’
economic liberalisation and deregulation policies could disrupt our business”.

Factors relating to expansion of our operations: Our home loans business has grown in recent years and
we expect to continue the expansion of our business. The efficiency of our staff is evident from the fact
that, the number of offices increased from 41 in 1998 to 211 (excluding offices of HDFC Sales Private
Limited) currently as against the number of employees which increased from 806 to 1,490 during the same
period. Total assets per employee as at March 31, 2009 stood at Rs. 650.0 million as compared to Rs. 560.0
million in the previous year and net profit per employee as at March 31, 2009 was Rs. 15.3 million as
compared to Rs. 16.9 million in the previous year. Employees are our most important assets and employee
costs are a large component of our total cost. The Indian financial services sector is highly competitive, and
it can be difficult and expensive to attract and retain talented and experienced employees. See “Risk
Factors ― We may not be able to successfully sustain its growth strategy”.




                                                      38
Financial Results for the year ending March 31, 2009

The table below sets forth, for the periods indicated, certain revenue and expense items for our Company's
non-consolidated operations.


                                                                                               (in Rs. million)
INCOME                                                    2007                  2008              2009
Operating Income                                             54,816.4              79,798.7         108,546.2
Fees and Other Charges                                           685.7                 632.2           1,149.4
Profit on Sale of Investments                                  2,923.0               1,332.6             252.3
Other Income                                                     207.6                 197.1             228.7
                                                             58,632.7              81,960.6         110,176.6
EXPENDITURE AND CHARGES

Interest and Other Charges                                    36,668.5             51,428.8             74,324.5
Staff Expenses                                                   912.7              1,177.9              1,386.1
Establishment Expenses                                           257.5                303.1                359.6
Other Expenses                                                 1,021.5              1,192.4              1,241.4
Depreciation and Amortisation                                    174.5                166.0                174.6
Provision for Contingencies                                      250.0                320.0                500.0
                                                              39,284.7             54,588.2             77,986.2

PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS                       19,348.0             27,372.4             32,190.4
Exceptional Items                                                329.8              6,362.6        --
PROFIT BEFORE TAX                                             19,677.8             33,735.0             32,190.4
Less : Provision for Tax                                       3,950.0              9,350.0              9,340.0
Less : Provision for Fringe Benefit Tax                           24.0                 22.5                 25.0
PROFIT AFTER TAX AVAILABLE FOR
APPROPRIATION                                                 15,703.8             24,362.5             22,825.4

The table below sets forth, for the periods indicated our Company's non-consolidated balance sheet:

Balance Sheet:

Particulars                                                              Year ended March 31
                                                          2007                   2008            2009
ASSETS:                                                                     (in Rs. million)

Cash and balances with banks                                  13,733.5              7,777.3            17,185.4
Loans                                                        569,043.6            733,277.8           851,981.1
Other Investments                                             24,237.0             39,624.5            71,009.1
Equity Investments in Subsidiaries and Associates             12,425.3             29,525.6            33,678.4
Fixed Assets                                                   2,130.7              2,084.9             2,034.1
Deferred tax asset (net)                                       1,231.0              1,466.4             2,158.2
Other assets                                                  13,079.7             13,133.3            23,544.1
Corporate Deposits                                            19,832.6             17,315.5            14,978.8

Total Assets                                                 655,713.4            844,205.3       1,016,569.2

LIABILITIES:

Debt securities in issue                                     247,844.3            366,552.1           396,671.1
Public Deposits                                              103,844.2            112,962.5           193,746.6
Other Borrowed Funds                                         220,241.8            211,997.6           248,143.1
Current liabilities                                           14,849.7             19,069.5            28,833.7
Provisions                                                    13,419.2             14,150.2            17,800.8

Total Liabilities                                            600,199.2            724,731.9           885,195.3

SHAREHOLDERS' EQUITY:

Ordinary shares                                                2,530.0              2,840.3              2,844.5
Securities premium                                             8,519.7             56,391.4             56,507.7
Other reserves                                                44,464.2             60,241.7             72,021.7



                                                    39
Total shareholders' equity                                     55,513.9            119,473.4           131,373.9
Total of Equity and Liabilities                               655,713.4            844,205.3         1,016,569.2


Results of Fiscal 2009 compared to Fiscal 2008

In fiscal 2009, our total approvals increased from Rs. 425,200 million in fiscal 2008 to Rs. 491,660 million,
which is a growth of 16 per cent. There was an increase in disbursements from Rs. 328,750.0 million in
fiscal 2008 to Rs. 396,500 million in fiscal 2009, which is a growth of 21 per cent. Our loan book also
increased from Rs. 733,277.8 million in fiscal 2008 to Rs. 851,981.1 million in fiscal 2009, which is a
growth of 16 per cent. Our expenditure and charges increased from Rs. 54,588.2 million in fiscal 2008 to
Rs.77,986.2 million in fiscal 2009, which is an increase of 43 per cent.

Income

Our income for fiscal 2009 increased by 34 per cent. from Rs. 81,960.6 million in fiscal 2008 to Rs.
110,176.6 million in fiscal 2009.

This was primarily due to an increase in our operating income from Rs. 79,798.7 million in fiscal 2008 to
Rs. 108,546.2 million in fiscal 2009, which is an increase of 36 per cent. and an increase in the fees and
other charges from Rs. 632.2 million in fiscal 2008 to Rs. 1,149.4 million in fiscal 2009, which is an
increase of 82 per cent.

In fiscal 2009 the profit on sale of investments stood at Rs. 252.3 million as compared to Rs. 1,332.6
million in fiscal 2008.

Expenditure and Charges

The following table sets forth the details of our expenditures and charges for the periods mentioned:


                                                                                 Fiscal
                                                                      2008                          2009
                                                                                 (in Rs. million)
Interest and Other Charges                                                51,428.8                      74,324.5
Staff Expenses                                                             1,177.9                       1,386.1
Establishment Expenses                                                       303.1                         359.6
Other Expenses                                                             1,192.4                       1,241.4
Depreciation and Amortisation                                                166.0                         174.6
Provisions for Contingencies…………………………                                       320.0                        500.00
Total                                                                     54,588.2                      77,986.2




                                                     40
Exceptional Income

For the year ended March 31, 2009, our exceptional income stood at Rs. nil as compared to Rs. 6,362.6
million in the previous year which related to profit on sale of the entire shareholding of Intelenet Global
Services Private Limited, which was earlier our associate company and profit on sale of part of our
investment in our subsidiaries - Standard Life Insurance Company Limited and HDFC General Insurance
Company Limited (now renamed HDFC Ergo General Insurance Company Limited) and HDFC
Investments Limited.

Profit for the year

The total profit before tax for the year ended March 31, 2009, stood at Rs. 32,190.4 million as compared to
Rs. 33,735.0 million in the previous year. After providing Rs. 9,365 million for taxes, the profit after tax for
the year ended March 31, 2009 stood at Rs. 22,825.4 million as compared to Rs. 24,362.5 million.

Analysis of Profits

For the year ended March 31, 2009, profit before considering profit on sale of investments and exceptional
items and tax stood at Rs. 31,938.1 million compared to Rs. 26,039.8 million for the previous year. After
providing Rs. 9,349.8 million for taxes, the net profit after tax for the year ended March 31, 2009, increased
by 23 per cent to Rs. 22,588.3 million as compared with Rs. 18,345.5 million in the previous year.

Analysis of Profit After Tax                                                  As at March 31
                                                                       2008                         2009
                                                                                 (in Rs. million)
Profit After Tax as Reported                                               24,362.5                    22,825.4
Less: Profit on Sale of Investments (net of tax)                            1,082.2                       237.1
Less: Exceptional Income (net of tax)                                       4,934.8                           -
Profit Before Exceptional Income and Sale of Investments                   18,345.5                    22,588.3

Spread on Loans
The average yield on our loan assets during fiscal 2009 was 12.20 per cent. per annum as compared to
11.25 per cent. per annum in the previous year. The average all-inclusive cost of funds was 9.9 per cent. per
annum as compared to 8.93 per cent. per annum in fiscal 2008. The spread on loans over the cost of
borrowings for fiscal 2009 was to 2.21 per cent. per annum as against 2.32 per cent. per annum in fiscal
2008.

Financial Condition

Current Assets, Loans and Advances

The table below sets forth the details of our current assets, loans and advances for the periods mentioned:


                                                                                 As at March 31
                                                                       2008                         2009
Current Assets                                                                   (in Rs. million)
Income Accrued on Investments                                                 738.2                        348.5
Interest Accrued on Deposits                                                  560.3                        440.1
Sundry Debtors (Unsecured: Considered good)                                   277.7                         20.1
Cash and Bank Balances
         Cash and Cheques on Hand                                             694.9                        837.1
         With Scheduled Banks
                 Current Accounts                                           7,434.3                     2,772.0
                 Deposit Accounts                                           7,554.4                     4,167.6
         With Non-Scheduled Banks in Current Accounts                           1.8                           -

       With RBI                                                                   -                          0.6
       With National Housing Bank                                           1,500.0                            -



                                                           41
        Loans and Advances
        Instalments due from borrowers                                    2,865.0                          4,639.4

        Advances recoverable in cash or kind or for value
                 to be received                                           9,459.6                         17,328.4
        Corporate Deposits                                               17,315.5                         14,978.8
        Total                                                            38,226.1                         55,708.3

Our current assets, loans and advances increased by 46 per cent. from Rs. 38,226.1 million as of March 31,
2008 to Rs. 55,708.3 million as of March 31, 2009, primarily due to an increase in the interest accrued on
investments, interest accrued on deposits, instalments due from borrowers, advances recoverable in cash or
kind for value to be received even though the corporate deposits decreased by Rs. 2,336.7 million.

Investments

As at March 31, 2009, the investment portfolio stood at Rs.104,687.5 million as against Rs. 69,150.1
million as at March 31, 2008.

The table below sets forth the details of our investments for the periods mentioned:


                                                                                  As at March 31
(At Cost)                                                             2008                             2009
                                                                  (Rs. million)                    (Rs. million)
Equity Shares – Subsidiaries and Associate Companies
                                                                         29,525.6                         33,678.4
Equity Shares – Other Companies                                           9,090.0                          9,837.6
Warrants – Associate Companies                                                 ―                           4,009.2
Convertible Preference Shares                                               589.6                            636.7
Cumulative Redeemable Preference Shares                                     325.2                            202.5
Convertible Debentures – Associate Companies and
Others                                                                            ―                          100.0
Debentures and Bonds – for Financing Real Estate
Projects                                                                  2,481.2                          2,283.3
Debentures and Bonds – Others                                             2,260.9                          1,595.9
Pass Through Certificates and Security Receipts – for
Financing Real Estate Projects                                            1,119.6                            960.9
Security Receipts – Others                                                   99.6                             88.3
Government Securities                                                     3,092.5                          6,524.6
Mutual Funds                                                             14,009.2                         37,324.7
Venture Funds and Other Funds                                             5,682.2                          6,468.0
Properties (Net of Depreciation)                                          1,422.1                          1,830.6
                                                                         69,697.7                        105,540.7
Less: Provision for Diminution in Value of Investments
                                                                            547.6                            853.2
Total                                                                    69,150.1                        104,687.5

The table below sets forth the book value and the market value of our investments as at March 31, 2009 and
March 31, 2008 (as previous year):


                                                                   Book Value                      Market Value
                                                                    (Rupees)                         Rupees
                                                                                   (Rs. million)
Aggregate of Quoted Investments                                            21,860.0                         59,428.0
Previous Year                                                            (22,005.7)                       (85,548.4)
Aggregate of Investments listed but not quoted                              7,258.0
Previous Year                                                             (3,192.5)
Aggregate of Investments in Unquoted Mutual Funds
                                                                          37,324.6                        37,027.0*



                                                            42
Previous Year                                                            (13,798.5)                   (13,750.2)
*Represents repurchase price
Aggregate of Unquoted Investments (Others)                                 36,414.3
Previous Year                                                            (28,731.3)
Properties                                                                  1,830.6
Previous Year                                                             (1,422.1)
                                                                         104,687.5
Previous Year                                                            (69,150.1)



Results of Fiscal 2008 compared to Fiscal 2007

In fiscal 2008, our total approvals increased from Rs. 333,320.0 million in fiscal 2007 to Rs. 425,200.0
million, which is a growth of 28 per cent. There was an increase in disbursements from Rs. 261,780.0
million in fiscal 2007 to Rs. 328,750.0 million in fiscal 2008, which is a growth of 26 per cent. Our loan
book also increased from Rs. 569,043.6 million in fiscal 2007 to Rs. 733,277.8 million in fiscal 2008,
which is a growth of 29 per cent. Our expenditure and charges increased from Rs. 39,284.7 million in fiscal
2007 to Rs. 54,588.2 million in fiscal 2008, which is an increase of 39 per cent.

Income

Our income for fiscal 2008 increased by 40 per cent. from Rs. 58,632.7 million in fiscal 2007 to Rs.
81,960.5 million in fiscal 2008.

This was primarily due to an increase in our operating income from Rs. 54,816.4 million in fiscal 2007 to
Rs. 79,798.7 million in fiscal 2008, which is an increase of 46 per cent. In fiscal 2009, we reclassified our
operating income for fiscal 2008 and fiscal 2009 and included a separate line item on profit on sale of
investments, which amounted to Rs. 1,332.6 million in fiscal 2008 and Rs. 252.3 million in fiscal 2009.

In fiscal 2008 profit on sale of investments stood at Rs. 1,332.6 million as compared to Rs. 2,923.0 million
in fiscal 2007.

Expenditure and Charges

The following table sets forth the details of our expenditures and charges for the periods mentioned:


                                                                                 Fiscal
                                                                  2007                         2008
                                                                            (in Rs. million)
Interest and Other Charges                                                36,668.5                      51,428.8
Staff Expenses                                                               912.7                       1,177.9
Establishment Expenses                                                       257.5                         303.1
Other Expenses                                                             1,021.5                       1,192.4
Depreciation and Amortisation                                                174.5                         166.0
Provisions for Contingencies…………………………                                       250.0                         320.0
Total                                                                     39,284.7                      54,588.2




                                                     43
Exceptional Income

For the year ended March 31, 2008, our exceptional income stood at Rs. 6,362.6 million which related to
profit on sale of the entire shareholding of Intelenet Global Services Private Limited, which was earlier our
associate company and profit on sale of part of our investment in our subsidiaries - Standard Life Insurance
Company Limited and HDFC General Insurance Company Limited, (now renamed HDFC ERGO General
Insurance Company Limited) and HDFC Investments Limited (Subsidiary Company) as compared to Rs.
329.8 million for the year ended March 31, 2007 on account of sale of shares of HDFC Standard Life
Insurance Company Ltd. and Rockfort Estate Developers Limited which was earlier our associate company.

Profit for the year
The total profit before tax for the year ended March 31, 2008, stood at Rs. 33,735.0 million as compared to
Rs. 19,677.8 million in the previous year – an increase of 71 per cent. After providing Rs. 9,372.5 million
for taxes, the profit after tax for the year ended March 31, 2008 stood at Rs. 24,362.5 million as compared
to Rs. 15,703.8 million – an increase of 55per cent.

Spread on Loans

The average yield on our loan assets during fiscal 2008 was 11.25 per cent per annum as compared to 9.67
per cent. per annum in fiscal 2007. The average all-inclusive cost of funds was 8.93 per cent. per annum as
compared to 7.49 per cent. per annum in fiscal 2007. The spread on loans over the cost of borrowings for
fiscal 2008 was 2.32 per cent. per annum as against 2.18 per cent. per annum in fiscal 2007.

Current Assets, Loans and Advances

The table below sets forth the details of our current assets, loans and advances for the periods mentioned:


                                                                                  As at March 31
                                                                       2007                          2008
Current Assets                                                                    (in Rs. million)
Income Accrued on Investments                                                  365.3                         348.5
Interest Accrued on Deposits                                                   287.8                         440.1
Sundry Debtors (Unsecured: Considered good)                                     50.2                          20.1
Cash and Bank Balances:
         Cash and Cheques on Hand                                             1,014.3                        837.1
                   With Scheduled Banks
                   Current Accounts                                        1,765.4                          2,772.0
         Deposit Accounts                                                 10,953.2                          4,167.6
         With RBI                                                              0.6                              0.6
         Loans and Advances
         Instalments due from borrowers                                       2,192.6                       2,865.0

        Advances recoverable in cash or kind or for value to be
                  received                                                10,183.5                       9,459.6
        Corporate Deposits                                                19,832.6                      17,315.5

Total                                                                     46,645.5                      38,226.1


Our current assets, loans and advances decreased by 18 per cent. from Rs. 46,645.5 million in as of March
31, 2007 to Rs. 38,226.1 million as of March 31, 2008.

Investments

As at March 31, 2008, the investment portfolio stood at Rs. 69,150.1 million as against Rs. 36,662.3
million at March 31, 2007.

The table below sets forth the details of our investments for the periods mentioned:



                                                                  44
                                                                              As at March 31
(At Cost)                                                           2007                         2008
                                                                (Rs. million)                (Rs. million)
Equity Shares – Subsidiaries and Associate Companies                   12,425.3                     29,525.6
Equity Shares – Other Companies                                          6,446.9                      9,090.0
Convertible Preference Shares                                                 ―                         589.6
Preference Shares – Subsidiary and Others                                  490.4                        325.2
Convertible Debentures                                                      20.8                           ―
Debentures and Bonds – for Financing Real Estate
Projects – Subsidiary and Others                                        3,341.2                       2,481.2
Debentures and Bonds – Others                                           1,721.4                       2,260.9
Pass Through Certificates and Security Receipts – for
Financing Real Estate Projects                                          1,089.1                       1,119.6
Pass Through Certificates and Security Receipts – Others
                                                                             ―                           99.6
Government Securities                                                   3,216.5                       3,092.5
Mutual Funds                                                            3,919.8                      14,009.2
Venture Funds and Other Funds                                           2,938.6                       5,682.2
Properties (Net of Depreciation)                                        1,448.1                       1,422.1
                                                                       37,058.1                      69,697.7
Less: Provision for Diminution in Value of Investments
                                                                          395.8                         547.6

Total                                                                  36,662.3                      69,150.1

The table below sets forth the book value and the market value of our investments as at March 31, 2008 and
March 31, 2007 (as Previous Year):


                                                                Book Value                     Market Value
                                                                 (Rupees)                        Rupees
                                                                               (Rs. million)
Aggregate of Quoted Investments                                        22,005.7                       85,548.4
Previous Year                                                          (5,817.4)                    (47,783.7)
Aggregate of Investments listed but not quoted                           3,192.5
Previous Year                                                          (3,436.5)
Aggregate of Investments in Unquoted Mutual Funds
                                                                       13,798.5                     13,750.2*
Previous Year                                                         (3,843.4)                     (3,603.0)*
Aggregate of Unquoted Investments (Others)                             28,731.3
Previous Year                                                        (22,116.9)
Properties                                                              1,422.1
Previous Year (142,20,72,997)                                         (1,448.1)
                                                                       69,150.1
Previous Year                                                        (36,662.3)
* Represents repurchase price

Liquidity and Capital Resources

We have historically financed liquidity and capital resource needs primarily through the use of funds
generated from operations, customer deposits, borrowings, new issuances of equity capital and
subordinated debt.

We are subject to NHB capital adequacy requirements, which are primarily based on the capital adequacy
accord reached by the Basel Committee of Banking Supervision, Bank of International Settlements in 1988.
NHB has issued guidelines to HFCs on prudential norms for income recognition, provisioning, asset
classification, provisioning for bad and doubtful debts, capital adequacy and concentration of
credit/investments. Our position with respect to the guidelines is as follows: As at March 31, 2009 our


                                                           45
capital adequacy ratio stood at 13.5 per cent. of the risk weighted assets, (of which Tier 1 capital was 11.72
per cent) as against the minimum requirement of 12 per cent. We are in compliance with the limits
prescribed by NHB in respect of concentration of credit, exposure to investment in real estate and capital
market exposure other than on its investment in HDFC Bank wherein NHB has granted us time for such
compliance as we are a promoter of HDFC Bank.

We plan to finance our liquidity and capital resource needs primarily through our earnings, borrowings,
cash on hand and from the proceeds of the Offering. In addition, in the future we may issue additional
equity securities. There can be no assurance that financing will be available if needed, on terms favourable
to us, or at all.

If additional funds are raised through issuance of equity securities, the percentage ownership of our
stockholders may be reduced, our stockholders may experience additional dilution in net book value per
share and such securities may have rights, preferences or privileges senior to those of the current holders of
its common stock.

Cash Flow

                                                               Year Ended March 31,
                                            2007                      2008                        2009
                                                                  (in Rs. million)
Net cash from / operating
activities                                     16420.0                    19,008.1                   27,799.3
Net cash from / (used in)
investing activities                           5,824.4                  (23,801.2)                  (34,146.2)
Net cash from / (used in)
financing activities                         (20,597.0)                    1,092.9                   15,525.4
Net increase/(decrease) in cash
and cash equivalents                           1,647.4                   (5,886.0)                     9,178.5
Cash and cash equivalents at the
beginning of the year                         12,016.2                    13,663.6                     7,777.6
Cash and cash equivalents at the
end of the year                               13,663.6                     7,777.6                   16,956.1

Investing Activities

The Investment Committee constituted by the Board of Directors is responsible for approving investment
proposals in line with the limits as set out by the Board of Directors. The Executive Directors are members
of the Committee.

The investment function supports the core business of housing finance. The investment mandate includes
ensuring adequate levels of liquidity to support core business requirements, maintaining a high degree of
safety and optimising the level of returns, consistent with acceptable levels of risk.

As at March 31, 2009, the investment portfolio stood at Rs. 104,687.5 million as against Rs. 69,150.1
million last year. Investments in liquid funds stood at Rs. 36,590.0 million, representing overnight
deployment of surplus funds. The proportion of investments to total assets was 10 per cent.

HFCs are required to maintain a statutory liquidity ratio (SLR) in respect of public deposits raised.
Currently the SLR requirement is 12.5 per cent. of public deposits. As at March 31, 2009, we have invested
Rs. 7,380 million in bonds issued by NHB and bank deposits and Rs. 8,810 million in approved securities
comprising government securities and government guaranteed bonds.

As at March 31, 2009, the treasury portfolio (excluding investments in equity shares) had an average
balance period to maturity of 29 months. The average yield on the non-equity portfolio for the year was
13.18 per cent. per annum.



                                                      46
We have classified our investments into current and long-term investments. The current investments have
been entirely ‘marked to market’. In respect of long-term investments, provisions have been made to reflect
any permanent diminution in the value of investments. After considering the opening balance of Rs. 547.6
million in the diminution in the value of investments account and the write back of provisions on account
of investments sold, a net amount of Rs. 305.7 million has been debited to the Provision for Contingencies
account.

As at March 31, 2009, the market value of quoted investments was higher by Rs. 65,584 million as
compared to the value at which these investments are reflected in the balance sheet. This unrealised gain
includes appreciation in the market value of investments held by our wholly owned subsidiaries, HDFC
Investments Limited and HDFC Holdings Limited. The corresponding figure for unrealised gains as at 30
June 2009 stood at Rs. 116,623.0 million.

Indebtedness

The following table sets forth the details of our Indebtedness as of the dates mentioned:


                                                                                                                                       As at March 31,

                                                                                                                    2007               2008                2009

     Loans                                                                                                                              (in Rs. million)

                                                                                                                         3,994.1
     Asian Development Bank ................................................................................................                    3,779.1             3,776.7

                                                                                               2,202.7
     DEG – Deutsche Investitions-Und Entwicklungsgesellschaft MbH................................                                               1,806.8             1,999.1

     International Finance Corporation ................................................................                      8,866.1            8,630.9             9,599.9

     Kreditanstalt für Wiederaufbau................................................................                           711.3               681.9              608.8

     Syndicated Loans – International                                                                                        4,429.8                 __                 __

     National Housing Bank................................................................................................ 4,863.8              7,197.4            11,789.0

                                                                                                             181,318.2
     Scheduled Banks and Financial Institutions................................................................                               168,632.0           199,031.9

     Others (Finance Lease)                                                                                                      0.1                   -                  -

     Foreign Currency Convertible Bonds (Redeemable in 2010)                                                                21,793.4            5,163.3             5,575.6
     (Unsecured) ................................................................................................

     Bonds (Redeemable at par between 2009 and 2022) ................................                                        1,136.4            1,109.8             1,046.5

     Non-Convertible Debentures................................................................                            184,813.5          325,529.0           323,949.0

     Floating Rate Notes – International (Redeemable in 2007)                                                                4,351.0                   -                  -

     Under a Line from Kreditanstalt für Wiederaufbau (Unsecured) ................................                            411.7               411.7              411.7

     Loans from Scheduled Banks (Unsecured) – Short Term ................................                                   13,443.9           20,857.8            20,926.0

     Commercial Paper (Unsecured) ................................................................                          22,000.0           21,000.0            52,350.0

     Non-Convertible Subordinated Debentures (Unsecured) ................................                                   13,750.0           13,750.0            13,750.0

                                                                                                                        103,693.5
     Deposits (Unsecured) ................................................................................................                    112,782.3           193,586.4

     Interest Accrued and Due................................................................................................ 150.7               180.2              160.2


As at March 31, 2009, the total loans outstanding from banks, financial institutions and the National
Housing Bank amounted to Rs. 231,750.0 million as compared to Rs. 196,690.0 million as at March 31,
2008.




                                                                                          47
During the year ending March 31, 2009, we did not issue any subordinated debt. As at March 31, 2009, our
outstanding subordinated debt was Rs. 13,750 million. The debt is subordinated to our present and future
senior indebtedness. Based on the balance term to maturity, as at March 31, 2009, Rs. 11,350.6 million of
the book value of subordinated debt is considered as Tier II under the guidelines issued by the NHB for the
purpose of capital adequacy computation.

Our ability to incur additional debt in the future is subject to a variety of uncertainties including, among
other things, the amount of capital that other Indian entities may seek to raise in the domestic and foreign
capital markets, economic and other conditions in India that may affect investor demand for our securities
and those of other Indian entities, the liquidity of the Indian capital markets and our financial condition and
results of operations. We intend to continue to utilize long-term debt.

Contractual Commitments

Pursuant to the merger of Centurion Bank of Punjab with HDFC Bank, in order for us, as a promoter of
HDFC Bank, to retain our current shareholding in HDFC Bank, HDFC Bank made a preferential offer to us
to subscribe to 26,200,220 warrants, convertible into 26,200,220 equity shares of Rs. 10 each of HDFC
Bank, at a price of Rs. 1,530.13 per share, in accordance with Chapter XIII of the Securities and Exchange
Board of India (Disclosure and Investor Protection) Guidelines, 2000. Under the terms and conditions of
the said warrants, we paid a sum of 10 per cent. of the price of the equity shares to be issued upon exercise
of such warrants at the time of allotment of the warrants on 3 June 2008. We have the right but not the
obligation to exercise the said warrants on or before 2 December 2009. If we elect to exercise the warrants,
we will be required to pay an additional amount of approximately Rs. 36,080.5 million.

Fixed Assets and Intangible Assets

Net fixed assets as at March 31, 2009 amounted to Rs. 2,034.1 million compared to Rs. 2,084.9 million as
at March 31, 2008.

Provision for Contingencies

As per the prudential norms prescribed by NHB, we are required to carry a provision of Rs. 3,166.4 million
as at March 31, 2009 in respect of non-performing assets and provisioning for standard non-housing assets.
As a matter of prudence, however, over the years, we have been transferring additional amounts to the
provision for contingencies account including transfers from the Additional Reserve (under section 29C of
the National Housing Bank Act, 1987).

In the year ending March 31, 2009, we utilised Rs. 787.8 million (net) out of the balance in provision for
contingencies primarily on account of provision in diminution of value of investments and loan write-offs.
After taking into account the transfers as well as the net utilisation, the balance in provision for
contingencies as at March 31, 2009 stood at Rs. 6,215.2 million.

Recoveries

With effect from March 31, 2005, an asset is a non-performing asset (NPA) if the interest or instalment is
overdue for 90 days as against the earlier norm where a loan was a NPA if the account was in arrears for
over 6 months. Gross non-performing loans outstanding (along with debentures and corporate deposits for
financing real estate projects) amounted to Rs. 7,015.5 million as at March 31, 2009, constituting 0.81 per
cent. of the portfolio. The principal outstanding in respect of individual loans where the instalments were in
arrears constituted 0.92 per cent. of the individual portfolio and the corresponding figure was 0.57 per cent.
in respect of the non-individual portfolio.

We have written off loans aggregating to Rs. 109 million during the year. This pertains to the housing loans
outstanding in respect of 1,184 individual borrowers. These loans have been written off pursuant to one-
time settlements, where we will continue making efforts to recover the money. During the year, we have
written back loans aggregating to Rs. 7.5 million (these were loans written off in earlier years). The net


                                                      48
write off for the year is Rs. 101.5 million. With this, we have, since inception, written off loans (net of
subsequent recovery) aggregating to Rs. 767.9 million. Thus as at March 31, 2009, the total loan write offs
stood at 4 basis points of cumulative disbursements since our inception.

Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss related to adverse changes in market prices, including interest rates and
foreign exchange rates, of financial instruments. We are exposed to various types of market risk, including
changes in interest rates and foreign exchange rates, in the ordinary course of business. We entered into
forward foreign exchange contracts and cross-currency swaps with banks to hedge against interest rate and
foreign exchange rate risks, the application of which is primarily for hedging purposes and not for
speculative purposes.

We maintain our accounting records and prepare our financial statements in Indian Rupees.

Interest Rate Risk

In line with global trends, the interest rate scenario has been volatile. We revised our Corporate Prime
Lending Rate (“CPLR”) for non-individual loans 4 times during the year ending March 31, 2009. The
CPLR is a dynamic benchmark based on an index of money market instruments. We also revised our Retail
Prime Lending Rate (“RPLR”) 4 times during the same year.

Risk Management

The Financial Risk Management and Hedging Policy as approved by our Audit Committee sets limits for
exposures on currency and interest rates. We manage our interest rate and currency risk in accordance with
the guidelines prescribed. The risk management strategy has been to protect against foreign exchange risk,
whilst at the same time exploring any opportunities for an upside, so as to keep the maximum all-in cost on
the borrowing in line with or lower than the cost of a borrowing in the domestic market for a similar
maturity.

We have to manage various risks associated with the mortgage business. These risks include credit risk,
liquidity risk, foreign exchange risk and interest rate risk. We manage credit risk through stringent credit
norms. Liquidity risk and interest rate risks arising out of maturity mismatch of assets and liabilities are
managed through regular monitoring of the maturity profiles.

We have, from time to time, entered into risk management arrangements in order to hedge its exposure to
foreign exchange and interest rate risks. The currency risk on the borrowings is actively hedged through a
combination of dollar denominated assets, long term forward contracts, principal only swaps (POS), full
currency swaps and currency options.

As at March 31, 2009, we had foreign currency borrowings (excluding FCCBs) of U.S. $ 984.62 million
equivalent. The entire principal on the foreign currency borrowings has been hedged by way of principal
only swaps, currency options, forward contracts and risk management arrangements with financial
institutions. Further, interest rate swaps on a notional amount of U.S. $ 215 million equivalent are
outstanding and have been undertaken to hedge the interest rate risk on the foreign currency borrowings. As
at March 31, 2009, our net foreign currency exposure on borrowings net of risk management arrangements
was nil.

As a part of asset liability management and on account of the predominance of our Adjustable Rate Home
Loan product as well as to reduce the overall cost of borrowings, we have entered into interest rate swaps
wherein it has converted its fixed rate rupee liabilities of a notional amount of Rs. 118,150 million as at
March 31, 2009 for varying maturities into floating rate liabilities linked to various benchmarks. In
addition, we have entered into cross currency swaps of a notional amount of U. S. $ 733 million equivalent




                                                     49
wherein it has converted its rupee liabilities into foreign currency liabilities and the interest rate is linked to
benchmarks of the respective currencies.

The total net foreign currency exposure inclusive of cross currency swaps is U. S. $ 616 million. The open
position is at 3.74 per cent. of our total borrowings .

Assets and liabilities in foreign currency net of risk management arrangements are revalued at the rates of
exchange prevailing at the end of the year. Cross currency swaps have been marked to market at the year
end.

Asset-Liability Management

As at March 31, 2009, assets and liabilities with maturity up to 1 year amounted to Rs. 313,380 million
and Rs. 338,280 million respectively. Asset and liabilities with maturity of between 2 years and 5 years
amounted to Rs. 410,680 million and Rs. 395,450 million respectively and assets and liabilities with
maturity beyond 5 years amounted to Rs. 292,510 million and Rs. 282,840 million respectively. We do not
generally take an interest rate mismatch. As at March 31, 2009, 82 per cent. of the assets and 80 per cent. of
the liabilities were on a floating rate basis.

Exchange Rate Risk

Monetary assets and liablilities in foreign currencies net of risk management arrangement are revalued at
the rate of exchange prevailing at the year end. Cross currency swaps have been marked to market at the
year end. For forward contact or instruments that are in substance, forward exchange contracts, the
exchange differences on such contractsare being amortised over the life of contracts. Loss on mark to
market of cross currency interest rates swaps is recognised in the Profit and Loss Account and the net gains
is not recognised keeping in view the principles of prudence as enumerated in Accounting Standard (AS1)
notified by the Companies (Accounting Standards) Rules, 2006.

Taxation

The effective tax rate for the year ending March 31, 2009 was 29.1 per cent. as compared to 27.8 per cent.
in the previous year.

Subsidiaries and Associates

Though housing remains the core business, we have continued to make investments in its subsidiary
companies. These investments are made in companies where there are strong synergies with us. We will
continue to explore avenues for such investments with the objective of providing a wide range of financial
services and products under the “HDFC” brand name. Fiscal 2009, we made gross investments in the
equity capital of our subsidiary companies, HDFC Standard Life Insurance Company Limited (Rs. 3,785
million) and HDFC ERGO General Insurance Company Limted (Rs. 370 million).

Our shareholding (together with our nominees) in our key subsidiary and associate companies is as follows:


     Company                                                                                                                    %

     HDFC Developers Limited ................................................................................................ 100.0

     HDFC Investments Limited ................................................................................................ 100.0

     HDFC Holdings Limited................................................................................................   100.0

                                                                                                                           100.0
     HDFC Trustee Company Limited................................................................................................

     HDFC Realty Limited................................................................................................     100.0




                                                                                      50
Company                                                                                                                     %

HDFC Property Ventures Limited ................................................................                         100.0

HDFC Sales Private Limited................................................................................................ 100.0

HDFC Ventures Trustee Company Limited................................................................                   100.0

                                                                                                                           80.5
HDFC Venture Capital Limited ................................................................................................

                                                                                                          74.0
HDFC ERGO General Insurance Company Limited ................................................................

HDFC Standard Life Insurance Company Limited                                                                              72.4

GRUH Finance Limited................................................................................................      61.5

HDFC Asset Management Company Limited................................................................                     60.0

HDFC Bank Limited(1) ................................................................................................     22.7




  Note:
  (1) Inclusive of warrants and shareholding of HDFC Investments Limited and HDFC Holdings Limited
  (2) HDFC Asset Management Company (Singapore) Pte Limited is a wholly owned subsidiary of
       HDFC Assetmenet Company Limited and Griha Investments, Mauritius is a wholly owned
       subsidiary of HDFC Holdings Limited.




                                                                                  51
                                              INDUSTRY OVERVIEW

The information in this section is derived from various government publications and other industry sources.
Neither we nor any other person connected with the issue has verified this information. Industry sources
and publications generally state that the information contained therein has been obtained from sources
generally believed to be reliable, but their accuracy, completeness and underlying assumptions are not
guaranteed and their reliability cannot be assured and accordingly, investment decisions should not be
based on such information.

Overview

India’s robust economic growth and the resultant increase in incomes are speeding up the pace of
urbanisation. This, along with the increasing availability of housing finance, has led to a housing boom in
the past few years. The housing shortage, however, continues to remain acute and as of fiscal 2007, it is
estimated at 24.7 million units.

Low Mortgage to GDP ratio

India has a low mortgage to GDP ratio, reiterating that India is highly underleveraged as against other
comparable countries. As India’s GDP grows, it could cause a rise in income levels and boost the credit
uptake in the economy, leading to the mortgage to GDP ratio moving upwards.

The following graph shows the ratio of mortgage loans to GDP for selected countries:




        Source: European Mortgage Federation, 2007 and Asian Development Bank, 2007

Accordingly housing finance disbursements are expected to increase as incomes catch up with the rise in
property prices.

Favourable Demographics

The total population of India is estimated to exceed 1,200 million in the year 2012-13 as compared to
roughly 1,100 million in the year 2006-07. At the same time, it is expected that there will be a steady
decline in the growth rate of the population, from around 3 per cent in the year 2006-07 to 2.6 per cent in
the year 2012-13. The housing finance market is expected to be affected by an increase in population in the
24-54 age group who have on average, a higher disposable income and this is expected to translate into
greater demand for housing.




                                                         52
Urbanisation

In 2006-07 the urban population accounted for 28 per cent. of the total population and it is expected to
reach around 32 per cent in India in the year 2012-13. Further, the growth in the urban population is
estimated to be 4.13 per cent in the same period, which is twice the projected growth of the rural
population, of around 1.95 per cent by the year 2012-13. Thus with increasing urbanisation, housing
demand is expected to increase as on one hand urbanisation reduces the area per household and on the other
hand it leads to an increasing need for more nuclear families, leading to the formation of a greater number
of households.

Nuclearisation

Nuclearisation refers to the formation of nuclear families from joint families. Nuclearisation, like
urbanisation, has a twin impact. It reduces the area utilised per household, but increases overall household
formation, thereby increasing the demand for housing units.

Affordability

Income Growth

There has been a steady movement of households into higher income categories. Urban households, with
annual incomes above Rs 500,000, are expected to grow on average by 12 per cent in the next 5 years. The
following graph shows property price estimates in suburban Mumbai compared against annual income,
demonstrating the significant improvement in affordability (property prices by annual income) over the
period shown.




         1 lac = 100,000


Tax benefits

Tax incentives for the housing sector have been instrumental in driving growth in housing and housing
finance sectors.

Tax Benefits for Individuals: Tax deduction is available for home loans under two sections of the Income
Tax Act of India (excluding home loans from private sources such as friends, family, etc). As per Section
24(b) of the Income Tax Act, 1961 annual interest payments up to Rs 150,000 on housing loans can be
claimed as a deduction from taxable income. As per Section 80C, read with section 80 CCE of the Income
Tax Act, 1961 the principal repayment up to Rs 100,000 on home loan is allowed as a deduction from gross
total income.

While corporate borrowers do not get any special tax incentives, deduction of interest paid on a loan is
allowed as a normal deduction for tax purposes.


                                                     53
Tax Benefits for lenders: Under Section 36(1) (viii) of the Indian Income Tax Act 1961, with respect to any
special reserve created and maintained by a financial corporation engaged in providing long-term finance
for construction or purchase of houses in India for residential purposes, a maximum amount of 20 per cent
(previously 40 per cent) of the profits derived from such business and carried to such special reserve is tax
deductible. This deduction is available only up to twice the total amount of the company’s paid-up share
capital and its general reserves.

The Government of India announced two new specific measures on July 27, 2009 aimed at providing a
further fillip to affordable housing in India:

·        Introduction of an interest subvention scheme to support lower and middle income housing. Under
         this scheme, a one per cent subsidy would be provided to all housing loans up to Rs 1 million to
         individuals, provided the cost of house does not exceed Rs 2 million. The Government expects to
         spend Rs 10 billion towards the interest subsidy, which will be routed through the commercial
         banks and the housing finance companies registered with the National Housing Bank.

·        Extension of a tax holiday under section 80IB(10) of the IT Act to real estate developers on profits
         derived from projects approved between April 1, 2007 and March 31, 2008, if completed on or
         before March 31, 2012. The extension exempts builders from paying tax on income from the sale
         of houses of 1,000 sq ft built-up area within 25 km of municipal limits of big cities and 1,500 sq ft
         in other sites. Earlier, the provision was limited to projects sanctioned before March 2007 and to
         be completed before March 2010.

The Housing Finance Industry

Interest rate movements, income levels and property prices play a crucial role in shaping the growth of
housing finance in India. Disbursements in the housing finance sector, which grew at a 43 per cent CAGR
from 2000-01 to 2004-05, dropped to around 16 per cent from 2004-05 to 2007-08. This initial growth was
driven by the combined effect of a booming economy leading to higher income levels, low interest rates
and steady property prices. However, between 2004-05 and 2007-08, property prices and interest rates
moved up and reduced affordability. Since 2007-2008, residential property prices have decreased by an
estimated 20 to 40 per cent. across the country, which has improved affordability.

Key Drivers of Disbursement Growth

The penetration of housing loans has increased due to the following:

Good branch network of lenders
Increasing acceptability of loans among customers
Comfortable customer earning profile, as the majority of customers are from the salaried class
Comfort of lenders in the sale of collateral in case of defaults

Competition

Banks command an advantage over Housing Finance Companies (HFCs) through having a larger deposit
base which provides, access to low-cost funds and larger branch networks. On the other hand, HFCs being
focussed housing market participants offer better customer service, have lower operating costs and are not
subjected to mandated direct lending norms.

The following graph shows market share of the housing finance market by disbursements made divided
between banks and HFCs for the period from 2004-05 to 2008-09 as estimated by CRISIL.




                                                     54
E: Estimated
Source: CRISIL Research

Interest rates

Two types of interest rate loans are available in the market:

Fixed (the interest rate remains constant over the tenure of the loan) ; and
Floating (the interest rate is linked to the benchmark prime lending rate).

As floating rate loans are reset when the cost of funds for lenders increase, they do not carry much interest
rate risk. Therefore, fixed rate loans, for which the lender bears the interest rate risk, are priced higher than
floating rate loans. Currently, the housing finance industry in India is principally based on floating rate
lending.




                                                       55
                                                   BUSINESS

Introduction

Overview

HDFC is the largest housing finance company in India in terms of total assets and mortgage lending. As of
June 30, 2009, the Company’s outstanding mortgage loan portfolio amounted to Rs. 883,538.3 million and
total assets were Rs. 974,787.6 million. Our principal business is providing finance to individuals,
corporates, developers and co-operative societies for the purchase, construction, development and repair of
houses, apartments and commercial property in India.

As of June 30, 2009, our distribution network comprised of 269 outlets, which include 58 offices of our
wholly owned distribution company, HDFC Sales Private Limited. As of June 30, 2009, we have financed
over 3.3 million housing units with cumulative loan approvals amounting to Rs. 2,497,090 million and
cumulative loan disbursements amounting to Rs. 2,004,940 million. In addition, we have also serviced
approximately 1 million depositors and 25,000 deposit agents.

HDFC was the first private sector retail housing finance company to be set up in India and we were
incorporated as a public limited company on October 17, 1977.

Our initial public offering was in 1978. Our Equity Shares are listed on the BSE and the NSE. The closing
price of the Equity Shares on August 14, 2009 on the NSE was Rs. 2,316.00 per Equity Share and on the
BSE was Rs. 2,310.80. As of the same date, our market capitalisation on the NSE was Rs. 659,042 million.

As of June 30, 2009, HDFC’s capital adequacy ratio was 15 per cent. as against a minimum regulatory
requirement of 12 per cent. and our Tier I capital was 13.7 per cent., as against a minimum requirement of
6 per cent.

Strategy

Our primary objective is to enhance the residential housing stock in India through the provision of housing
finance on a systematic and professional basis and to promote home ownership throughout India. We have
contributed to increasing the flow of resources to the housing sector through the integration of the housing
finance sector with the overall domestic financial markets in India.

Our primary goals are to:

     ·      maintain our position as the leading housing finance institution in India;
     ·      develop close relationships with individual households and enhance our customer
            relationships;
     ·      transform ideas for housing finance into viable and creative solutions;
     ·      provide consistently high returns to shareholders; and
     ·      grow through diversification by leveraging off our existing client base.

Our primary growth strategies are to:

     ·      increase the return on equity in order to maximise shareholder value: As of March 31, 2009,
            our return on equity (on the closing balance of shareholder’s equity) excluding exceptional
            items stood at 17.4 per cent. as against 16.3 per cent. as of March 31, 2008;
     ·      minimise gross non-performing assets: Our gross non-performing loans stood at 0.81 per cent.
            of our loan portfolio as of March 31, 2009, compared to 0.84 per cent. as of March 31, 2008.
            Non-performing loans overdue for a period of more than six months, stood at 0.56 per cent. of
            the loan portfolio as of March 31, 2009, as against 0.68 per cent. in the previous year;



                                                     56
     ·      minimise cost to income ratio: for fiscal 2009 our cost to income ratio stood at 8.8 per cent., as
            against 9.2 per cent. in fiscal 2009. We believe our cost to income ratio continues to be among
            the lowest in the financial sector in Asia; and
     ·      grow loan approvals and disbursements at sustainable levels: Our loan approvals and
            disbursements have grown by 16 per cent. and 21 per cent. respectively in fiscal 2009.

Organisational Structure

The following diagram sets forth an overview of our organisational structure:




Loan Products

We lend to individuals, members of co-operative societies and companies for the financing of construction
or purchase of residential and non-residential buildings in India. We endeavour constantly to improve and
expand our existing product portfolio. Our products are designed to be flexible to satisfy the diverse needs
of our customers and we have introduced various innovative lending products at affordable rates of interest
to serve such diverse purposes. The principal products offered by us include the following:

     ·      home loans provided to individuals to finance the purchase of property or land, for construction
            and for extension, repair or renovation of property;
     ·      loans against the value and security of a property provided to new and existing customers for
            purposes such as education, medical costs and other approved purposes;



                                                     57
     ·         non-residential premises loans provided to professionals to facilitate purchase or construction
               of their office premises and renovation of their existing office premises;
     ·         corporate loans, including loans provided to approved corporations for financing the purchase
               or construction of staff accommodation and office premises and line of credit facilities under
               which we provide funds to corporates for onward lending to their employees; and
     ·         developer loans provided to approved developers for financing the construction of housing
               projects and loans to property owners against rent receivables.

The loans outstanding under these product categories and as a percentage of total outstanding loans as of
March 31, 2007, 2008 and 2009, were as follows:

                                                                                               As of March 31
                                                                   2007              %           2008           %           2009               %
                                                                                      (Rs. million, except percentages)
                                                                    3
     Individuals.................................................. 73,624.5          66    483,781.4            66    548,894.4                64*
     Corporate bodies ................................ 178,585.1                     31    231,017.8            31    284,165.3                34
     Others ......................................................... 16,834          3     18,478.6             3      18,921.4                2
                                                                  569,043.6
     Total...........................................................               100    733,277.8           100    851,981.1               100
       Note:
         *       If the individual loans sold were to be included, individual loans would comprise 66 per cent. of total outstanding loans.

Individual Loans

We offer loans to acquire or construct residential accommodation in India. The principal eligibility criterion
is the borrower’s repayment capacity. Loans are generally repaid in equated monthly instalments (“EMIs”)
over a period of 5 to 20 years. The maximum loan size is 85 per cent. of the cost of the property and is
based on our evaluation of the repayment capacity of the customer. The security for such loans is equitable
mortgage over the property to be financed and/or such other collateral security as may be necessary.

We offer an option to individuals to choose between a fixed rate of interest or a variable rate of interest. We
also offer customers a combined option of a part fixed, part variable rate of interest to allow them to hedge
against unexpected interest rate movements.

In the case of fixed rate housing loans, the rate of interest remains fixed for the entire tenor of the housing
loan. In the case of the variable rate loans, the interest rate is linked to our Retail Prime Lending Rate
(“RPLR”) and the rate on the loan is reviewed every three months from the date of the first disbursement of
the loan.

The term of any loan varies according to the purpose of the loan and most loans are for a term of 15 to 20
years, or until the retirement age of the borrower, whichever is earlier.

Pursuant to our individual home loan agreements, borrowers are typically required to pay a processing fee
of up to one per cent. of the total amount of the loan prior to the disbursement.

As security for the loans provided by us, we require borrowers to grant us a first legal charge over the
property and deposit the title deeds to the property with us. Borrowers may also be required to obtain a
guarantee from a person of good financial standing acceptable to us. We may also require the borrower to
assign collateral in the form of insurance policies or bonds. These decisions are based on our internal credit
rating of the borrower.

We, as a part of our corporate marketing initiative, advance housing loans for the purchase, construction,
extension, repair or renovation of property to employees of approved corporates. These loans are at
preferential terms and conditions and the employees of the approved corporates enjoy value additions such
as guarantee waiver and real estate counselling.

The disbursement of individual home loans has increased in recent years largely due to increased marketing
efforts, increased demand for home loans due to a lower interest rate environment in India, stable property


                                                                               58
prices, increased fiscal benefits available to home-owners, higher disposable incomes and increased
urbanisation.

Of the total loans outstanding as of June 30, 2009, individual loans comprised 63per cent. If individual
loans sold during the preceding twelve months amounting to Rs. 56,200.0 million were to be included,
individual loans would comprise 65per cent. of the total outstanding loans.
     Other loan products

Apart from home loans, we offer a number of other lending products:

     ·      Home Improvement Loans: Loans for internal and external repairs and other structural
            improvements of homes;
     ·      Home Extension Loans: Loans to finance additions and extensions in the form of an additional
            room, floor and any other extensions to homes;
     ·      Home Equity / Top-Up Loans: Loans advanced against the value and security of the customer’s
            existing property for non-housing purposes such as education, medical costs, etc.;
     ·      Non-Residential Premises Loans: Loans provided to professionals such as doctors, chartered
            accountants and other such professionals to facilitate purchase or construction of their own
            office premises and/or to renovate their existing office premises;
     ·      Short-Term Bridging Loans: Loans for the interim period between the purchase of a new house
            and sale of an old one; and
     ·      Land Purchase Loans: Loans to acquire land for construction of a residential unit.

We also grant loans to non-resident Indians (“NRIs”) and persons of Indian origin for the purchase or
construction of dwelling units anywhere in India.

     Repayment terms

We offer flexible repayment schemes to structure customers’ repayment terms in accordance with their
unique needs. These include:

     ·      Step Up Repayment Facility: In this facility, the repayment schedule is linked to customers’
            expected growth in income and repayment is accelerated proportionately with the assumed
            increase in income;
     ·      Flexible Loan Instalment Plan: In this facility, the repayment schedule is tranched with an
            initial higher instalments for a fixed term followed by lower instalments for the balance of the
            term; and
     ·      Balloon Repayment Facility: In this facility, the repayment is made at the end of the loan term
            from a financial investment, such as an insurance policy or bond, which is assigned as security
            for the loan.

Non-Individual Loans

     Corporate loans

We also lend to corporate bodies for the construction or purchase of new residential housing for the use of
their employees anywhere in India. We also give loans to corporations for financing the purchase and
construction of non-residential premises. As part of our portfolio, we also provide loans against rent
receivables.

The demand for corporate loans has primarily been driven by the information technology and business
process outsourcing sectors, which generally prefer to lease premises. We give loans to owners of
properties used by such corporations by discounting the lease rentals.




                                                    59
We offer loans and line of credit facilities to approved corporations for the purchase or construction of
accommodation for their employees and office premises and loans to housing boards and co-operative
housing societies.

     Developer loans

We offer loans to approved developers for the construction of housing projects and loans to property
owners which are secured by rent receivables from their tenants.

Developer loans are typically for a term of one to two years. We generally require security by way of a
mortgage over the property, a personal guarantee in respect of amounts due under the loan and such other
security as we may require.

     Sale of loans

During fiscal 2009, we sold Rs. 42,450.0 million of loans to HDFC Bank under the loan assignment route,
which qualified as priority sector advances for HDFC Bank. Approximately half of the total loans assigned
to HDFC Bank were assigned pursuant to the exercise of the buy-back option embedded in the home loan
arrangement between us and HDFC Bank.

The amount of loans that was sold under the mortgage backed securities (MBS) and loan assignment route
as at March 31, 2009 stood at Rs. 61,800.0 million. We continue to service these loans. The residual
income on loans sold is recognised at the time of actual collections, (i.e. over the life of the underlying
loans) and not upfront on a net present value basis. Where individual loans have been sold, the issues carry
a rating indicating the highest degree of safety. As at March 31, 2009, loans aggregating Rs. 88,850.0
million have been sold by us through the issue of MBS and via loan assignment.

Marketing and Distribution

     Offices

Our business activities are conducted principally through our extensive marketing network of 269 offices
throughout India, including 58 outlets of our wholly owned distribution company, HDFC Sales Private
Limited (HSPL). In addition, we cover over 2,400 towns and cities. An outreach programme is a mobile
office and is conducted in locations where we do not have a permanent office.

To cater to NRI’s, we have opened offices in London, Dubai and Singapore and have service associates in
Kuwait, Qatar, Sharjah, Abu Dhabi and Saudi Arabia.

     Distribution

In addition to our office network, we also market our loan products through distribution channels which
include HSPL, which provides us with a dedicated sales force to sell our products. Home loans are also
marketed through an arrangement with HDFC Bank. The loans sourced by HDFC Bank are booked by
HDFC and HDFC Bank is paid a sourcing fee. We also use a few third party direct selling associates (
“DSAs”) to market loan products. All these channels only market our loan products, but we continue to
retain control over the credit, legal and technical appraisal, thereby ensuring that the quality of borrowers to
whom loans are distributed is not compromised in any way and is consistent across all distribution
channels.

As at 30 June 2009, 95 per cent. of our mortgages are sourced by ourselves or through our affiliates.

     Cross-selling

Our subsidiary and associate companies have strong synergies with us allowing us to focus on offering
customers a wide range of financial products and services under the “HDFC” brand.


                                                      60
We distribute insurance products and our employees from various branches have undergone the required
training in order to qualify as financial consultants to sell products of HDFC Standard Life Insurance
Company and HDFC Ergo General Insurance Company Limited.

Cross-selling initiatives include introduction of a wide range of special benefits for housing loan customers
such as life insurance cover at attractive prices, lower minimum balance requirements for savings accounts
at HDFC Bank, standing instructions for direct debit of payment of monthly instalments on housing loans,
free credit cards and lower interest rates for consumer loans from HDFC Bank.

We have entered into an arrangement with HDFC Bank whereby HDFC Bank sources loans for us. The
arrangement seeks to leverage the strengths of the two organisations in terms of product acceptance,
operational efficiencies and credit expertise on the one hand and sales origination and distribution on the
other. (See “ Key Subsidiaries and Associates — HDFC Bank Limited”).

Loan Book

Our home loans have continued to grow as a result of increased demand for home loans, lower and more
affordable interest rates, increased fiscal benefits available to home-owners, higher disposable incomes and
increased urbanisation.

As at June 30, 2009, our loan book increased to Rs. 870,458.0 million from Rs. 773,271.0 million as at
June 30, 2008, representing a growth of 13 per cent. The growth in the loan book would have been 20 per
cent. if the loans sold during the preceding twelve months were to be included in the loan book.

We also make investments in debentures, pass through certificates, security receipts and corporate deposits
towards financing real estate projects. As of June 30, 2009, our outstanding investments in debentures and
corporate deposits for financing housing and real estate projects amounted to Rs. 13,080.3 million as
against Rs. 12,956.8 million as at June 30, 2008.

Our loan portfolio is diversified both in terms of market segmentation and geographical spread. In terms of
market segmentation, as of June 30, 2009, individual loans, inclusive of loans sold, constituted 65 per cent.,
and non-individual loans constituted 35 per cent. of our outstanding loans. In terms of geographical spread,
the Western Region constituted 38 per cent., the Southern Region 30 per cent., the Northern Region 28 per
cent. and the Eastern Region 4 per cent. of the loans outstanding .

Interest rates

An important component of our asset and liability management policy is our management of interest rate
risk, which is the relationship between market interest rates and interest rates on our interest-earning assets
and interest-bearing liabilities. See “— Risk Management — Interest rate risk management”.

Currently, the housing finance industry in India is principally based on floating rate lending. The interest
rates on our floating rate loans are benchmarked to our RPLR.

A prepayment charge is levied if the prepayment amount exceeds 25 per cent. of the outstanding loan.

Size and concentration of loans

NHB guidelines restrict HFCs from making loans to a single borrower or a group of borrowers in excess of
15 per cent. and 25 per cent., respectively, of an HFC’s total net worth. As of June 30, 2009, our single
largest borrower accounted for Rs. 10,133.7 million or 7 per cent. of our net worth.

As of June 30, 2009, our 10 largest performing loans accounted for Rs. 51,199.1 million or 6 per cent. of
our outstanding loans.



                                                      61
Collateral

Most of the loans provided by us are secured by an equitable mortgage of the property being financed.
Loans granted by us could also be secured or partly secured by pledges of shares, units or other securities,
assignments of life insurance policies, hypothecation of assets, bank guarantees, company or personal
guarantees, negative liens or assignments of hire purchase receivables. There could also be loans provided
which are accompanied by undertakings to create a security.

Our lending policy requires that the maximum value of home loans should not exceed 85 per cent. of the
assessed value of the property provided as security at the time of the loan approval.

We use in-house valuers to value properties to be given as security and we consider these valuations to be
more conservative than market valuations as the valuation is typically the lesser of the transaction value
and the market value of the property.

Credit approval

Approvals and disbursements

Our loan approvals for the three months ended June 30, 2009 were Rs. 122,590.0 million compared with
Rs. 99,960.0 million in the corresponding period in 2008, representing a growth of 23 per cent. Loan
disbursements for the three months ended June 30, 2009 were Rs. 86,880.0 million compared with Rs.
72,040.0 million in the corresponding period in 2008, representing a growth of 21 per cent.

The following table sets forth approvals and disbursements in the periods mentioned:



                                                                   Fiscal                            Three months ended June 30,
                                                      2006           2007        2008        2009            2008              2009

      (in Rs. millions)
                                                    256,340        333,320   425,200.0   491,660.0        99,960.0        122,590.0
     Approvals ..................................
                                                    206,790        261,780   328,750.0   396,500.0        72,040.0         86,880.0
     Disbursements ...........................

Credit policy

Our credit policy is central to all our lending activities and functions. Our standard credit norms and
procedures are reviewed periodically and are applicable to all segments of our business.

The credit approval process is initiated at the office where the initial application is made. Each loan
approval passes through various levels of assessment from the time a customer requests the loan until the
time the loan is disbursed.

Our loan approval process is decentralised, with varying approval limits. Approval of lending proposals
beyond certain limits is referred to the management committee. Larger proposals, as appropriate, are
referred to the Board of Directors.

Information Acquisition

Gathering authentic and reliable customer information is essential for our credit appraisal processes:

Carefully Designed Application Form: The application form captures the applicant’s income and stability
factors, such as the employment and dependency details, age and educational status and other financial
obligations of the applicant, amongst other details.


                                                              62
Standard Document List: The standard documentation to be provided by the applicant includes evidence of
identification, income, employment, asset holdings and details of the property to be financed.

Customer Interface: A personal meeting/telephone discussion is carried out with the customer. This helps
in arriving at the credit decision and aids in satisfying any queries.

Customer Credit Verifications: We ensure that employer and residence field credit investigations are
executed to verify that the information supplied by the customer is authentic.

Credit Bureau Report: Credit Information Bureau India Limited (“CIBIL”) is a repository of information
which contains credit histories of customers. CIBIL provides this information to its members in the form of
credit information reports.

Credit Appraisal

Post documentation and information gathering, the process of credit appraisal begins. Each loan goes
through four levels of assessment – the appraiser at level one, the double checker at level two and two
approvers at levels three and four. These levels of assessment are conducted by officers with a stipulated
level of experience, with clear financial delegations at each level.

The loan processing software has in-built warnings and validations with respect to the credit policy,
industry outlook and government regulations.

Disbursement Diligence

Legal Due Diligence: A specialised in-house team scrutinises the transaction-related documents, checking
various legal issues such as the authenticity of the ownership papers of the seller and compliance with
statutory approvals laid down by the relevant authorities. This is an important aspect as, in India, land
ownership falls under the purview of state legislation and laws differ from state to state.

Technical Due Diligence: A specialised in-house team assesses the property structure and confirms that the
property selected has been constructed in accordance with the appropriate building plans and standards.

Disbursement: the process of handing over the cheque of the approved amount to the customer occurs only
after the required legal and technical diligence reports are satisfactory.

Asset classification

With effect from March 31, 2005, the NHB amended The Housing Finance Companies (NHB) Directions,
2001, with respect to prudential norms for recognising non-performing assets (“NPAs”). In accordance
with the revised norms, NPAs are recognised as such when an asset is 90 days overdue compared to an
equivalent period of 180 days under the previous guidelines. The classification and provisioning
requirements are as follows:

Asset Classification                      Guidelines Period of Default             Provisioning Required
                                                                                            (in per cent.)
Standard Assets                                                        <90 days                          -

Sub-standard Assets                                          >90 days–15 months                         10

Doubtful Assets

                                                         15.01 months –27 months                        20
                                                         27.01 months –51 months                        30
                                                                      >51 months                        50


                                                    63
Asset Classification                        Guidelines Period of Default                    Provisioning Required
                                                                                                     (in per cent.)
Loss Assets                                                                          -                         100


In addition, a general provision of 0.40 per cent. of the total outstanding amount on non-housing loans
which are standard assets is also required to be made.

We have a strong record of loan recoveries and our non-performing loans are one of the lowest in the
financial sector in India. Our gross non-performing loans as of March 31, 2009 amounted to Rs. 7,015.5
million, which is equivalent to 0.81 per cent. of the portfolio, comprising loans as well as debentures issued
by corporates and corporate deposits placed for financing their real estate projects.

In terms of prudential norms as stipulated by NHB, we are required to carry a provision of Rs. 3,166.4
million in respect of non-performing assets and a general provision on outstanding standard non-housing
loans. As a matter of prudence, however, over the years, we have been transferring additional amounts to
the provision for contingencies account, including transfers from the Additional Reserve (under section
29C of the National Housing Bank Act, 1987).

During fiscal 2009, we have utilised Rs. 787.8 million (net) out of the balance in the provision for
contingencies account primarily on account of provision in diminution of value of investments and loan
write-offs. After taking into account the transfers as well as the net utilisation, the balance in the provision
for contingencies account as of March 31, 2009 stood at Rs. 6,215.2 million, which is equivalent to 0.73
per cent. of the portfolio.

The following table sets forth the details of our gross non-performing loans as a percentage of our portfolio
and the provision for contingencies as a percentage of our portfolio:

                                                             Gross non-performing loans
                                                                   as a percentage of the     Provision for contingencies as
     As of March 31,                                                            portfolio      a percentage of the portfolio
     2009                                                                           0.81                               0.73
     2008                                                                           0.84                               0.64
     2007                                                                           0.92                               0.72

There are no loans classified as loss assets. For fiscal 2009 the net-write off was Rs. 101.5 million. Since
inception, we have written off loans (net of subsequent recovery) aggregating to Rs. 767.9 million. Thus as
of March 31, 2009, the total loan write offs stood at 4 basis points of cumulative disbursements since our
inception.

Funding

Overview

We have expanded our sources of funds in order to reduce our funding costs, protect interest margins and
maintain a diverse funding portfolio that will enable us to achieve funding stability and liquidity.

As at June 30, 2009, 86 per cent. of our liabilities comprised borrowings. Our sources of funding comprise
bonds and debentures, which constitute 47 per cent, domestic term loans, which constitute 26 per cent,
deposits, which account for 24 per cent, international borrowings, which constitute 2 per cent. and foreign
currency convertible bonds (FCCBs), which constitute 1 per cent. of our total funding requirement as at
June 30, 2009.

Sources of Borrowings

Subordinated Debt




                                                      64
As at June 30, 2009, our outstanding subordinated debt stood at Rs. 13,750.0 million. The debt is
subordinated to our present and future senior indebtedness. Based on the balance term to maturity, as at
June 30, 2009, Rs. 10,550.0 million of the book value of subordinated debt is considered as Tier II under
the guidelines issued by the NHB for the purpose of capital adequacy computation.


Bonds and debentures

As of June 30, 2009, outstanding bonds, debentures, foreign currency convertible bonds and commercial
paper amounted to Rs. 403,348.6 million as against Rs. 377,014.1 million as of June 30, 2008.

Foreign Currency Convertible Bonds (“FCCBs”)

In September 2005 we concluded the issue of USD 500 million zero coupon FCCBs. The bonds are
convertible into our equity shares at any time up to July 29, 2010 at the option of the holders, at Rs.1,399
per equity share, representing a conversion premium of 50 per cent. over the initial reference share price.
The premium payable on redemption of the FCCBs is charged to the Securities Premium Account over the
life of the FCCBs.

Up to March 31, 2009, we had allotted 12,167,765 equity shares pursuant to the conversion of the FCCBs,
representing 77.9 per cent. of the FCCBs.

If the balance FCCBs are not converted within the above-mentioned conversion period, the remaining
bondholders would have the right to redeem the outstanding bonds on 27 September 2010 at a yield to
maturity of 4.62 per cent. per annum.

Deposit products

We offer a range of savings products to individuals, associations of persons, co-operatives, educational and
charitable trusts and corporate bodies. The savings products carry competitive rates of interest and have
different features to suit investor requirements. Our deposits have been rated “AAA” for 14 consecutive
years. We accept deposits in accordance with the guidelines stipulated in the NHB directions. As of June
30, 2009, we had deposits outstanding of Rs. 197,276.8 million, received from approximately 1 million
depositors. We currently have over 25,000 deposit agents.

Term loans from commercial banks and financial institutions

During fiscal 2009, we raised loans from commercial banks aggregating to Rs. 161,970.0 million. Out of
this, loans amounting to Rs. 90,840.0 million qualify for priority sector allocation. We raised a further Rs.
26,760.0 million from the banking sector as Foreign Currency (Non-Resident) Accounts (Banks) Scheme
(“FCNR-B”).

During the quarter ended June 30, 2009, we raised term loans of Rs. 61,972.2 million from commercial
banks. As at June 30, 2009, the total loans outstanding from banks, financial institutions and the NHB
amounted to Rs. 221,059.5 million as compared to Rs. 204,949.4 million as at June 30, 2008.

International borrowings

We have in earlier years availed foreign currency borrowings from Asian Development Bank (“ADB”)
under the Housing Finance Facility Project - ADB II (USD 100 million), from the KfW (DM 25 million
and Euro 15.33 million), from DEG, a member of the KfW Group of Germany (USD 50 million) and from
International Finance Corporation (“IFC”), Washington (USD 200 million).

Foreign exchange hedging strategies




                                                     65
We have from time to time entered into risk management arrangements in order to hedge our exposure to
foreign exchange and interest rate risks. The currency risk on the borrowings is actively hedged through a
combination of dollar denominated assets, long term forward contracts, principal only swaps (“POSs”), full
currency swaps and currency options.

As at June 30, 2009, our foreign currency borrowings amounted to U.S. $ 1,004.6 million equivalent and
our net foreign currency exposure on borrowings net of risk management arrangements was nil.

Rating

Both CRISIL and ICRA, the leading rating agencies in India, have assigned a “AAA” rating for our
deposits, bonds and debentures. This rating represents the highest safety grade with respect to timely
repayment of principal and interest.

Risk Management

As a financial intermediary, we are exposed to risks that are particular to our lending business and the
environment in which we operate. Our goal in risk management is to ensure that we understand, measure
and monitor the various risks that arise and that we adhere strictly to the policies and procedures which are
established to address these risks.

As a financial intermediary, we are primarily exposed to liquidity risk, interest rate risk, credit risk,
operational risk and legal risk.

Liquidity risk management

Liquidity risk arises in the funding of lending and investment activities. It includes both the risk of
unexpected increases in the cost of funding an asset portfolio at appropriate maturities and the risk of being
unable to liquidate a position in a timely manner at a reasonable price. The goal of liquidity risk
management is to be able, even under adverse conditions, to meet all liability repayments on time and fund
all investment opportunities.

We maintain diverse sources of liquidity to facilitate flexibility in meeting funding requirements. Our
operations are principally funded by borrowings from deposits, domestic term loans, bonds and debentures
and international borrowings. (See “Funding — Sources of Borrowings”).

We also maintain a proportion of liquid assets that are readily marketable. We are required to maintain a
statutory liquidity ratio in respect of public deposits raised. Currently the statutory liquidity ratio
requirement is 12.5 per cent. of public deposits.

We actively monitor our liquidity position and attempt to maintain adequate liquidity at all times to meet all
requirements of borrowers, while also meeting the requirement of lending groups, and to be able to
consider investment opportunities as they arise. A separate group within the Company is responsible for
liquidity management.

Interest rate risk management

We seek to minimise our exposure to interest rate fluctuations by managing our assets and liabilities.

A gap analysis provides a static view of the maturity and re-pricing characteristics of our balance sheet
positions. An interest rate gap report is prepared manually by classifying all assets and liabilities into
various time period categories according to contracted maturities or anticipated re-pricing date. The
difference in the amount of assets and liabilities maturing or being re-priced in any time period category
then gives an indication of the extent of exposure to the risk of potential changes in the margins on new or
re-priced assets and liabilities.



                                                     66
As at March 31, 2009, assets and liabilities with maturities of up to one year amounted to Rs. 313,380.0
million and Rs. 338,288.0 million respectively. Assets and liabilities with maturities of between two years
and five years amounted to Rs. 410,688.0 million and Rs. 395,450.0 million respectively and assets and
liabilities with maturities beyond five years amounted to Rs. 292,510.0 million and Rs. 282,830.0 million
respectively.

Since our balance sheet consists predominantly of Rupee-denominated assets and liabilities, movements in
domestic interest rates constitute the main source of interest rate risk. However, we generally do not
maintain a significant interest rate mismatch between our assets and liabilities. As of March 31, 2009, 82
per cent. of our assets were floating rate loans and 80 per cent. of our liabilities were floating rate
borrowings. As the floating rate assets and floating rate liabilities are broadly matched, besides basis risk,
any movement in interest rates has a limited impact on us.

We also monitor our asset liability management positions in accordance with the directions stipulated in the
NHB Guidelines for Asset Liability Management System in Housing Finance Companies.

Credit Risk Management

Credit risk is the risk of default by a counterparty in a transaction and arises from lending and investment
activities that we undertake.

We manage our credit risk by evaluating the creditworthiness of counterparties, carrying out cashflow
analyses, setting credit limits for counterparties and obtaining collateral and other security where
appropriate. Actual credit exposures and limits and asset quality are regularly monitored and controlled by
our senior management.

Operational Risk

An operational risk can result from a variety of factors, including failure to obtain proper internal
authorisations, improperly documented transactions, failure of operational and information security
procedures, computer systems, software or equipment, fraud, inadequate training and employee errors. We
attempt to mitigate operational risk by maintaining a comprehensive system of internal controls,
establishing systems and procedures to monitor transactions, maintaining key back-up procedures,
undertaking regular contingency planning and providing employees with continuous training.

Legal Risk

The uncertainty of enforceability of the obligations of our customers and counterparties, including our
ability to foreclose on collateral, creates legal risk. Changes in law and regulation could adversely affect
our operations. We seek to minimise legal risk by using stringent legal documentation, employing
procedures designed to ensure that transactions are properly authorised and consulting internal and external
legal advisers.

Information Technology

Our investments in technology have always been dictated by value enhancements for customers. Most of
our systems have been developed in-house and all of our offices are electronically inter-connected. We
were among the first non-bank financial organisations in India to offer deposit receipts, deposit renewals
and loans against deposits on-line. Technology has helped us reduce cycle time and has enabled the
organisation to enhance customer satisfaction.

Our website, www.hdfc.com, offers a number of interactive features and email based services. In December
2000, we became the first Indian housing finance company to offer on-line approval for housing loans.

The website offers information on our products and services, including interactive tools such as a monthly
instalment calculator and a deposit calculator. Through the website, we provide customers with an option of


                                                     67
applying for housing loans on-line. The number of applications received for online loans, particularly from
NRIs, has been encouraging.

An investor help desk has been incorporated into the website providing relevant information regarding us,
including responses to frequently asked questions by investors. An up-to-date corporate profile has also
been made available to investors and lenders on the website.

Employees

As of June 30, 2009, we had 1,502 full-time employees. The following table sets out a breakdown of the
employees by function:

     Headquarter staff .........................................................................................................................................................         264
     Branch staff .................................................................................................................................................................      1,238
     Total............................................................................................................................................................................   1,502

Training and development are accorded a high priority by us. The “HDFC School”, established in fiscal
2001, predominantly provides training to frontline staff working in the areas of lending operations,
recoveries and deposits in relation to products and processes. The HDFC School is facilitated by senior
staff members.

Over the last 10 years, the number of offices has increased from 41 to 211 (excluding offices of HSPL) as
of March 31, 2009 while the number of employees has increased from 806 to 1,490 during the same period.

Total assets per employee as of March 31, 2009 stood at Rs. 650.0 million as compared to Rs. 560.0
million in the previous year and net profit per employee as of March 31, 2009 was Rs. 15.3 million as
compared to Rs. 16.9 million in the previous year.

The average age of our employees is 37 years. The average tenure of all employees is approximately 11
years, while the average tenure of senior management is approximately 23 years.

We offer our employees a range of incentives, including housing loans at reduced rates, vehicle/consumer
financing, healthcare benefits and performance incentives. We also have employee share option schemes.

Our employees are not represented by a union, which is consistent with other HFCs in India. We have not
suffered any strikes since incorporation and we consider our relations with our employees to be good.

Key Subsidiaries and Associates

Housing finance continues to remain our core business. While the main focus is to grow the housing
portfolio, organically and inorganically, we have made investments in various group companies in order to
capitalise on our strong brand and to maximise returns for shareholders. These group companies have
strong synergies with us and such diversification enables us to offer a wide gamut of financial services and
products to our customers. Some of the key subsidiaries and associate companies are described below:

HDFC Bank Limited (“HDFC Bank”)

HDFC Bank, a commercial bank, was promoted by us in fiscal 1993, with an initial capital of Rs. 2,000
million.

We and HDFC Bank continue to capitalise on the strong synergies through a system of referrals, special
arrangements and cross-selling in order to effectively provide a wide range of products and services under
the HDFC brand name, while maintaining an arm’s length relationship within the applicable regulatory
framework.




                                                                                                68
Pursuant to the merger of Centurion Bank of Punjab with HDFC Bank, in order for us, as a promoter of
HDFC Bank, to retain our current shareholding in HDFC Bank, HDFC Bank made a preferential offer to us
to subscribe to 26,200,220 warrants, convertible into 26,200,220 equity shares of Rs. 10 each of HDFC
Bank, at a price of Rs. 1,530.13 per share, in accordance with Chapter XIII of the Securities and Exchange
Board of India (Disclosure and Investor Protection) Guidelines, 2000. Under the terms and conditions of
the said warrants, we paid a sum of 10 per cent. of the price of the equity shares to be issued upon exercise
of such warrants at the time of allotment of the warrants on 3 June 2008. We have the right but not the
obligation to exercise the said warrants on or before 2 December 2009. If we elect to exercise the warrants,
we will be required to pay an additional amount of Rs. 36,080.5 million.

As at March 31, 2009, gross advances of HDFC Bank stood at Rs. 1,002,390.0 million which is an increase
of 48 per cent. over the gross advances as at March 31, 2008 and retail loans stood at Rs. 611,540.0 million,
representing an increase of 56 per cent. over the retail loans as at March 31, 2008. As at March 31, 2009,
HDFC Bank’s distribution network included 1,412 branches (including extension counters) and 3,295
ATMs in 528 cities as against 761 branches and 1,977 ATMs in 327 cities as at March 31, 2008.

For fiscal 2009, HDFC Bank reported a profit after tax of Rs. 22,450 million as against Rs. 15,900 million
in fiscal 2008, representing an increase of 41 per cent. In fiscal 2009, HDFC Bank’s board of directors
recommended a dividend of Rs. 10 per share as against Rs. 8.50 per share in fiscal 2008.
HDFC Bank earned a net profit after tax of Rs. 6,060 million during the quarter ended June 30, 2009
representing an increase of 31 per cent. over corresponding period last year.

Inclusive of the HDFC Bank Warrants, we, together with our wholly owned subsidiaries HDFC
Investments Limited and HDFC Holdings Limited, hold 22.7 per cent. of the equity share capital of HDFC
Bank.

HDFC Standard Life Insurance Company Limited (“HDFC–SL”)

HDFC-SL is a joint venture between HDFC and Standard Life Assurance Company (UK) (“Standard
Life”). We hold 72.4 per cent. of the equity share capital in HDFC-SL. In October 2000, HDFC-SL became
the first private sector company to obtain registration from the Insurance Regulatory and Development
Authority (“IRDA”) for life insurance. In December 2000, it also became the first private sector company
to issue life insurance policies after the liberalisation of the sector. As at March 31, 2009, HDFC-SL was
the fifth largest private sector life insurer in India, in terms of new business premiums collected.

Gross premium income of HDFC-SL for fiscal 2009 stood at Rs. 55,646.9 million as compared to Rs.
48,585.6 million in fiscal 2008. The sum assured in force for fiscal 2009 was Rs. 571,580 million as
compared to Rs. 457,430 million in fiscal 2008.

The company has a portfolio of 25 retail products and four group products covering saving, investment,
protection and retirement needs of the customers, along with five optional rider benefits.

HDFC-SL covers over 720 cities and towns in India through its 595 distribution points in the country with
over 200,000 financial consultants appointed by it. HDFC-SL also has a strong association with its
bancassurance partners, which has contributed significantly to its growth.

HDFC-SL reported a loss of Rs. 5,029.6 million for fiscal 2009. Like most life insurance companies in the
initial phase, HDFC-SL has reported losses. This is essentially due to the accounting norms applicable to
insurance companies wherein the commission expenses are recognised upfront in the year in which they are
incurred while the corresponding income is recognised over the entire life of the policies issued.

HDFC Asset Management Company Limited (“HDFC–AMC”)

HDFC-AMC is the investment manager to HDFC Mutual Fund, with HDFC Trustee Company Ltd. acting
as trustee. HDFC Standard Life Investments Limited, the investment arm of Standard Life Assurance



                                                     69
Company Limited are co-sponsors of HDFC Mutual Fund. As at March 31, 2009, HDFC Mutual Fund was
the second largest domestic mutual fund in India, in terms of assets under management.

As at March 31, 2009, HDFC-AMC managed 37 debt and equity oriented schemes of HDFC Mutual Fund.
During fiscal 2009, the average assets under management were amounted to Rs. 652,580.0 million (which
is inclusive of average assets under discretionary portfolio management/advisory services). The number of
investor accounts increased to over 3.4 million as at March 31, 2009 as compared to 3 million as at March
31, 2008.

As at March 31, 2009, HDFC-AMC had points of acceptance in 181 locations across the country.

For fiscal 2009, HDFC-AMC reported a profit after tax of Rs. 1,291.1 million as against Rs. 1,177.4
million in fiscal 2008. HDFC-AMC paid an interim dividend of Rs. 15 per share for fiscal 2009.
We hold 60 per cent. of the equity share capital of HDFC-AMC.

HDFC ERGO General Insurance Company Limited (“HDFC-ERGO”)

HDFC-ERGO is a joint venture between HDFC and ERGO International AG (“ERGO”), the primary
insurance entity of Munich Re Group (Germany).

HDFC-ERGO offers a complete range of insurance products like motor, health, travel, home and personal
accident insurance in the retail segment and customised products like property, marine and liability
insurance in the corporate segment. While continuing to develop its retail business, HDFC-ERGO
increased its presence in the corporate business, which accounted for 49 per cent. of its total business
during fiscal 2009.

According to the IRDA, the growth in the non-life insurance sector during fiscal 2009 has slowed to 9 per
cent. However, HDFC-ERGO recorded a growth of 56 per cent. during fiscal 2009 with a gross written
premium of Rs. 3,740.3 million in fiscal 2009 as against Rs. 2,400.0 million in fiscal 2008.

In fiscal 2009, HDFC-ERGO developed its distribution and product capabilities. HDFC-ERGO currently
distributes its products through 50 branches across India as compared to 15 branches in fiscal 2008. HDFC-
ERGO has also made considerable progress in the development of its agency force and direct sales teams.
In addition, the company continues to leverage on HDFC's distribution capability to drive growth.

In fiscal 2009, HDFC-ERGO made a loss of Rs. 257.5 million. The loss for fiscal 2009 was primarily on
account of continued reduction in the premium rates due to de-tariffing, cost of expansion and a higher
share of loss arising on the Indian Motor Third Party Insurance Pool which has been set up by all general
insurers in India to collectively service commercial vehicle third party insurance business.

We hold 74 per cent. of the equity share capital of HDFC-ERGO.

GRUH Finance Limited (“GRUH”)

GRUH is a housing finance company with operations primarily in the Indian states of Gujarat and
Maharashtra and is now expanding its network to other states like Karnataka, Madhya Pradesh, Rajasthan,
Chhatisgarh and Tamil Nadu.

During fiscal 2009, GRUH disbursed loans amounting to Rs. 6,555.2 million as against Rs. 6,322.9 million
in fiscal 2008.

For fiscal 2009, GRUH reported a profit after tax of Rs. 502.8 million as compared to Rs. 423.4 million in
fiscal 2008, which is an increase of 19 per cent. The board of directors of GRUH recommended a dividend
of Rs. 4.80 per share for fiscal 2009 as compared to Rs. 4 per share in fiscal 2008.

We hold 61.5 per cent. of the equity share capital of GRUH.


                                                    70
HDFC Sales Private Limited (“HSPL”)

Home Loan Services India Private Limited was renamed as HDFC Sales Private Limited to facilitate
identification with the HDFC brand by customers. HSPL continues to strengthen our marketing and sales
efforts by providing a dedicated sales force to sell home loans and other financial products.

HSPL has a presence in 56 locations. During fiscal 2009, HSPL sourced loans accounting for 44 per cent.
of individual loans disbursed by us.

HSPL is a wholly owned subsidiary.

HDFC Venture Capital Limited (“HVCL”)

In April 2004, SEBI amended the SEBI (Venture Capital Funds) Regulations, 1996 to permit venture
capital funds to invest in real estate. Pursuant to these amendments, we set up a venture capital company
and launched a property fund called HDFC Property Fund (the “Fund”) in December 2004 with HDFC
Ventures Trustee Company Limited acting as trustee, and HDFC Venture Capital Limited appointed as the
asset management company for the Fund.

The Fund currently has two schemes. The first scheme is HDFC India Real Estate Fund (“HI-REF”), with a
corpus of Rs. 10,000.0 million, which has been fully invested. Exits are being explored for some of the
investments of the scheme.

The second scheme, HDFC IT Corridor Fund has a corpus of Rs. 4,464.0 million. This scheme has
disbursed the entire corpus in rental income yielding commercial properties in major cities in India and
exits are being explored for some of the investments of the scheme.

During fiscal 2009, HVCL made a profit after tax of Rs. 130.2 million as compared to Rs. 124.6 million in
fiscal 2008. The board of directors of HVCL approved the payment of an interim dividend of Rs. 320 per
equity share in fiscal 2009 and no final dividend was declared.

We hold 80.5 per cent. of the equity share capital of HVCL.

HDFC Property Ventures Limited (“HPVL”)

HPVL provides investment advisory services to overseas asset management entities. Such entities in turn
manage and advise offshore private equity funds. During fiscal 2009, HPVL made a profit after tax of Rs.
45.8 million and its board of directors approved a maiden dividend of Rs. 90 per equity share in fiscal
2009.

We hold 100 per cent. of the equity share capital of HPVL.

Other Services

Property Services Group

Our Property Services Group assists individuals and companies in locating suitable residential or
commercial premises in major cities and towns in India. These facilities are also available to NRIs. HDFC
also undertakes valuation of real estate for companies.

Advance Processing Facility

We have an “Advance Processing Facility” under which developers who are undertaking a residential
project can approach us for approval in principle to finance individuals buying a dwelling unit in their



                                                    71
project. The facility has been designed to expedite the processing of loan applications and make it more
convenient for individuals to obtain loans from us.

Training

We, having pioneered and helped develop market-oriented housing finance in India, have continued to
expand our services to a broader spectrum of clients by offering specialised training courses.

Our Centre for Housing Finance provides technical assistance to national governments and to housing
finance institutions in developing countries, especially in the field of institutional development for effective
shelter finance delivery. The second major area of activity of the Centre for Housing Finance is managerial
training for housing finance institutions.

Consultancy

We have been considered by the World Bank and other multilateral agencies as a model private sector
housing finance agency in developing countries and we have provided technical assistance for new and
existing institutions, not only in India but also in a number of countries in Asia, Africa and Eastern Europe.
Members of our senior management have been invited to various countries to provide consultancy services
related to housing finance and urban development.

We have served as consultants to international agencies such as the World Bank, the United States Agency
for International Development, the ADB, the United Nations Centre for Human Settlements (UNCHS), the
Commonwealth Development Corporation and the United Nations Development Programme.

Insurance

Our policy is to insure all of our properties adequately against fire and other usual risks. We also maintain
insurance for operational risks such as the loss or theft of cash or securities.

Our insurance policies are subject to exclusions which are customary for insurance policies of the type held
by us, including those exclusions which relate to war and terrorism-related events.

We believe that our insurance policies as described above are appropriate for our business.

Intellectual Property

We have registered our service mark under the Trade Marks Act, 1999.




                                                      72
                                    REGULATIONS AND POLICIES

The following description is a summary of certain sector specific laws and regulations in India, which are
applicable to the Company. The information detailed in this chapter has been obtained from publications
available in the public domain. The regulations set out below may not be exhaustive, and are only intended
to provide general information to the investors and are neither designed nor intended to substitute for
professional legal advice.

The Company is engaged in the business of providing finance for housing to individuals and the corporate
sector. The major regulations governing the Company are detailed below:

The National Housing Bank Act, 1987

The National Housing Bank Act, 1987 (the “NHB Act”), was enacted to establish National Housing Bank
(“NHB”) to operate as a principal agency to promote housing finance companies (“HFCs”) and to provide
financial and other support to such institutions. The business of the NHB includes making loans and
advances or other form of financial assistance to HFCs; guaranteeing the financial obligations of HFCs and
underwriting the issue of stocks, shares, debentures and other securities of HFCs.

Under the NHB Act, a HFC is required to obtain certificate of registration and meet the net owned fund
requirements for carrying on housing finance business. Further, every HFC is required to invest and
continue to invest in India in unencumbered approved securities, an amount which, at the close of business
on any day, is not be less than five per cent (or such higher percentage as the NHB may specify), of the
deposits outstanding at the close of business on the last working day of the second preceding quarter.

Additionally, every HFC is required to maintain in India in an account with a scheduled bank in term
deposits or certificate of deposits (free of charge or lien) or in deposits with the NHB or by way of
subscription to the bonds issued by the NHB, a sum which, at the close of business on any day, together
with the investment as specified above, shall not be less than ten per cent (or such higher percentage as the
NHB may specify), of the deposits outstanding in the books of the HFC at the close of business on the last
working day of the second preceding quarter. Pursuant to the NHB Act, every HFC is also required to
create a reserve fund and transfer therein a sum not less than twenty per cent of its net profit every year as
disclosed in the profit and loss account and before any dividend is declared.

Under the terms of the NHB Act, the NHB has the power to direct deposit accepting HFCs to furnish such
statements, information or particulars relating to deposits received by the HFC, as may be specified by the
NHB. The NHB may cause an inspection to be made of any deposit accepting HFC, for the purpose of
verifying the correctness or completeness of any statement, information or particulars furnished to the NHB
or for the purpose of obtaining any information or particulars which the HFC has failed to furnish on being
called upon to do so.

The National Housing Bank General Regulations, 1988

Pursuant to the provisions of the NHB Act, the RBI issued the National Housing Bank General
Regulations, 1988 (the “NHB Regulations”). The NHB Regulations provide for meetings of the board of
directors of the NHB and its committees; fees and allowances of the directors and members of the NHB
and general provisions in relation to execution of contracts and issuance of bonds by the NHB.

The Housing Finance Companies (National Housing Bank) Directions, 2001

The objective of the Housing Finance Companies (National Housing Bank) Directions (the “HFC
Directions)” was to consolidate and issue directions in relation to the acceptance of deposits by the HFCs.
Additionally, the HFC Directions provide the prudential guidelines for income recognition, accounting
standards, asset classification, provision for bad and doubtful assets, capital adequacy and concentration of



                                                     73
credit/investment to be observed by the HFCs and the matters to be included in the auditors’ report by the
auditors of HFCs.

Pursuant to the HFC Directions, no HFC having net owned funds of less than Rs.20 million is allowed to
accept public deposits. Further, no HFC having net owned funds in excess of Rs.20 million is allowed to
renew or accept public deposits in excess of five times the net owned funds, unless such HFC has obtained
credit rating for fixed deposits not below 'A' rating from any one of the approved rating agencies at least
once a year and it is compliance of all the prudential norms. In the absence of credit rating, a HFC is
allowed to renew or accept public deposit not exceeding two times of its net owned fund or Rs. 100 million,
whichever is lower including any amount remaining outstanding in its books as on the date of acceptance or
renewal of such deposit, subject to it (a) being in compliance with all the prudential norms; and (b) having
capital adequacy ratio of not less than fifteen per cent as per the last audited balance sheet.

Pursuant to a circular dated April 13, 2009, HFCs having assets of Rs. 1 billion and above and issuing
financial products like commercial paper, debentures to which rating is assigned by rating agencies are
required to furnish the information about downgrading/upgrading of assigned rating of any financial
product issued by them, within fifteen days of such a change in rating to the NHB.

Under the HFC Directions, no HFC shall have deposits inclusive of public deposits, the aggregate amount
of which, together with the amounts, if any, held under the RBI Act and loans or other assistance from the
NHB, is in excess of sixteen times of its net owned fund. In addition, no HFC shall accept or renew any
public deposit which is (a) repayable on demand or on notice; or (b) unless such deposit is repayable after a
period of twelve months or more but not later than eighty four months from the date of acceptance or
renewal of such deposits. No HFC is allowed to invite or accept or renew any public deposit at a rate of
interest exceeding twelve and a half percent per annum. Interest may be paid or compounded at rests which
shall not be shorter than monthly rests. Further, no HFC shall invite or accept or renew repatriable deposits
from non-resident Indians under non-resident (external) account scheme at a rate exceeding the rate
specified by the RBI for such deposits with the scheduled commercial banks. Additionally, the period of
deposits shall not be less than one year and not more than three years.

In accordance with the prudential norms mentioned in the HFC Directions, income recognition shall be
based on recognised accounting policies. Every HFC shall, after taking into account the degree of well
defined credit weaknesses and extent of dependence on collateral security for realisation, classify its
lease/hire purchase assets, loans and advances and any other forms of credit into the specified classes, viz.
standard assets, sub-standard assets, doubtful assets and loss assets. Thereafter, every HFC, after taking into
account the time lag between an account becoming non-performing, its recognition as such, the realisation
of the security and the erosion over time in the value of security charged, is required to make provision
against sub-standard assets, doubtful assets and loss assets as provided under the HFC Directions.

The HFC Directions also require each HFC to maintain a minimum capital ratio consisting of tier 1 and tier
II capital which shall not be less than 12 per cent of its aggregate risk weighted assets and the risk adjusted
value of its off-balance sheet items. The total tier II capital shall not at any time exceed 100 per cent of its
tier I capital.

Under the HFC Directions, degrees of credit risk expressed as percentage weights have been assigned to
balance sheet assets. Hence, the value of each asset is multiplied by the relevant risk weight to arrive at its
risk adjusted value. The aggregate shall be taken in to account for calculating the minimum capital
adequacy ratio of an HFC.

Further, in terms of the HFC Directions, no housing finance company shall invest in land or building,
except for its own use, an amount exceeding twenty per cent of its capital fund. Such investment over and
above ten percent of its owned fund is required to be made only in residential units. Additionally, no HFC
shall lend to any single borrower exceeding fifteen percent of its owned fund, and to any single group of
borrowers exceeding twenty-five percent of its owned fund. A HFC is not allowed to invest in the shares of
another company exceeding fifteen percent of its owned fund; and in the shares of a single group of
companies exceeding twenty-five percent of its owned fund. A HFC shall not lend and invest


                                                      74
(loans/investments together) exceeding twenty-five percent of its owned fund to a single party and forty
percent of its owned fund to a single group of parties. The HFC Directions provide for exposure
permissible for HFCs to the capital market. Additionally, a HFC is not allowed to lend against its own
shares.

Pursuant to the HFC Directions, the aggregate exposure of a HFC to the capital market in all forms should
not exceed 40 per cent of its networth as on March 31 of the previous year, Within this overall ceiling,
direct investment in shares, convertible bonds, debentures, units of equity-oriented mutual funds and all
exposures to venture capital funds should not exceed 20 per cent of its networth.

The Prevention of Money Laundering Act, 2002

The Prevention of Money Laundering Act, 2002 (the “PMLA”) was enacted to prevent money laundering
and to provide for confiscation of property derived from, and involved in, money laundering. In terms of
the PMLA, every financial institution, including a HFC, is required to maintain record of all transactions of
specified nature and value and verify and maintain the records of the identity of all its clients, in such a
manner as may be prescribed. The PMLA also provides for power of summons, searches and seizures to the
authorities under the PMLA.

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
(the “SARFAESI Act”) regulates the securitization and reconstruction of financial assets of banks and
financial institutions. The SARFAESI Act provides for measures in relation to enforcement of security
interest and rights of the secured creditor in case of default.

The RBI has issued guidelines to banks on the process to be followed for sales of financial assets to asset
reconstruction companies. These guidelines provide that a bank or a financial institution may sell financial
assets to an asset reconstruction company provided the asset is a non-performing asset. These assets are to
be sold on a “without recourse” basis only. A securitization company may, for the purposes of asset
reconstruction, provide for measures such as the proper management of the business of the borrower, by
change in, or take over of, the management of the business of the borrower; the sale or lease of a part or
whole of the business of the borrower and certain other measures.

Additionally, under the provisions of the SARFAESI Act, any securitisation company or reconstruction
company may act as act as an agent for any bank or financial institution for the purpose of recovering their
dues from the borrower on payment of such fee or charges as may be mutually agreed upon between the
parties.

Refinance Scheme for Housing Finance Companies, 2003

Pursuant to Refinance Scheme for Housing Finance Companies, 2003 (“Refinance Scheme”), HFCs
registered with NHB are eligible to obtain refinance from NHB in respect of their direct lending up to Rs. 5
million to individuals for the purchase, construction, repair and upgrade of housing units.

In addition, the HFCs are required to provide long term finance for purchase, construction, repair and
upgrading of dwelling units by home-seekers. The HFCs are also required to have specific levels of capital
employed and net owned fund to be eligible to avail refinance facilities under the Refinance Scheme. The
financial assistance can be drawn by HFCs in respect of loans already advanced by them and also for
prospective disbursements.

Master Circular on Housing Finance issued by the Reserve Bank of India

Pursuant to the Master Circular on Housing Finance dated July 1, 2009 issued by the Reserve Bank of
India, banks are eligible to deploy their funds under the housing finance allocation in any of the three


                                                     75
categories, i.e.; (i) direct finance; (ii) indirect finance; or (iii) investment in bonds of NHB/Housing and
Urban Development Corporation Limited, or combination thereof. Indirect finance includes loans to
housing finance institutions, housing boards, other public housing agencies, etc., primarily for augmenting
the supply of serviced land and constructed units.

Under the terms of the Master Circular on Housing Finance, banks may grant term loans to HFCs taking in
to account (long-term) debt-equity ratio, track record, recovery performance and other relevant factors.
Further, all HFCs registered with NHB are eligible to apply for refinance from NHB and will be eligible
subject to the refinance policy. The Master Circular also provides for construction activities eligible for
bank credit, reporting requirements, banks exposure to real estate sector and risk weight on housing
finance. In terms of the Master Circular on Housing Finance, the applicable risk weight on housing finance
is governed by the provisions of Master Circular on Prudential Guidelines on Capital Adequacy and Market
Discipline – Implementation of the New Capital Adequacy Frame Work, which provides that banks lending
to individuals for acquiring residential property which are fully secured by mortgages on the residential
property that is or will be occupied by the borrower, or that is rented, shall have a risk weight of 50 per cent
for a loan up to Rs. 3 millions and a weight of 75 per cent for a loan of Rs. 3 million and above, provided
the loan to value (“LTV”) ratio is not more than 75 per cent, based on the board valuation policy. Lending
for acquiring residential property, which meets the above criteria but have LTV ratio of more than 75
percent, will attract a risk weight of 100 percent.

Short- term foreign currency borrowings by housing finance companies

Pursuant to a RBI circular dated November 17, 2008, HFCs registered with NHB have been allowed to
raise short- term foreign currency borrowings, under the approval route, subject to complying with capital
adequacy norms and other prudential norms. Under the said circular, the all-in-cost ceiling should not
exceed 6 months Libor + 200 bps. The maximum amount should not exceed 50 per cent of the NOF or
USD 10 million (or its equivalent), whichever is higher. Also, the borrowings are required to be fully
swapped into rupees for the entire maturity.

Eligible lenders under the said circular are multilateral or bilateral financial institutions, reputed regional
financial institutions and foreign equity holders with minimum direct equity holdings of 25 per cent. The
resources are required to be used only for refinancing the short-term liabilities and no fresh assets should be
booked out of the resources. The maximum maturity should not exceed three years.

Priority sector lending

Pursuant to a RBI circular dated December 8, 2008, loans granted by banks to HFCs, approved by NHB for
the purpose of refinance, for on-lending to individuals for purchase/construction of dwelling units would be
classified under priority sector, provided the housing loans granted by HFCs do not exceed Rs. 2 million
per dwelling unit per family. However, the eligibility under this measure is restricted to five per cent of the
individual bank’s total priority sector lending, on an ongoing basis.

Accounting for taxes on income

Pursuant to a NHB circular dated March 28, 2005 regulatory treatment in relation to deferred tax assets and
deferred tax liabilities was clarified as under:

1.       The balance in the deferred tax assets item appearing in the balance sheet will not be eligible for
         inclusion in tier I capital or net owned funds for capital adequacy purposes as it is not an eligible
         item of capital.

2.       Deferred tax assets will be treated as an intangible asset and should be deducted from tier I capital.

Guidelines for Asset Liability Management System for HFCs




                                                      76
The Guidelines for Asset Liability Management System for HFCs (“ALM Guidelines”) lays down broad
guidelines for HFCs in respect of management of liquidity and interest rate risks. The ALM Guidelines
provide that the board of directors of a HFC should have overall responsibility for management of risks and
should decide the risk management policy and set limits for liquidity, interest rate, exchange rate and equity
price risks. Additionally, an asset-liability committee is required to be constituted consisting of the HFC's
senior management for ensuring adherence to the limits set by the board as well as for deciding the
business strategy of the HFC (on the assets and liabilities sides) in line with the HFC's budget and decided
risk management objectives.

The ALM Guidelines also recommended classification of various components of assets and liabilities into
different time buckets for preparation of gap reports (liquidity and interest rate sensitive). As per the ALM
Guidelines, HFCs which are better equipped to reasonably estimate the behavioural pattern of various
components of assets and liabilities on the basis of past data/empirical studies could classify them in the
appropriate time buckets, subject to approval by the asset-liability committee /board of the HFC.

In addition, each HFC is required to set prudential limits on individual gaps in various time buckets with
the approval of the Board/management committee. Such prudential limits should have a relationship with
the total assets, earning assets or equity.

Guidelines on Fair Practices Code for HFCs

The Guidelines on Fair Practices Code for HFCs (“Fair Practices Code”) were issued on September 5,
2006. The Fair Practices Code seeks to promote good and fair practices by setting minimum standards in
dealing with customers, increase in transparency, encouragement of market forces, higher operating
standards, fair and cordial relationship between customer and HFCs and foster confidence in the housing
finance system.

The Fair Practices Code provides for provisions in relation to providing regular and appropriate updates to
the customer and prompt resolution of grievances. Further, the HFCs are required to disclose information
on interest rates, common fees, terms and conditions and charges through notices etc. HFCs are required to
ensure that advertising and promotional material is clear and not misleading and that privacy and
confidentiality of the customers’ information is maintained. Further, whenever loans are given, HFCs
should explain to the customer the repayment process by way of amount, tenure and periodicity of
repayment. However if the customer does not adhere to repayment schedule, a defined process in
accordance with the laws of the land shall be followed for recovery of dues. The process will involve
reminding the customer by sending him / her notice or by making personal visits and / or repossession of
security, if any.

Guidelines for Recovery Agents Engaged by HFCs

The Guidelines for Recovery Agents Engaged by HFCs (“Recovery Agents Guidelines”) were issued on
July 14, 2008. In terms of the Recovery Agents Guidelines, HFCs are required to have a due diligence
process in place for engagement of recovery agents, which should cover individuals involved in the
recovery process. HFCs are required to ensure that the recovery agents are properly trained to handle with
care and sensitivity their responsibilities, in particular, aspects like hours of calling, privacy of customer
information, etc. HFCs are also required to inform the borrower the details of recovery agency firms/
companies while forwarding default cases to the recovery agency.

Under the Recovery Agents Guidelines, any person authorised to represent a HFC in collection or/and
security repossession should follow guidelines such as contacting customer ordinarily at the place of his /
her choice; interaction with the customer in a civil manner and assistance to resolve disputes or differences
regarding dues in a mutually acceptable and orderly manner.

Know Your Customer Guidelines




                                                     77
The RBI has extended the Know Your Customer (“KYC”) guidelines to NBFCs and advised all NBFCs to
adopt the same with suitable modifications depending upon the activity undertaken by them and ensure that
a proper policy framework of anti-money laundering measures is put in place. The KYC policies are
required to have certain key elements, including inter alia customer acceptance policy, customer
identification procedures, monitoring of transactions and risk management, adherence to KYC guidelines
and the exercise of due diligence by persons authorized by the NBFC, including its brokers and agents. The
KYC Guidelines issued by the NHB for HFCs have also been revisited in the above context and revised
guidelines were issued by NHB on April 10, 2006.


Norms for excessive interest rates

The NHB has advised all HFCs to revisit internal principles and procedures in determining interest rates
and fee and other charges. According to this advice, the Board of each HFC is required to revisit its policies
on interest rate determination, fee and other charges, including margin and risk premium charged to
different categories of borrowers and approve the same.

Foreign Investment in HFCs

Pursuant to Press Note 7 of 2008 series issued by the Department of Industrial Policy and Promotion, 100
per cent foreign direct investment under the automatic route is permitted for investment in housing finance
sector, subject to following conditions:

1.    Minimum Capitalisation:

      i)        For FDI up to 51 per cent - US$ 0.5 million to be brought upfront
      ii)       For FDI above 51 per cent and up to 75 per cent - US $ 5 million to be brought upfront
      iii)      For FDI above 75 per cent and up to 100 per cent - US $ 50 million out of which US $ 7.5
                million to be brought upfront and the balance in 24 months.

2.    Foreign investors can set up 100 per cent operating subsidiaries without the condition to disinvest a
      minimum of 25 per cent of its equity to Indian entities, subject to bringing in US$ 50 million without
      any restriction on number of operating subsidiaries without bringing in additional capital.

3.    Joint venture operating NBFC’s that have 75 per cent or less than 75 per cent foreign investment will
      also be allowed to set up subsidiaries for undertaking other NBFC activities, subject to the
      subsidiaries also complying with the applicable minimum capital inflow.

4.    Compliance with guidelines of the RBI is required in this regard.

5.    The minimum capitalization norms would apply where the foreign holding in NBFC (both direct and
      indirect) exceeds the limits indicated above.

6.    The capital for the purpose of minimum capitalization norms shall consist of ordinary shares only.

Where FDI is allowed on an automatic basis without FIPB approval, the RBI would continue to be the
primary agency for the purposes of monitoring and regulating foreign investment. In cases where FIPB
approval is obtained, no approval of the RBI is required except with respect to fixing the issuance price,
although a declaration in the prescribed form, detailing the foreign investment, must be filed with the RBI
once the foreign investment is made in the Indian company. The foregoing description applies only to an
issuance of shares by, and not to a transfer of shares of, Indian companies. Every Indian company issuing
shares or convertible debentures in accordance with the RBI regulations is required to submit a report to the
RBI within 30 days of receipt of the consideration and another report within 30 days from the date of issue
of the shares to the non-resident purchaser.




                                                     78
                                     DIRECTORS AND MANAGEMENT

Board of Directors

The composition of the Board of Directors of the Company is governed by the provisions of the Companies
Act and the listing agreements with the Stock Exchanges. As per the Articles of Association of the
Company, the Company shall not have less than three Directors and not more than fifteen Directors
(excluding nominee Directors of financial institutions and/or special Directors).

Currently, the Company has 14 Directors. The present composition of the Board of Directors and its
proceedings are in accordance with the Companies Act and the norms of the code of corporate governance
as applicable to listed companies in India.

Not less than two-thirds of the total number of Directors are required to be elected directors who are liable
to retire by rotation. At the Company's annual general meeting, one-third or such of the Directors for the
time being who are liable to retire by rotation, retire from office. A retiring Director is eligible for re-
election. The quorum for meetings of the Board is the higher of one-third of the total number of Directors
or two Directors.

The following table sets forth details regarding the Board of Directors as at the date of this Preliminary
Placement Document:

            Name                             Designation                              Address
Mr. Deepak S. Parekh               Executive Chairman                    HDFC Limited, HT Parekh Marg,
                                                                         169,     Backbay     Reclamation,
                                                                         Mumbai, 400 020
Mr. Keshub Mahindra                Vice Chairman, Independent            St. Helen's Court, Dr. Gopalrao
                                   Director                              Deshmukh Marg, Mumbai,
                                                                         400 026
Mr. Shirish B. Patel               Independent Director                  Nanda Deep 2A, ML Dahanukar
                                                                         Marg, Mumbai, 400 026
Mr. B. S. Mehta                    Independent Director                  No. 37, Maheshwari Mansion, 5th
                                                                         Floor, 34 L Jagmohandas Marg,
                                                                         Mumbai, 400 036
Mr. D. M. Sukthankar               Independent Director                  No. 5, Priya Co-op Hsg Soc Ltd.,
                                                                         Khan Abdul Gafar Khan Road,
                                                                         Worli Sea Face, Mumbai, 400 030
Mr. D. N. Ghosh                    Independent Director                  South City Projects (Kolkata)
                                                                         Limited, Tower 1, Flat No. 22E
                                                                         375 Prince Anwar Shah Road
                                                                         Kolkata, 700 064
Dr. S. A. Dave                     Independent Director                  Bldg. No. 17, Flat No. 31, MHB
                                                                         Colony, Opp. Lilavati Hospital,
                                                                         Bandra Reclamation, Bandra (W),
                                                                         Mumbai, 400 050
Dr. Ram S. Tarneja                 Independent Director                  Flat No. 2102, Planet Godrej
                                                                         Aqua Tower II, K K Marg, Jacob
                                                                         Circle    Mahalaxmi,    Mumbai,
                                                                         400 026
Mr. N.M. Munjee                    Independent Director                  Benedict Villa, House no 471
                                                                         Saude vado, Chorao Island
                                                                         Tiswadi, Goa 403 102
Dr. Bimal Jalan                    Independent Director                  4 Babar Road, New Delhi 110 001
Mr. D. M. Satwalekar               Independent Director                  No. 9, Nutan Alka Co-op Hsg.
                                                                         Society, Santacuz(W), Mumbai,


                                                     79
              Name                                Designation                             Address
                                                                              Maharashtra 400 054
Dr. J. J. Irani*                      Non-Executive Director                  221A,     NCPA       Apartments,
                                                                              Nariman Point, Mumbai 400 021
Ms. Renu Sud Karnad                   Joint Managing Director                 HDFC Limited, The Capital Court,
                                                                              Munirka Outer Ring Road, Olof
                                                                              Palme Marg, New Delhi 110 067
Mr. Keki M. Mistry                    Vice Chairman and Managing              HDFC Limited, HT Parekh Marg,
                                      Director                                169,   Backbay      Reclamation,
                                                                              Mumbai 400 020
*Appointed as a special Director under articles 125 and 126 of the Articles of Association of the Company with effect
from January 18, 2008.

All the Directors of the Company are Indian nationals.

Brief Profiles

Mr. Deepak S. Parekh is the Executive Chairman and whole time Director of the Company. He holds a
Bachelor’s Degree in commerce from the University of Mumbai and is a fellow of the Institute of
Chartered Accountants (England & Wales). He was honoured by the Government of India with the Padma
Bhushan in 2006 for his services towards trade and industry in India. He is also on the board of directors of
Castrol India Limited, Glaxosmithkline Pharmaceuticals Limited, HDFC Asset Management Company
Limited, HDFC ERGO General Insurance Company Limited, HDFC Standard Life Insurance Company
Limited, Hindustan Oil Exploration Company Limited, Hindustan Unilever Limited, Infrastructure
Development Finance Company Limited, Mahindra and Mahindra Limited, Siemens Limited and The
Indian Hotels Company Limited. He has been on the Board of Directors of the Company since March 1,
1985.

Mr. Keshub Mahindra is the Vice Chairman and independent Director of the Company. He is a graduate
of the Wharton School of the University of Pennsylvania, U.S.A. He is also the Chairman of the Mahindra
and Mahindra Group of companies. He is a director on the board of Bombay Burmah Trading Corporation
Limited, Bombay Dyeing and Manufacturing Company Limited, Mahindra and Mahindra Limited,
Mahindra Holdings Limited and Mahindra Ugine Steel Company Limited. He has been on the Board of
Director of the Company since October 17, 1977.

Mr. Shirish B. Patel is an independent Director of the Company. He holds a Master’s Degree in arts from
the University of Cambridge. He founded and is now the chairman-emeritus of a firm of consulting civil
engineers with expertise in prefabrication, mass housing, tall buildings, factories, bridges and marine
works. He is also director of HDFC Developers Limited. He has been on the Board of Directors of the
Company since its October 17, 1977. He is also the member of Compensation Committee of the Company.

Mr. B. S. Mehta is an independent Director of the Company. He holds a Bachelor’s Degree in commerce
from the University of Mumbai and is a fellow of the Institute of Chartered Accountants of India and
Association of Certified Chartered Accountants, United Kingdom. Mr. Mehta is an accountant in practice
and deals with matters related to taxation, accountancy and valuation of mergers and acquisitions. Mr.
Mehta is a director on the board of Atul Limited, Bharat Bijlee Limited, CEAT Limited, Century Enka
Limited, Clarinat Chemicals (India) Limited, Gillette India Limited, IL&FS Investment Managers Limited,
JB Chemicals & Pharmaceuticals Limited, National Securities Depository Limited, Pidilite Industries
Limited, Procter & Gamble Hygiene & Health Care Limited, Sasken Communication Technologies
Limited, SBI Capital Markets Limited and Sudarshan Chemical Industries Limited. He has been a Director
of the Company since June 14, 1988.

Mr. D. M. Sukthankar is an independent Director of the Company. He 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 has been associated with the housing sector for a number of years. He is also a director of


                                                         80
HDFC Developers Limited, Indoco Remedies Limited, Phoenix Township Limited and Tata Housing
Development Company Limited. He has been on the Board of Directors of the Company since January 25,
1989.

Mr. D. N. Ghosh is an independent Director of the Company. He holds a Master’s Degree in economics
from Calcutta University. He was the Chairman of the State Bank of India. Mr. Ghosh is currently the
chairman of ICRA Limited. Mr. Ghosh is a director on the board of Birla Corporation Limited, ICRA
Management Consulting Services Limited and Sundaram BNP Paribas Asset Management Company
Limited. He has been on the Board of Directors of the Company since November 21, 1989.

Dr. S. A. Dave is an independent Director of the Company. He holds a Doctorate of economics and a
Master’s Degree in economics from the University of Rochester. Dr. Dave was the chairman of SEBI and
Unit Trust of India. He is currently the chairman of the Centre for Monitoring Indian Economy. He is a
director on the board of Anand Rathi Securities Limited, Escorts Limited, Jaybharat Textiles and Real
Estate Limited, KSL and Industries Limited, Mudra Lifestyle Limited, Nippo Batteries Limited, Nitin Fire
Protection Industries Limited, Phoenix Township Limited, Quantum Information Services Limited, SBI
DFHI Limited and Shrenuj & Company Limited. He was appointed to the Board of Directors of the
Company on August 1, 1990.

Dr. Ram S. Tarneja is an independent Director of the Company. He holds a Doctorate in human resources
from Cornell University. He also has a Master’s Degree in arts from the University of Delhi and University
of Virginia and a Bachelor’s Degree in arts (Honors) from University of Delhi. Dr. Tarneja was the
Managing Director of Bennett, Coleman and Company Limited. He is also the chairman of Jolly Board
Limited. He is a director of Bennett Coleman and Company Limited, Bharat Gears Limited, GATI Limited,
GIVO Limited, NESCO Limited, OTIS Elevator Company (India) Limited, Phillips Carbon Black Limited,
Phenoix Township Limited, SOWiL Limited and Transcorp International Limited. He was appointed to the
Board of Director of the Company on December 15, 1994.

Mr. N. M. Munjee is an independent Director of the Company. He holds a Master’s Degree in economics
from the London School of Economics. He is currently the Chairman of Development Credit Bank Limited.
He is a director of ABB Limited, Ambuja Cements Limited, Apollo Health Street Limited, Bharti-Axa Life
Insurance Company Limited, Ciba India Limited, Cummins India Limited, Indian Railway Finance
Corporation Limited, Tata Chemicals Limited, Tata Motors Limited, The Shipping Corporation of India
Limited, Unichem Laboratories Limited and Voltas Limited. He was appointed to the Board of Directors of
the Company on February 1, 1998.

Dr. Bimal Jalan is an independent Director of the Company. He is a B.A. (Hons.), B.A. (Tripos), M.A., M.
Phil and Ph.D. Educated at Presidency College, Kolkata, University of Cambridge, University of Oxford
and University of Bombay, Mumbai. He is a nominated Member of Parliament (Rajya Sabha) and former
Governor of the Reserve Bank of India. He has previously held several positions in the Government
including those of Finance Secretary and Chairman of the Economic Advisory Council to Prime Minister.
He has also been associated with a number of public institutions, and is currently the Chairman of the
Public Interest Foundation, Delhi. He was appointed to the Board of Directors of the Company on April 30,
2008. Dr. Bimal Jalan is not a director of any other public limited company.

Mr. D. M. Satwalekar is an independent Director of the Company. He holds a Bachelor’s Degree in
technology from the Indian Institute of Technology, Bombay and a Master’s Degree in business
administration from the American University, U.S.A. He was the Managing Director and Chief Executive
Officer of HDFC Standard Life Insurance Company Limited. He was earlier appointed as the Managing
Director of the Company in 1999 and had been working with the Company from 1979 to 2000. He is also
the director of Asian Paints Limited, Entertainment Network (India) Limited, Infosys Technologies
Limited, Piramal Healthcare Limited, and The Tata Power Company Limited. He was appointed to the
Board of Director of the Company on March 1, 1990.

Dr. J. J. Irani is a non-executive Director of the Company. He was appointed as a Special Director under
Articles 125 and 126 of the Articles of Association of the Company with effect from January 18, 2008. He


                                                    81
holds a doctorate from University of Sheffield, U.K. He also holds a Master’s Degree in science from
Nagpur University and M.Met from University of Sheffield, U.K. Queen Elizabeth II conferred on him
Honorary Knighthood (KBE) for his contribution to Indo-British Trade & Co-operation. The President of
India conferred on him the award of Padma Bhushan in 2007 for his services to trade and industry in the
country. He is a director on the board of several other companies including BOC India Limited,
Electrosteel Castings Limited, Kansai Nerolac Paints Limited, Repro India Limited, Tata Motors Limited,
Tata Refractories Limited, Tata Sons Limited, Tata Steel Limited and TRF Limited.

Ms. Renu Sud Karnad is a Joint Managing Director of the Company. She is a graduate in law from the
University of Mumbai and holds a Master’s Degree in economics from the University of Delhi. She is a
Parvin Fellow - Woodrow Wilson School of International Affairs, Princeton University, U.S.A. She is
currently the director of Bosch Limited, Credit Information Bureau (India) Limited, Gruh Finance Limited,
HDFC Asset Management Company Limited, HDFC Bank Limited, HDFC ERGO General Insurance
Company Limited, HDFC Property Ventures Limited, HDFC Standard Life Insurance Company Limited,
HDFC Ventures Capital Limited, ICI India Limited, Indraprastha Medical Corporation Limited and Sparsh
BPO Services Limited. She has been on the Board of Directors of the Company since May 1, 2000.

Mr. Keki M. Mistry is the Vice Chairman and Managing Director of the Company. He holds a Bachelor’s
Degree in commerce from the University of Mumbai and is a fellow of the Institute of Chartered
Accountants of India. He has been employed with the Company since 1981 and was appointed as the
Executive Director of the Company in 1993, as the Deputy Managing Director in 1999, as the Managing
Director in 2000 and was re-designated as the Vice Chairman and Managing Director of the Company in
October 2007. He is also on the board of directors of Greatship (India) Limited, Gruh Finance Limited,
HDFC Asset Management Company Limited, HDFC Bank Limited, HDFC Developers Limited, HDFC
ERGO General Insurance Company Limited, HDFC Standard Life Insurance Company Limited,
Infrastructure Leasing & Financial Services Limited, Next Gen Publishing Limited, Shrenuj & Company
Limited, Sun Pharmaceuticals Industries Limited and The Great Eastern Shipping Company Limited.

None of the Directors of Company are related to each other.

Borrowing Powers of the Directors of the Company

Pursuant to resolution passed by the shareholders of the Company on July 16, 2008 and in accordance with
provisions of the Companies Act, the Board has been authorized to borrow sums of money for the purpose
of business operations of the Company upon such terms and conditions and with or without security as the
Board of Directors may think fit, provided that money or monies to be borrowed together with the monies
already borrowed by the Company shall not exceed, at any time, a sum of Rs. 1,500 billion.

Interest of Directors of the Company

All of our Directors, including independent Directors, may be deemed to be interested to the extent of fees
payable to them for attending meetings of the Board or a committee thereof as well as to the extent of other
remuneration and reimbursement of expenses payable to them under the Articles of Association, and to the
extent of remuneration paid to them for services rendered as an officer or employee of the Company.

The Directors, including independent Directors, may also be regarded as interested in the Equity Shares
held by them, or Equity Shares, if any, held by or that may be subscribed by and allotted to the companies,
firms and trust, in which they are interested as directors, members, partners or trustees. All of our Directors
may also be deemed to be interested to the extent of any dividend payable to them and other distributions in
respect of the said Equity Shares.

All of the Directors may be deemed to be interested in the contracts, agreements/ arrangements entered into
or to be entered into by the Company with any company in which they hold directorships or any
partnership firm in which they are partners as declared in their respective capacity. Except as otherwise
stated in this Preliminary Placement Document and statutory registers maintained by the Company in this
regard, the Company has not entered into any contract, agreements, arrangements during the preceding two


                                                      82
years from the date this Preliminary Placement Document in which the Directors are interested directly or
indirectly and no payments have been made to them in respect of these contracts, agreements, arrangements
which are proposed to be made with them.

The Company’s Directors have not taken any loan from the Company.

Terms of Employment of our Executive Directors

Mr. Deepak S. Parekh

Pursuant to the shareholders resolution dated July 22, 2009, Mr. Deepak S. Parekh was re-appointed as the
Managing Director of the Company (designated as ‘Chairman’) with effect from March 1, 2009 up to the
close of business hours on December 31, 2009. Currently, Mr. Deepak S. Parekh is being paid a salary of
Rs. 695,000 per month. Mr. Deepak S. Parekh is eligible for post retirement benefits including pension and
other benefits. He is also entitled to get commission equivalent to such sum as may be fixed by the Board
of Directors or the Compensation Committee of Directors, subject to an overall ceiling of 1 per cent of net
profits in a fiscal year and perquisites equivalent to his salary for the aforementioned period.

Perquisites to Mr. Deepak S Parekh includes rent-free furnished accommodation, reimbursement of gas,
electricity, water charges and medical expenses, furnishings, payment of premium on personal accident and
health insurance, club fees, and such other perquisites as may be approved by the Board or Compensation
Committee of Directors, subject to an overall ceiling of his total salary for the said period.

Other benefits and allowances to Mr. Parekh include use of car (with driver), telephones for the Company’s
business (expenses whereof would be borne and paid by the Company), house maintenance/ house rent
allowance, leave travel allowance, contribution to provident fund, superannuation fund and all other
benefits as are applicable to directors and/or senior employees of the Company including but not limited to
gratuity, leave entitlement, encashment of leave and housing and other loan facilties as per the schemes of
the Company and approved by the Board or Compensation Committee of Directors, from time to time.

Mr. Parekh is also entitled to post retirement pension and other post retirement benefit(s) in the form of
housing, medical benefits and use of car in accordance with schemes framed by the Compensation
Committee of Directors and approved by the Board.

Mr. Keki M. Mistry

Pursuant to the shareholders’ resolution in the general meeting of the Company held on July 15, 2005, Mr.
Keki M. Mistry was reappointed as Managing Director of the Company for a period of five years with
effect from November 14, 2005. Currently, Mr. Mistry is being paid a salary of Rs. 620,000 per month. Mr.
Mistry is eligible for post retirement benefits including pension and other benefits. He is also entitled to get
commission equivalent to such sum as may be fixed by the Board or the Compensation Committee of
Director, subject to an overall ceiling of 1 per cent of net profits in a fiscal year and perquisites equivalent
to his annual salary.

Perquisites to Mr. Mistry includes rent-free furnished accommodation, reimbursement of gas, electricity,
water charges and medical expenses, furnishings, payment of premium on personal accident and health
insurance, club fees, and such other perquisites as may be approved by Board or Compensation Committee
of Directors, subject to an overall ceiling of his annual salary.

Other benefits to Mr. Mistry includes use of car (with driver), telephones for the Company’s business
(expenses whereof would be borne and paid by the Company), house maintenance / house rent allowance,
leave travel allowance, contribution to provident fund, superannuation fund and all other benefits as are
applicable to directors and/or senior employees of the Company including but not limited to gratuity, leave
entitlement, encashment of leave and housing and other loan facilities as per the schemes of the Company
and approved by the Board or Compensation Committee of Directors, from time to time.



                                                      83
Mr. Mistry is also entitled to post-retirement pension and other post retirement benefit(s) in the form of
medical benefits and use of car in accordance with schemes framed by the Compensation Committee of
Directors and approved by the Board, from time to time.

Ms. Renu Sud Karnad

Pursuant to the shareholders’ resolution dated July 16, 2008, Ms. Renu Sud Karnad was reappointed as a
whole-time Director of the Company (designated as joint Managing Director) for a period of five years
with effect from May 3, 2008. Currently, Ms. Karnad is being paid a salary of Rs. 570,000 per month. Ms.
Karnad is eligible for post retirement benefits including pension and other benefits. She is also entitled to
get commission equivalent to such sum as may be fixed by the Board or the Compensation Committee of
Directors, subject to an overall ceiling of 1 per cent of net profits in a fiscal year and perquisites equivalent
to her annual salary.

Perquisites to Ms. Karnad include rent-free furnished accommodation, reimbursement of gas, electricity,
water charges and medical expenses, furnishings, payment of premium on personal accident and health
insurance, club fees, and such other perquisites as may be approved by Board or Compensation Committee
of Directors, subject to an overall ceiling of her annual salary.

Other benefits and allowances to Ms. Karnad include use of car (with driver), telephones for the
Company’s business (expenses whereof would be borne and paid by the Company), house
maintenance/house rent allowance, leave travel allowance, contribution to provident fund, superannuation
fund and all other benefits as are applicable to directors and/or senior employees of the Company including
but not limited to gratuity, leave entitlement and encashment of leave and housing and other loan facilities
as per the schemes of the Company and approved by the Board or Compensation Committee of Directors,
from time to time.

Ms. Karnad is also entitled to post-retirement pension and other post-retirement benefits in the form of
medical benefits and use of car in accordance with schemes framed by the Compensation Committee of
Directors and approved by the Board, from time to time.

Shareholding of Directors

The following table sets forth the shareholding of the Directors in the Company as on July 31, 2009.

                 Name                                Number of Equity Shares                  Percentage (%)
Mr. Deepak S. Parekh                                                       346,543                        0.12
Mr. Keshub Mahindra                                                          62,000                       0.02
Mr. Shirish B. Patel                                                         41,500                       0.01
Mr. B. S. Mehta                                                              65,000                       0.02
Mr. D. M. Sukthankar                                                         42,000                       0.01
Mr. D. N. Ghosh                                                              30,187                       0.01
Dr. S.A. Dave                                                                55,783                       0.02
Dr. Ram S. Tarneja                                                           71,500                       0.03
Mr. N.M. Munjee                                                              10,580                          -
Dr. Bimal Jalan                                                                   -                          -
Mr. D.M. Satwalekar                                                        213,960                        0.08
Dr. J. J. Irani                                                                   -                          -
Ms. Renu Sud Karnad                                                        208,000                        0.07
Mr. Keki M. Mistry                                                           60,000                       0.02

Remuneration of the Directors

The following tables set forth all compensation paid by the Company to the Directors for Fiscal 2009.




                                                       84
A.       Executive Directors

                                                                                                        (In Rs.)
     Name          Salary and       Monetary value           Commission           Total          Stock options
                   allowances        of perquisites,          Payable                            granted under
                   per annum        other allowances                                              ESOS 2008
                                     and retirement
                                        benefits
Mr. Deepak            7,305,000           13,237,740           25,020,000         45,562,740             450,000
S. Parekh
Mr. Keki M.           6,495,000             6,983,123          18,600,000         32,078,123             368,480
Mistry
Ms. Renu              5,985,000             6,777,944          17,100,000         29,862,944             368,480
Sud Karnad

B        Non-Executive Directors
                                                                                                          (In Rs.)
          Name                    Sitting Fees                 Commission                        Total
Dr. J. J. Irani                            40,000                           500,000                      540,000
Mr. Keshub Mahindra                       100,000                           500,000                      600,000
Mr. Shirish B. Patel                      100,000                           500,000                      600,000
Mr. B. S. Mehta                           160,000                           500,000                      660,000
Mr. D. M. Sukthankar                       50,000                           500,000                      550,000
Mr. D.N. Ghosh                            100,000                           500,000                      600,000
Dr. S. A. Dave                            100,000                           500,000                      600,000
Dr. Ram S. Tarneja                         70,000                           500,000                      570,000
Mr. N.M. Munjee                            40,000                           500,000                      540,000
Dr. Bimal Jalan                            40,000                           500,000                      540,000
Mr. D. M. Satwalekar+                      90,000                           500,000                      590,000
 +
  Includes sitting fees paid for attending two meetings of the Committee of Directors constituted by the Board for
subscription by the Company to the preferential issue of Equity Shares by HDFC Bank Limited and to approve the
annual audited consolidated financial results for the year ended March 31, 2008.

Each eligible non-executive director has been granted 10,000 stock options under ESOS 2008. These
options have still not vested. 7,500 stock options each of Mr. Keshub Mahindra, Mr. D. M. Sukthankar, Dr.
S. A. Dave and Mr. N. M. Munjee have vested but have not been exercised under ESOS 2005.

Under ESOS 2007, the non-executive Directors have each been granted 10,000 stock options which have
vested but have not been exercised.

The commission payable to the non-executive directors is approved by the Board and is subject to the
overall limits as approved by the shareholders of the Company.

Changes in Our Board of Directors during the last three years

Name                               Date of Change                Reason

Dr. Vijay Kelkar                   October 19, 2006              Appointed as Special Director
Dr. Vijay Kelkar                   December 31, 2007             Resigned as Special Director
Dr. J.J. Irani                     January 18, 2008              Appointed as Special Director
Dr. Bimal Jalan                    April 30, 2008                Appointed as Additional Director
Dr. Bimal Jalan                    July 16, 2008                 Appointed as Director at the AGM
Mr. S. Venkitaramanan              July 17, 2008                 Resigned as a Director



                                                        85
Corporate Governance

The Company has been complying with the mandatory requirements of Clause 49 of the Listing Agreement
and the applicable regulations, including the Listing Agreement with the Stock Exchanges and the SEBI
Guidelines, in respect of corporate governance norms including constitution of the Board and Committees
thereof. The corporate governance framework is based on an effective independent Board, separation of
the Board’s supervisory role from the executive management team and constitution of the Board
Committees, as required under law.

The Board is constituted in compliance with the Companies Act, the Listing Agreement with the Stock
Exchanges and in accordance with best practices in corporate governance. The Board functions either as a
full Board or through various committees constituted to oversee specific operational areas. The executive
management of the Company provides the Board detailed reports on its performance periodically.

Currently the Board has 14 Directors, of which the Chairman of the Board is an Executive Director, and in
compliance with the requirements of Clause 49 of the Listing Agreement. The Company has 11 non-
executive Directors of which 10 are independent.

Committees of the Board of Directors

There are three Board level committees of the Company, which have been constituted and function in
accordance with the relevant provisions of the Companies Act and the Listing Agreement. These are (i)
Audit Committee, (ii) Investors’ Grievance Committee and (iii) Compensation Committee. A brief on each
Committee, its scope and composition is given below:

Audit Committee

The terms of reference of the Audit Committee inter alia includes overseeing the Company’s financial
reporting process and disclosures of financial information. The prime responsibility of the Audit
Committee is to review with the management, the quarterly/annual financial statements prior to
recommending the same to the Board of Directors for approval. The Audit Committee also recommends to
the Board of Directors, the appointment or re-appointment of the statutory auditors and the audit fees
payable. The Audit Committee’s functions include reviewing the adequacy of the internal audit function, its
structure, reporting process, audit coverage and frequency of internal audits. The responsibility of the
committee is to also review the findings of any internal investigation by the internal auditors in matters
relating to suspected fraud or irregularity or failure of internal control systems of material nature and report
the same to the Board.

The Audit Committee’s functions include reviewing the adequacy control functions and systems, its
structure, reviewing the reports of the internal and statutory auditors and ensuring that adequate follow-up
action is taken by the management on observation and management made by the respective auditors.

The Audit Committee consists of the following:

1.       Dr. S.A. Dave, Chairman;
2.       Mr. B.S. Mehta; and
3.       Mr. D.N. Ghosh.

The Audit Committee met five times in the fiscal 2009.

Investors’ Grievance Committee

The terms of reference of the Investors’ Grievance Committee include overseeing share transfers and
reviewing the mechanism for redressal of investors’ complaints. The Investors’ Grievance Committee also
reviews the adherence to the service standards and other investor service initiatives undertaken by the
Company.


                                                      86
This committee consists of:

1.      Dr. Ram S. Tarneja, Chairman;
2.      Mr. Keki M. Mistry; and
3.      Mr. D.M. Satwalekar.

The Investors’ Grievance Committee met three times in the fiscal 2009.

Compensation Committee

The terms of reference of the Compensation Committee are to review and recommend compensation
payable to the executive Directors and also to formulate and administer the employee stock option
schemes, including the review and grant of options to eligible employees.

The annual compensation of executive directors is approved by the committee and is subject to the overall
limits as approved by the shareholders.

The Compensation Committee consists of the following:

1.      Mr. Keshub Mahindra, Chairman
2.      Mr. Shirish B. Patel; and
3.      Mr. B. S. Mehta.

The Compensation Committee met five times in the fiscal 2009.

Policy on Disclosures and Internal Procedure for Prevention of Insider Trading

Pursuant to the Company’s policy on disclosures and internal procedure for prevention of insider trading,
no Director or employee including designated employees of the Company shall derive any benefit or assist
others to derive any benefit by giving investment advice from access to and possession of price sensitive
information about the Company, which is not in public domain and constitutes insider information. All
Directors and employees including designated employees of the Company are required to comply with
SEBI (Prohibition of Insider Trading) Regulations, 1992 and also adhere to the HDFC Share Dealing Code
framed by the Company for prevention of Insider Trading.

Key Management Personnel

In addition to Mr. Deepak S. Parekh, Ms. Renu Sud Karnad and Mr. Keki M. Mistry the following are the
key managerial personnel of the Company:

Name                            Designation              Qualification               Experience       at
                                                                                     HDFC (years)

Mr. R. Anand                    Senior       General     B. Com., D. Adv. and P.     29
                                Manager            –     R.
                                Communications
Mr. R. Arivazhagan              Senior       General     B. Sc., B. Tech. and        23
                                Manager            –     P.G.D.M.
                                Information
                                Technology
Mr. J. C. A. D’Souza            Senior       General     M. Com., M.B.A. and         25
                                Manager – Treasury       D.F.M., S.E.M (LSB)
Ms. M. Ganguli                  Senior       General     B.Sc. and LL. B.            28
                                Manager – New Delhi
Mr. Mathew Joseph               Senior       General     B.Sc. and A.C.A.            21


                                                   87
                                Manager – Tamil
                                Nadu and Kerela
Mr. S. Menon                    Senior        General    B.Com. and M.B.A.            25
                                Manager – Mumbai
                                Region
Mr. S. N. Nagendra              Senior        General    B.A., B.L. and M.B.A.        27
                                Manager – Karnataka
                                and Goa
Mr. M. Ramabhadran              Senior        General    B.A. and F.C.A.              19
                                Manager – Accounts
                                and IT –USG
Mr. V. S. Rangan                Senior        General    B.Com., A.C.A. and           23
                                Manager – Corporate      A.I.C.W.A.
                                Planning and Finance

Interests of Key Management Personnel

The key management personnel of the Company do not have any interest in the Company other than to the
extent of their shareholding in the Company, the remuneration or benefits to which they are entitled to as
per their terms of appointment and reimbursement of expenses incurred by them during the ordinary course
of business.

Except as stated hereinabove, none of the key management personnel of the Company have been paid any
consideration of any nature from the Company, other than their remuneration.

Changes in the Key Management Personnel

There are no changes in the key management personnel of the Company in the last three years.




                                                    88
      ORGANISATIONAL STRUCTURE, PRINCIPAL SHAREHOLDERS AND DEBENTURE
                                 HOLDERS

The Company was incorporated as an Indian public limited company on October 17, 1977. The Company’s
registered office is located at Ramon House, H.T. Parekh Marg, 169 Backbay Reclamation Churchgate,
Mumbai – 400 020, India.

In 2000, the Company acquired Home Trust Housing Finance Company Limited (“Home Trust”).
Consequent to the said acquisition and pursuant to the approval of High Court of Bombay by its order dated
March 14, 2001, Home Trust was merged with the Company with effect from October 1, 2000.

The Company 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.

Shareholding Pattern

The shareholding pattern of the Company as on June 30, 2009 is as follows:

            Category of shareholder                        Number of Shares                Total
                                                                                           shareholding
                                                                                           as a % of total
                                                                                           number of
                                                                                           Shares
                                                                                           As a % of
                                                                                           (A+B+C)
(A)         Shareholding of Promoter and Promoter
            Group
(1)         Indian                                                                    0                  0

(2)         Foreign                                                                   0                  0

(B)         Public shareholding
(1)         Institutions
(a)         Mutual Funds/ UTI                                                 10,217,380             3.59
(b)         Financial Institutions/ Banks                                      1,444,335             0.51
(c)         Central Government/ State Government(s)                               13,630                -
(d)         Insurance Companies                                               24,651,388             8.66
(e)         Foreign Institutional Investors                                  170,510,345            59.92
(f)         Any Others (Specify)                                              42,741,657            15.02
            FDI – Foreign Institutions                                        42,739,498            15.02
(g)         Foreign Bank                                                           2,159                -

            Sub-Total                                                        249,578,735            87.71

(2)         Non-institutions
(a)         Bodies Corporate                                                   3,683,341              1.29
(b)         Individuals
            i. Individual shareholders holding nominal                        24,896,218              8.75
            share capital up to Rs 1 lakh
            ii. Individual shareholders holding nominal                        3,694,871              1.30
            share capital in excess of Rs. 1 lakh.
(c)         Any Other (specify)                                                2,707.189              0.95
            i. Directors and their Relatives and Friends                       1,397,207              0.49
            ii. Hindu Undivided Families                                         193,561              0.07
            iii. Non Resident Indians                                            493,362              0.17
            iv. Overseas Corporate Bodies                                            800                 -


                                                    89
              Category of shareholder                      Number of Shares                   Total
                                                                                              shareholding
                                                                                              as a % of total
                                                                                              number of
                                                                                              Shares
                                                                                              As a % of
                                                                                              (A+B+C)
              iv. Clearing Members                                               581,814                 0.20
              v. Trusts                                                           40,445                 0.01

              Sub-Total (B)                                                   34,981,619                  12.29

(B)           Total Public Shareholding                                     284,560,354               100.00
              (B)

              TOTAL (A)+(B)                                                 284,560,354               100.00

(C)           Shares held by Custodians and against                                     -                     -
              which Depository Receipts have been
              issued

              TOTAL (A)+(B)+(C)                                             284,560,354               100.00

The following table sets out a list of shareholders holding more than one per cent of the paid up capital of
the Company as on June 30, 2009:

S. No.                            Name                               Number of              Percentage (%)
                                                                      Shares
      1.  Citigroup Strategic Holdings Mauritius Limited               25,853,941                          9.10
      2.  CMP Asia Limited                                             15,400,000                          5.41
      3.  Europacific Growth Fund                                      12,629,346                          4.44
      4.  Life Insurance Corporation of India                          7, 774, 439                         2.73
      5.  Citigroup Holdings Mauritius Limited                          7,477,620                          2.63
      6.  The Growth Fund of America INC                                4,835,000                          1.70
      7.  Merill Lynch Capital Markets Espana S A S V                   4,253,683                          1.49
      8.  Aberdeen Asset Managers Limited A/c                           3,940,000                          1.38
          Aberdeeninternational India Opportunities Fund
          Mauritius Limited
      9. JP Morgan Asset Management Europe S.A.R.L. A/c                   3,373,240                        1.19
          JP Morgan Funds – Emerging Markets Equity Fund
      10. JP Morgan Asset Management Europe S.A.R.L. A/c                  3,158,530                        1.11
          Flagship Indian Investment Company Mauritius
          Limited
      11. Copthall Mauritius Investment Limited                           3,061,527                        1.08
      12. Carnegie Fund                                                   2,943,400                        1.03
          Total                                                          94,740,726                       33.29

The following table sets out a list of the ten debenture holders holding the highest value of outstanding
debentures of the Compnay, across all series of non-convertible debentures as on June 30, 2009:


S. No      Name of debenture      Address                           Number     of     Amount        (in    Rs.
           holders                                                  debentures        Million)
1.         Life       Insurance   Investment Department, 6th               77,483                     77,483
           Corporation of India   Floor, West Wing, Central


                                                      90
S. No   Name of debenture       Address                          Number     of   Amount     (in    Rs.
        holders                                                  debentures      Million)
                                Office, Yogakshema, Jeevan
                                Bima Marg, Mumbai 400 021
2.      CBT EPF EPS A/C         HDFC Bank Limited, Custody              12,405                12,405
        HSBC AMC Limited        Services, Trade World, A Wing,
                                Gr Flr, Kamla Mills Compound,
                                Senapati Bapat Marg, Lower
                                Parel West, Mumbai 400 013
3.      Birla    Sun    Life    C/o Standard Chartered Bank,            10,486                10,486
        Trustee    Company      Custody And Clearing Services,
        Private Limited A/C     23-25, M G Road, Fort, Mumbai
        Birla    Sun    Life    400 001
        Savings Fund
4.      Reliance     Capital    Deutsche Bank AG, DB House,              9,065                    9,065
        Trustee    Company      Hazarimal Somani Marg, Fort,
        Limited     Reliance    Mumbai 400 001
        Fixed Horizon Fund
        - Ix
5.      Reliance     Capital    Deutsche Bank AG, DB House,              8,935                    8,935
        Trustee    Company      Hazarimal Somani Marg, Fort,
        Limited         A/C     Mumbai 400 001
        Reliance Liquidity
        Fund
6.      Army          Group     AGI Bhawan, Rao Tula Ram                 8,200                    8,200
        Insurance Fund          Marg, PB 14, P O Vasant Vihar,
                                New Delhi 110 057
7.      Reliance      capital   Deutsche Bank AG, DB House,              7,710                    7,710
        Trustee    Company      Hazarimal Somani Marg, Fort,
        Limited         A/C     Mumbai 400 001
        Reliance      Money
        Manager Fund
8.      HDFC         Trustee    HDFC Bank Limited, Custody               7,479                    7,479
        Company      Limited    Services, Trade World, A Wing,
        A/C HDFC Cash           Gr Flr, Kamla Mills Compound,
        Management Fund         Senapati Bapat Marg, Lower
        Treasury Advantage      Parel West, Mumbai 400 013
        Plan
9.      ICICI      Prudential   Deutsche Bank AG, DB House,              6,710                    6,710
        Life       Insurance    Hazarimal Somani Marg, Fort,
        Company Limited         Mumbai 400 001
10.     Coal          Mines     C/o ICICI Securities Primary             5,770                    5,770
        Provident Fund          Dealership   Limited,   ICICI
                                Centre, H. T. Parekh Marg,
                                Churchgate, Mumbai 400 020




                                                  91
             TERMS AND CONDITIONS OF THE 0% AUGUST 2011 NON-CONVERTIBLE
                                    DEBENTURES

The following other than the words in italics constitutes the Terms and Conditions of the Non-Convertible
Debentures and will appear on the reverse of each 0% August 2011 NCD Consolidated Certificate (as defined
below):

The issue of [●] zero per cent. secured redeemable non-convertible debentures of the face value of Rs.
1,000,000 each due August 2011 (the “0% August 2011 NCDs”) of Housing Development Finance
Corporation Limited (the “Issuer”), was authorized by a resolution of the Board of Directors of the Issuer
on June 9, 2009. The 0% August 2011 NCDs are constituted and secured by a trust deed dated [on or about
the closing date] (the “Debenture Trust Deed”) made between the Issuer and IDBI Trusteeship Services
Limited as trustee for the holders of the 0% August 2011 NCDs (the “Debenture Trustee”), which term
shall, where the context so permits, include all other persons for the time being acting as Debenture
Trustee. The statements in these terms and conditions (the “Conditions”) include summaries of, and are
subject to, the detailed provisions of the Debenture Trust Deed. The holders of the 0% August 2011 NCDs
are entitled to the benefit of the Debenture Trust Deed and are bound by, and are deemed to have notice of,
all the provisions of the Debenture Trust Deed.

1.      Status

        The 0% August 2011 NCDs constitute direct and secured obligations of the Issuer and shall rank
        pari passu inter se and with the 0% August 2012 NCDs and without any preference or priority
        among themselves. Subject to any obligations preferred by mandatory provisions of the law
        prevailing from time to time, the 0% August 2011 NCDs shall also, as regards the principal
        amount of the 0% August 2011 NCDs, redemption premium and all other monies secured in
        respect of the 0% August 2011 NCDs, rank pari passu with all other present direct and secured
        obligations of the Issuer. The claims of the 0% August 2011 NCD Holders shall be superior to the
        claims of the unsecured creditors of the Issuer (subject to any obligations preferred by mandatory
        provisions of the law prevailing from time to time).

2.      Form, Denomination, Title and Listing

2.1     Form

2.1.1   The allotment of 0% August 2011 NCDs in this Issue shall only be in a dematerialized form (i.e.,
        not in the form of physical certificates but be fungible and be represented by the statement issued
        through the electronic mode). The Issuer has made depository arrangements with National
        Securities Depository Limited (“NSDL”) and Central Depository Services (India) Limited
        (“CDSL”, and together with NSDL, the “Depositories”) for the issue of 0% August 2011 NCDs
        in dematerialised form. Subject to Condition 2.1.2, the 0% August 2011 NCD holders will hold
        the 0% August 2011 NCDs in dematerialised form and deal with the same in accordance with the
        provisions of the Depositories Act, 1996 /rules as notified by the Depositories from time to time.

2.1.2   The 0% August 2011 NCDs holders may rematerialize the 0% August 2011 NCDs at any time
        after allotment, in accordance with the provisions of the Depositories Act, 1996 /rules as notified
        by the Depositories from time to time.

2.2     Denomination

        The denomination of each 0% August 2011 NCD is Rs. 1,000,000.

        In case of 0% August 2011 NCDs that are rematerialized and held in physical form, the Issuer will
        issue one certificate to the 0% August 2011 NCD holder for the aggregate amount of 0% August
        2011 NCDs that are rematerialized and held by such 0% August 2011 NCD holder (each such
        certificate a “0% August 2011 NCD Consolidated Certificate”). In respect of the 0% August


                                                    92
        2011 NCD Consolidated Certificates, the Issuer will, upon receipt of a request from the 0%
        August 2011 NCD holder within 5 business days of such request, split such 0% August 2011 NCD
        Consolidated Certificates into smaller denominations in accordance with the Articles of
        Association, subject to a minimum denomination of one 0% August 2011 NCD (“Market Lot”).
        No fees would be charged for splitting any 0% August 2011 NCD Consolidated Certificates;
        however, stamp duty payable, if any, would be borne by the 0% August 2011 NCD holder. The
        request for split of a 0% August 2011 NCD Consolidated Certificate should be accompanied by
        the original 0% August 2011 NCD Consolidated Certificate which will, upon issuance of the split
        0% August 2011 NCD Consolidated Certificates, be cancelled by the Issuer.

2.3     Title

        In case of: (i) 0% August 2011 NCDs held in the dematerialized form, the person for the time
        being appearing in the register of beneficial owners of a Depository as the holder of an 0% August
        2011 NCD, and (ii) 0% August 2011 NCDs held in physical form, the person for the time being
        appearing in the Register of 0% August 2011 NCD holders as the holder of an 0% August 2011
        NCD shall be treated for all purposes by the Issuer, the Debenture Trustee, the Depositories and all
        other persons dealing with such person as the holder thereof and its absolute owner for all
        purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any
        interest in it or any writing on, theft or loss of the 0% August 2011 NCD Consolidated Certificate
        issued in respect of the Warrant and no person will be liable for so treating the holder. In these
        Conditions, “0% August 2011 NCD holder” and “holder” means the person in whose name an
        0% August 2011 NCD is registered.

        Title to the 0% August 2011 NCDs shall pass only by transfer and registration as described in
        Condition 3.

2.4     Listing

        The 0% August 2011 NCDs will be listed on the Wholesale Debt Market segments of the National
        Stock Exchange of India Limited (the “NSE”) and the Bombay Stock Exchange Limited (the
        “BSE”, and together with the BSE, the “Stock Exchanges”).

3.      Transfers of 0% August 2011 NCDs; Issue of 0% August 2011 NCD Consolidated
        Certificates

3.1     Register

        The Issuer shall maintain at its registered office (or such other place as permitted by law) a register
        of 0% August 2011 NCD holders (the “Register of 0% August 2011 NCD holders”) containing
        such particulars as required by Section 152 of the Companies Act. In terms of Section 152A of the
        Companies Act, the Register of 0% August 2011 NCD holders maintained by a Depository for any
        0% August 2011 NCDs in dematerialized form under Section 11 of the Depositories Act shall be
        deemed to be a Register of 0% August 2011 NCD holders for the purposes of this Condition 3.1.

3.2     Transfers

        Subject to Conditions 3.3 and 3.4:

3.2.1   In case of 0% August 2011 NCDs held in the dematerialized form, transfers of 0% August 2011
        NCDs may be effected only through the Depository(ies) through which such 0% August 2011
        NCDs to be transferred are held, in accordance with the provisions of the Depositories Act, 1996
        /rules as notified by the Depositories from time to time.

3.2.2   In case of 0% August 2011 NCDs held in physical form, transfers of 0% August 2011 NCDs may
        be effected only by delivery of the 0% August 2011 NCD Consolidated Certificate issued in


                                                     93
        respect of that 0% August 2011 NCD, with the form of transfer on the back thereof duly
        completed and signed by the holder or his duly authorized attorney, to the specified office of the
        Registrar. No transfer of title of an 0% August 2011 NCD will be valid unless and until entered on
        the Register of 0% August 2011 NCD holders. In accordance with Article 51 and Article 60 of the
        Articles of Association, a fee not exceeding Re. 1 may be charged by the Issuer for each 0%
        August 2011 NCD transferred and, if so required by the Directors, be paid before registration
        thereof.

3.3     No transfer except on Stock Exchange for one year

        The 0% August 2011 NCDs shall not be sold for a period of one year from the date of Allotment
        except on the floor of the Stock Exchanges.

3.4     Transfer after Maturity Date

        If a request for transfer of the 0% August 2011 NCD is not received by the Registrar before the
        Maturity Date, the redemption proceeds of the 0% August 2011 NCDs shall be paid to the seller
        and not to the buyer. In such cases, any claims shall be settled inter se between the parties and no
        claim or action shall lie against the Issuer.

3.5     Formalities Free of Charge

        Registration of a transfer of 0% August 2011 NCDs and issuance of new 0% August 2011 NCD
        Consolidated Certificates will be effected without charge by or on behalf of the Issuer, but upon
        payment (or the giving of such indemnity as the Issuer may require) in respect of any tax or other
        governmental charges which may be imposed in relation to such transfer, and the Issuer being
        satisfied that the regulations concerning transfers of 0% August 2011 NCDs have been complied
        with.

4.      Redemption and Cancellation

4.1     Unless previously redeemed as provided herein, the Issuer will redeem the 0% August 2011 NCDs
        at [●] per cent. of their principal amount on [●] (the “Maturity Date”). The Issuer or the 0%
        August 2011 NCD holder may not redeem the 0% August 2011 NCDs at any time prior to the
        Maturity Date, except as provided in Condition 7 below.

4.2     All 0% August 2011 NCDs that are redeemed will forthwith be cancelled.

5.      Payments

5.1     Principal and Premium

5.1.1   Payment of principal and premium will be made to:

        (i)      in case of 0% August 2011 NCDs held in the dematerialized form, to the person
                 appearing in the register of beneficial owners of a Depository as the beneficial owner of
                 an 0% August 2011 NCD; and

        (ii)     in case of 0% August 2011 NCDs held in physical form, to the person appearing in the
                 Register of 0% August 2011 NCD holders

        on the Maturity Date.

5.1.2   Payment of principal and premium will be made through the Electronic Clearing Service (ECS),
        Direct Credit, Real Time Gross Settlement (RTGS) or National Electronic Funds Transfer (NEFT)
        as per the applicable norms prescribed by the Reserve Bank of India.


                                                    94
5.2     Payments on Sundays and public holidays

        If the Maturity Date falls on a Sunday or a public holiday or any other holiday in Mumbai notified
        in terms of the Negotiable Instruments Act, 1881, then the principal and premium, as the case may
        be, would be paid on the next working day.

5.3     Applicable laws

        All payments are subject in all cases to any applicable laws and regulations, but without prejudice
        to the provisions of Condition 5.2. No commissions or expenses shall be charged to the 0%
        August 2011 NCD holders in respect of such payments.

5.4     Taxation

        Payment of premium will be subject to deduction of income tax under the provisions of Income-
        Tax Act, 1961 or any statutory modification or re-enactment thereof for the time being in force or
        any other duties, assessments or governmental charges of whatever nature imposed or levied by or
        on behalf of India or any authority thereof or therein having power to tax.

6.      Security

        The principal amount of the 0% August 2011 NCDs, redemption premium and any other monies
        payable by the Issuer in respect of the 0% August 2011 NCDs will be secured by a negative lien
        on the assets of the Issuer and mortgage of the immovable property of the Issuer as identified in
        the Debenture Trust Deed.

7.      Events of Default

7.1     The Trustee at its discretion may, and if so required in writing by the holders of not less than 25
        per cent. in principal amount of the 0% August 2011 NCDs then outstanding or if so directed by
        an Extraordinary Resolution shall (subject to being indemnified and/or secured by the 0% August
        2011 NCD holders to its satisfaction), give notice to the Issuer that the 0% August 2011 NCDs
        are, and they shall accordingly thereby become, due and repayable at their Early Redemption
        Amount if any of the events listed in Clause 7.2 (each, an “Event of Default”) has occurred.

7.2     Each of the following events shall be an Event of Default:

7.2.1   Default is made in any payment of any sum due in respect of the 0% August 2011 NCDs or any of
        them and such failure continues for a period of two (2) days;

7.2.2   The Issuer does not perform or comply with one or more of its other obligations in relation to the
        0% August 2011 NCDs or the Debenture Trust Deed which default is incapable of remedy or, if in
        the opinion of the Debenture Trustee capable of remedy, is not remedied within 15 days after
        written notice of such default shall have been given to the Issuer by the Debenture Trustee;

7.2.3   the Issuer is (or is deemed by law or a court to be) insolvent or bankrupt or unable to pay (in the
        opinion of the Debenture Trustee) a material part of its debts, or stops, suspends or threatens to
        stop or suspend payment of all or (in the opinion of the Debenture Trustee) a material part of (or
        of a particular type of) its debts, proposes or makes any agreement for the deferral, rescheduling or
        other readjustment of all or (in the opinion of the Debenture Trustee) a material part of (or all of a
        particular type of) its debts (or of any part which it will or might otherwise be unable to pay when
        due), proposes or makes a general assignment or an arrangement or composition with or for the
        benefit of the relevant creditors in respect of any of such debts or a moratorium is agreed or
        declared in respect of or affecting all or any part of (or of a particular type of) the debts of the
        Issuer;


                                                     95
7.2.4    a distress, attachment, execution or other legal process is levied, enforced or sued out on or against
         any material part of the property, assets or revenues of the Issuer and is not discharged or stayed
         within 45 days;

7.2.5    an order is made or an effective resolution passed for the winding-up or dissolution, judicial
         management or administration of the Company, or the Company ceases or threatens to cease to
         carry on all or substantially all of its business or operations, except for the purpose of and
         followed by a reconstruction, amalgamation, reorganisation, merger or consolidation on terms
         approved by an Extraordinary Resolution of the 0% August 2011 NCD holders;

7.2.6    an encumbrancer takes possession or an administrative or other receiver or an administrator is
         appointed of the whole or (in the opinion of the Trustee) any substantial part of the property,
         assets or revenues of the Company (as the case may be) and is not discharged within 45 days;

7.2.7    the Issuer commences a voluntary proceeding under any applicable bankruptcy, insolvency,
         winding up or other similar law now or hereafter in effect, or consent to the entry of an order for
         relief in an involuntary proceeding under any such law, or consent to the appointment or taking
         possession by a receiver, liquidator, assignee (or similar official) for any or a substantial part of its
         property or take any action towards its re-organisation, liquidation or dissolution;

7.2.8    it is or will become unlawful for the Company to perform or comply with any one or more of its
         obligations under any of the 0% August 2011 NCDs or the Debenture Trust Deed;

7.2.9    any step is taken by governmental authority or agency or any other competent authority, with a
         view to the seizure, compulsory acquisition, expropriation or nationalisation of all or (in the
         opinion of the Trustee) a material part of the assets of the Company which is material to the
         Company;

7.2.10   any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any
         of the events referred to in any of the foregoing paragraphs.

7.3      If any Event of Default or any event which, after the notice, or lapse of time, or both, would
         constitute an Event of Default has happened, the Issuer shall, forthwith give notice thereof to the
         Debenture Trustee in writing specifying the nature of such event of default or of such event.

7.4      The security created in favour of the Debenture Trustee under the Debenture Trust Deed shall
         become enforceable by the Debenture Trustee upon the occurrence of an Event of Default.

7.5      For the purposes of this Condition 7, “Early Redemption Amount” in respect of each Rs.
         1,000,000 principal amount of 0% August 2011 NCDs means the amount determined which
         represents for the holder thereof on the relevant date for determination of the Early Redemption
         Amount (the “Determination Date”) a gross yield to maturity identical to that applicable in the
         case of redemption on the maturity date, being [●] per cent. per annum (calculated on a semi-
         annual basis) and shall be calculated in accordance with the following formula, rounded (if
         necessary) to two decimal places with 0.005 being rounded upwards (provided that if the date
         fixed for redemption is the Semi-Annual Date (as set out below), such Early Redemption Amount
         shall be as set out in the table below in respect of such Semi-Annual Date):

         Early Redemption Amount = Previous Redemption Amount x (1 + r/2)d/p

         where:

          Previous Redemption Amount          =    Early Redemption Amount on the Semi-Annual Date
                                                   immediately preceding the date fixed for redemption as set
                                                   out below (or if the redeemed prior to [the first Semi-


                                                       96
                                               Annual Date], Rs. 1,000,000

                                                   Semi-Annual Date                  Early Redemption
                                                                                          Amount
                                               [●]…………………………                   [●]
                                               [●]…………………………                   [●]
                                               [●]…………………………                   [●]
                                               [●]…………………………                   [●]
                                               [●]…………………………                   [●]
                                               [●]…………………………                   [●]
                                               [●]…………………………                   [●]
                                               [●]…………………………                   [●]
                                               [●]…………………………                   [●]
                                               [●]…………………………                   [●]

       r    =   [●] per cent. expressed as a fraction

       d    =   number of days from and including the immediately preceding Semi-Annual Date (or, if
                the Bonds are to be redeemed prior to the first semi-annual date, from and including the
                Closing Date) to but excluding the date fixed for redemption, calculated on the
                basis of a 360 day year consisting of 12 months of 30 days each and, in the case
                of an incomplete month, the number of days elapsed

       p    =   180

8.    Meetings of 0% August 2011 NCD holders, modification, waiver and substitution

8.1   The regulations with regard to meetings of 0% August 2011 NCD holders will be in the form
      given in Annexures ‘C’ & ‘D’ to the Companies (Central Government’s) General Rules and
      Forms, 1956, except as modified by these Conditions.

8.2   The terms and conditions attached to the 0% August 2011 NCDs, including these Conditions, may
      be varied, modified or abrogated with the consent, in writing, of those holders of the 0% August
      2011 NCDs who hold at least three-fourth of the outstanding amount of the 0% August 2011
      NCDs or with the sanction accorded pursuant to a resolution passed at a meeting of the 0% August
      2011 NCD holders under the series, provided that nothing in such consent or resolution shall be
      operative against the Issuer where such consent or resolution modifies or varies the terms and
      conditions of the 0% August 2011 NCDs which are not acceptable to the Issuer.

9.    Future Borrowings

      The Issuer shall be entitled, from time to time, to make further issue of 0% August 2011 NCDs
      and/or other debenture and /or such other instruments to the public, shareholders of the Issuer
      and/or avail of further financial and/or guarantee facilities from financial institutions, banks and/or
      any other person on the security or otherwise of its properties without the consent of the
      Debenture Trustee or the 0% August 2011 NCD holder.

10.   Notices

      The notices to the 0% August 2011 NCD holders required to be given by the Issuer or the Trustees
      shall be deemed to have been given if sent by ordinary post to the sole/first allottee or sole/first
      registered holder of the 0% August 2011 NCD, as the case may be. All notices to be given by 0%
      August 2011 NCD holders shall be sent by registered post or by hand delivery to the Issuer at its
      Registered Office.

11.   Replacement of 0% August 2011 NCDs


                                                   97
      If any rematerialized 0% August 2011 NCD is mutilated, defaced, destroyed, stolen or lost, it may
      be replaced at the specified office of the Registrar upon payment by the claimant of such costs as
      may be incurred in connection therewith and on such terms as to evidence and indemnity as the
      Issuer or the Registrar may require. Mutilated or defaced 0% August 2011 NCDs must be
      surrendered before replacements will be issued.

12.   Buy back of 0% August 2011 NCDs

      The Issuer may from time to time, subject to applicable law and necessary approvals, buyback 0%
      August 2011 NCDs on terms and conditions to be decided by the Issuer.

13.   Governing Law and Jurisdiction

      The 0% August 2011 NCDs and the Debenture Trust Deed are governed by, and shall be
      construed in accordance with, the laws of India and any dispute arising out of or in connection
      with the 0% August 2011 NCDs shall be subject to the exclusive jurisdiction of courts at Mumbai.




                                                 98
             TERMS AND CONDITIONS OF THE 0% AUGUST 2012 NON-CONVERTIBLE
                                    DEBENTURES

The following other than the words in italics constitutes the Terms and Conditions of the Non-Convertible
Debentures and will appear on the reverse of each 0% August 2012 NCD Consolidated Certificate (as defined
below):

The issue of [●] zero per cent. secured redeemable non-convertible debentures of the face value of Rs.
1,000,000 each due August 2012 (the “0% August 2012 NCDs”) of Housing Development Finance
Corporation Limited (the “Issuer”), was authorized by a resolution of the Board of Directors of the Issuer
on June 9, 2009. The 0% August 2012 NCDs are constituted and secured by a trust deed dated [on or about
the closing date] (the “Debenture Trust Deed”) made between the Issuer and IDBI Trusteeship Services
Limited as trustee for the holders of the 0% August 2012 NCDs (the “Debenture Trustee”), which term
shall, where the context so permits, include all other persons for the time being acting as Debenture
Trustee. The statements in these terms and conditions (the “Conditions”) include summaries of, and are
subject to, the detailed provisions of the Debenture Trust Deed. The holders of the 0% August 2012 NCDs
are entitled to the benefit of the Debenture Trust Deed and are bound by, and are deemed to have notice of,
all the provisions of the Debenture Trust Deed.

1.      Status

        The 0% August 2012 NCDs constitute direct and secured obligations of the Issuer and shall rank
        pari passu inter se and with the 0% August 2011 NCDs and without any preference or priority
        among themselves. Subject to any obligations preferred by mandatory provisions of the law
        prevailing from time to time, the 0% August 2012 NCDs shall also, as regards the principal
        amount of the 0% August 2012 NCDs, redemption premium and all other monies secured in
        respect of the 0% August 2012 NCDs, rank pari passu with all other present direct and secured
        obligations of the Issuer. The claims of the 0% August 2012 NCD Holders shall be superior to the
        claims of the unsecured creditors of the Issuer (subject to any obligations preferred by mandatory
        provisions of the law prevailing from time to time).

2.      Form, Denomination, Title and Listing

2.1     Form

2.1.1   The allotment of 0% August 2012 NCDs in this Issue shall only be in a dematerialized form (i.e.,
        not in the form of physical certificates but be fungible and be represented by the statement issued
        through the electronic mode). The Issuer has made depository arrangements with National
        Securities Depository Limited (“NSDL”) and Central Depository Services (India) Limited
        (“CDSL”, and together with NSDL, the “Depositories”) for the issue of 0% August 2012 NCDs
        in dematerialised form. Subject to Condition 2.1.2, the 0% August 2012 NCD holders will hold
        the 0% August 2012 NCDs in dematerialised form and deal with the same in accordance with the
        provisions of the Depositories Act, 1996 /rules as notified by the Depositories from time to time.

2.1.2   The 0% August 2012 NCDs holders may rematerialize the 0% August 2012 NCDs at any time
        after allotment, in accordance with the provisions of the Depositories Act, 1996 /rules as notified
        by the Depositories from time to time.

2.2     Denomination

        The denomination of each 0% August 2012 NCD is Rs. 1,000,000

        In case of 0% August 2012 NCDs that are rematerialized and held in physical form, the Issuer will
        issue one certificate to the 0% August 2012 NCD holder for the aggregate amount of 0% August
        2012 NCDs that are rematerialized and held by such 0% August 2012 NCD holder (each such
        certificate a “0% August 2012 NCD Consolidated Certificate”). In respect of the 0% August


                                                    99
        2012 NCD Consolidated Certificates, the Issuer will, upon receipt of a request from the 0%
        August 2012 NCD holder within 5 business days of such request, split such 0% August 2012 NCD
        Consolidated Certificates into smaller denominations in accordance with the Articles of
        Association, subject to a minimum denomination of one 0% August 2012 NCD (“Market Lot”).
        No fees would be charged for splitting any 0% August 2012 NCD Consolidated Certificates;
        however, stamp duty payable, if any, would be borne by the 0% August 2012 NCD holder. The
        request for split of a 0% August 2012 NCD Consolidated Certificate should be accompanied by
        the original 0% August 2012 NCD Consolidated Certificate which will, upon issuance of the split
        0% August 2012 NCD Consolidated Certificates, be cancelled by the Issuer.

2.3     Title

        In case of: (i) 0% August 2012 NCDs held in the dematerialized form, the person for the time
        being appearing in the register of beneficial owners of a Depository as the holder of an 0% August
        2012 NCD, and (ii) 0% August 2012 NCDs held in physical form, the person for the time being
        appearing in the Register of 0% August 2012 NCD holders as the holder of an 0% August 2012
        NCD shall be treated for all purposes by the Issuer, the Debenture Trustee, the Depositories and all
        other persons dealing with such person as the holder thereof and its absolute owner for all
        purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any
        interest in it or any writing on, theft or loss of the 0% August 2012 NCD Consolidated Certificate
        issued in respect of the Warrant and no person will be liable for so treating the holder. In these
        Conditions, “0% August 2012 NCD holder” and “holder” means the person in whose name an
        0% August 2012 NCD is registered.

        Title to the 0% August 2012 NCDs shall pass only by transfer and registration as described in
        Condition 3.

2.4     Listing

        The 0% August 2012 NCDs will be listed on the Wholesale Debt Market segments of the National
        Stock Exchange of India Limited (the “NSE”) and the Bombay Stock Exchange Limited (the
        “BSE”, and together with the BSE, the “Stock Exchanges”).

3.      Transfers of 0% August 2012 NCDs; Issue of 0% August 2012 NCD Consolidated
        Certificates

3.1     Register

        The Issuer shall maintain at its registered office (or such other place as permitted by law) a register
        of 0% August 2012 NCD holders (the “Register of 0% August 2012 NCD holders”) containing
        such particulars as required by Section 152 of the Companies Act. In terms of Section 152A of the
        Companies Act, the Register of 0% August 2012 NCD holders maintained by a Depository for any
        0% August 2012 NCDs in dematerialized form under Section 11 of the Depositories Act shall be
        deemed to be a Register of 0% August 2012 NCD holders for the purposes of this Condition 3.1.

3.2     Transfers

        Subject to Conditions 3.3 and 3.4:

3.2.1   In case of 0% August 2012 NCDs held in the dematerialized form, transfers of 0% August 2012
        NCDs may be effected only through the Depository(ies) through which such 0% August 2012
        NCDs to be transferred are held, in accordance with the provisions of the Depositories Act, 1996
        /rules as notified by the Depositories from time to time.

3.2.2   In case of 0% August 2012 NCDs held in physical form, transfers of 0% August 2012 NCDs may
        be effected only by delivery of the 0% August 2012 NCD Consolidated Certificate issued in


                                                     100
        respect of that 0% August 2012 NCD, with the form of transfer on the back thereof duly
        completed and signed by the holder or his duly authorized attorney, to the specified office of the
        Registrar. No transfer of title of an 0% August 2012 NCD will be valid unless and until entered on
        the Register of 0% August 2012 NCD holders. In accordance with Article 51 and Article 60 of the
        Articles of Association, a fee not exceeding Re. 1 may be charged by the Issuer for each 0%
        August 2012 NCD transferred and, if so required by the Directors, be paid before registration
        thereof.

3.3     No transfer except on Stock Exchange for one year

        The 0% August 2012 NCDs shall not be sold for a period of one year from the date of Allotment
        except on the floor of the Stock Exchanges.

3.4     Transfer after Maturity Date

        If a request for transfer of the 0% August 2012 NCD is not received by the Registrar before the
        Maturity Date, the redemption proceeds of the 0% August 2012 NCDs shall be paid to the seller
        and not to the buyer. In such cases, any claims shall be settled inter se between the parties and no
        claim or action shall lie against the Issuer.

3.5     Formalities Free of Charge

        Registration of a transfer of 0% August 2012 NCD and issuance of new 0% August 2012 NCD
        Consolidated Certificates will be effected without charge by or on behalf of the Issuer, but upon
        payment (or the giving of such indemnity as the Issuer may require) in respect of any tax or other
        governmental charges which may be imposed in relation to such transfer, and the Issuer being
        satisfied that the regulations concerning transfers of 0% August 2012 NCDs have been complied
        with.

4.      Redemption and Cancellation

4.1     Unless previously redeemed as provided herein, the Issuer will redeem the 0% August 2012 NCDs
        at [●] per cent. of their principal amount on [●] (the “Maturity Date”). The Issuer or the 0%
        August 2012 NCD holder may not redeem the 0% August 2012 NCDs at any time prior to the
        Maturity Date, except as provided in Condition 7 below.

4.2     All 0% August 2012 NCDs that are redeemed will forthwith be cancelled.

5.      Payments

5.1     Principal and Premium

5.1.1   Payment of principal and premium will be made to:

        (i)      in case of 0% August 2012 NCDs held in the dematerialized form, to the person
                 appearing in the register of beneficial owners of a Depository as the beneficial owner of
                 an 0% August 2012 NCD; and

        (ii)     in case of 0% August 2012 NCDs held in physical form, to the person appearing in the
                 Register of 0% August 2012 NCD holders

        on the Maturity Date.

5.1.2   Payment of principal and premium will be made through the Electronic Clearing Service (ECS),
        Direct Credit, Real Time Gross Settlement (RTGS) or National Electronic Funds Transfer (NEFT)
        as per the applicable norms prescribed by the Reserve Bank of India.


                                                   101
5.2     Payments on Sundays and public holidays

        If the Maturity Date falls on a Sunday or a public holiday or any other holiday in Mumbai notified
        in terms of the Negotiable Instruments Act, 1881, then the principal and premium, as the case may
        be, would be paid on the next working day.

5.3     Applicable laws

        All payments are subject in all cases to any applicable laws and regulations, but without prejudice
        to the provisions of Condition 5.2. No commissions or expenses shall be charged to the 0%
        August 2012 NCD holders in respect of such payments.

5.4     Taxation

        Payment of premium will be subject to deduction of income tax under the provisions of Income-
        Tax Act, 1961 or any statutory modification or re-enactment thereof for the time being in force or
        any other duties, assessments or governmental charges of whatever nature imposed or levied by or
        on behalf of India or any authority thereof or therein having power to tax.

6.      Security

        The principal amount of the 0% August 2012 NCDs, redemption premium and any other monies
        payable by the Issuer in respect of the 0% August 2012 NCDs will be secured by a negative lien
        on the assets of the Issuer and mortgage of the immovable property of the Issuer as identified in
        the Debenture Trust Deed.

7.      Events of Default

7.1     The Trustee at its discretion may, and if so required in writing by the holders of not less than 25
        per cent. in principal amount of the 0% August 2012 NCDs then outstanding or if so directed by
        an Extraordinary Resolution shall (subject to being indemnified and/or secured by the 0% August
        2012 NCD holders to its satisfaction), give notice to the Issuer that the 0% August 2012 NCDs
        are, and they shall accordingly thereby become, due and repayable at their Early Redemption
        Amount if any of the events listed in Clause 7.2 (each, an “Event of Default”) has occurred.

7.2     Each of the following events shall be an Event of Default:

7.2.1   Default is made in any payment of any sum due in respect of the 0% August 2012 NCDs or any of
        them and such failure continues for a period of two (2) days;

7.2.2   The Issuer does not perform or comply with one or more of its other obligations in relation to the
        0% August 2012 NCDs or the Debenture Trust Deed which default is incapable of remedy or, if in
        the opinion of the Debenture Trustee capable of remedy, is not remedied within 15 days after
        written notice of such default shall have been given to the Issuer by the Debenture Trustee;

7.2.3   the Issuer is (or is deemed by law or a court to be) insolvent or bankrupt or unable to pay (in the
        opinion of the Debenture Trustee) a material part of its debts, or stops, suspends or threatens to
        stop or suspend payment of all or (in the opinion of the Debenture Trustee) a material part of (or
        of a particular type of) its debts, proposes or makes any agreement for the deferral, rescheduling or
        other readjustment of all or (in the opinion of the Debenture Trustee) a material part of (or all of a
        particular type of) its debts (or of any part which it will or might otherwise be unable to pay when
        due), proposes or makes a general assignment or an arrangement or composition with or for the
        benefit of the relevant creditors in respect of any of such debts or a moratorium is agreed or
        declared in respect of or affecting all or any part of (or of a particular type of) the debts of the
        Issuer;


                                                    102
7.2.4    a distress, attachment, execution or other legal process is levied, enforced or sued out on or against
         any material part of the property, assets or revenues of the Issuer and is not discharged or stayed
         within 45 days;

7.2.5    an order is made or an effective resolution passed for the winding-up or dissolution, judicial
         management or administration of the Company, or the Company ceases or threatens to cease to
         carry on all or substantially all of its business or operations, except for the purpose of and
         followed by a reconstruction, amalgamation, reorganisation, merger or consolidation on terms
         approved by an Extraordinary Resolution of the 0% August 2012 NCD holders;

7.2.6    an encumbrancer takes possession or an administrative or other receiver or an administrator is
         appointed of the whole or (in the opinion of the Trustee) any substantial part of the property,
         assets or revenues of the Company (as the case may be) and is not discharged within 45 days;

7.2.7    the Issuer commences a voluntary proceeding under any applicable bankruptcy, insolvency,
         winding up or other similar law now or hereafter in effect, or consent to the entry of an order for
         relief in an involuntary proceeding under any such law, or consent to the appointment or taking
         possession by a receiver, liquidator, assignee (or similar official) for any or a substantial part of its
         property or take any action towards its re-organisation, liquidation or dissolution;

7.2.8    it is or will become unlawful for the Company to perform or comply with any one or more of its
         obligations under any of the 0% August 2012 NCDs or the Debenture Trust Deed;

7.2.9    any step is taken by governmental authority or agency or any other competent authority, with a
         view to the seizure, compulsory acquisition, expropriation or nationalisation of all or (in the
         opinion of the Trustee) a material part of the assets of the Company which is material to the
         Company;

7.2.10   any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any
         of the events referred to in any of the foregoing paragraphs.

7.3      If any Event of Default or any event which, after the notice, or lapse of time, or both, would
         constitute an Event of Default has happened, the Issuer shall, forthwith give notice thereof to the
         Debenture Trustee in writing specifying the nature of such event of default or of such event.

7.4      The security created in favour of the Debenture Trustee under the Debenture Trust Deed shall
         become enforceable by the Debenture Trustee upon the occurrence of an Event of Default.

7.5      For the purposes of this Condition 7, “Early Redemption Amount” in respect of each Rs.
         1,000,000 principal amount of 0% August 2012 NCDs means the amount determined which
         represents for the holder thereof on the relevant date for determination of the Early Redemption
         Amount (the “Determination Date”) a gross yield to maturity identical to that applicable in the
         case of redemption on the maturity date, being [●] per cent. per annum (calculated on a semi-
         annual basis) and shall be calculated in accordance with the following formula, rounded (if
         necessary) to two decimal places with 0.005 being rounded upwards (provided that if the date
         fixed for redemption is the Semi-Annual Date (as set out below), such Early Redemption Amount
         shall be as set out in the table below in respect of such Semi-Annual Date):

         Early Redemption Amount = Previous Redemption Amount x (1 + r/2)d/p

         where:

          Previous Redemption Amount          =    Early Redemption Amount on the Semi-Annual Date
                                                   immediately preceding the date fixed for redemption as set
                                                   out below (or if the redeemed prior to [the first Semi-


                                                       103
                                               Annual Date], Rs. 1,000,000

                                                   Semi-Annual Date                  Early Redemption
                                                                                          Amount
                                               [●]…………………………                   [●]
                                               [●]…………………………                   [●]
                                               [●]…………………………                   [●]
                                               [●]…………………………                   [●]
                                               [●]…………………………                   [●]
                                               [●]…………………………                   [●]
                                               [●]…………………………                   [●]
                                               [●]…………………………                   [●]
                                               [●]…………………………                   [●]
                                               [●]…………………………                   [●]

       R    =   [●] per cent. expressed as a fraction

       D    =   number of days from and including the immediately preceding Semi-Annual Date (or, if
                the Bonds are to be redeemed prior to the first semi-annual date, from and including the
                Closing Date) to but excluding the date fixed for redemption, calculated on the
                basis of a 360 day year consisting of 12 months of 30 days each and, in the case
                of an incomplete month, the number of days elapsed

       P    =   180

8.    Meetings of 0% August 2012 NCD holders, modification, waiver and substitution

8.1   The regulations with regard to meetings of 0% August 2012 NCD holders will be in the form
      given in Annexures ‘C’ & ‘D’ to the Companies (Central Government’s) General Rules and
      Forms, 1956, except as modified by these Conditions.

8.2   The terms and conditions attached to the 0% August 2012 NCDs, including these Conditions, may
      be varied, modified or abrogated with the consent, in writing, of those holders of the 0% August
      2012 NCDs who hold at least three-fourth of the outstanding amount of the 0% August 2012
      NCDs or with the sanction accorded pursuant to a resolution passed at a meeting of the 0% August
      2012 NCD holders under the series, provided that nothing in such consent or resolution shall be
      operative against the Issuer where such consent or resolution modifies or varies the terms and
      conditions of the 0% August 2012 NCDs which are not acceptable to the Issuer.

9.    Future Borrowings

      The Issuer shall be entitled, from time to time, to make further issue of 0% August 2012 NCDs
      and/or other debenture and /or such other instruments to the public, shareholders of the Issuer
      and/or avail of further financial and/or guarantee facilities from financial institutions, banks and/or
      any other person on the security or otherwise of its properties without the consent of the
      Debenture Trustee or the 0% August 2012 NCD holder.

10.   Notices

      The notices to the 0% August 2012 NCD holders required to be given by the Issuer or the Trustees
      shall be deemed to have been given if sent by ordinary post to the sole/first allottee or sole/first
      registered holder of the 0% August 2012 NCD, as the case may be. All notices to be given by 0%
      August 2012 NCD holders shall be sent by registered post or by hand delivery to the Issuer at its
      Registered Office.

11.   Replacement of 0% August 2012 NCDs


                                                   104
      If any rematerialized 0% August 2012 NCD is mutilated, defaced, destroyed, stolen or lost, it may
      be replaced at the specified office of the Registrar upon payment by the claimant of such costs as
      may be incurred in connection therewith and on such terms as to evidence and indemnity as the
      Issuer or the Registrar may require. Mutilated or defaced 0% August 2012 NCDs must be
      surrendered before replacements will be issued.

12.   Buy back of 0% August 2012 NCDs

      The Issuer may from time to time, subject to applicable law and necessary approvals, buyback 0%
      August 2012 NCDs on terms and conditions to be decided by the Issuer.

13.   Governing Law and Jurisdiction

      The 0% August 2012 NCDs and the Debenture Trust Deed are governed by, and shall be
      construed in accordance with, the laws of India and any dispute arising out of or in connection
      with the 0% August 2012 NCDs shall be subject to the exclusive jurisdiction of courts at Mumbai.




                                                 105
                                 TERMS AND CONDITIONS OF THE WARRANTS
The following other than the words in italics are the Terms and Conditions of the Warrants and will appear on the
reverse of each Warrant Consolidated Certificate (as defined below).

The issue of [●] Warrants (the “Warrants”) each exchangeable for one (1) Equity Share of face value of Rs. 10 each
(the “Equity Shares”) of Housing Development Finance Corporation Limited (the “Issuer”), was authorized by a
resolution of the Board of Directors of the Issuer on June 9, 2009 and a resolution of the shareholders of the Issuer on
July 22, 2009. The Warrants are subscribed at a price of Rs. [●] each and were issued on [●] 2009. The Registered
Office of the Issuer is at Ramon House, H.T. Parekh Marg, 169 Backbay Reclamation Churchgate, Mumbai 400 020
(the “Registered Office”).

1.       Status

         The Warrants constitute direct, unsubordinated, unconditional and unsecured obligations of the
         Issuer and shall at all times rank pari passu and without any preference or priority among
         themselves and shall also rank pari passu with all other present and future direct and
         unsubordinated, unconditional and unsecured obligations of the Issuer (subject to any obligations
         preferred by mandatory provisions of the law prevailing from time to time).

2.       Form, Denomination, Title and Listing

2.1      Form

         The allotment of Warrants in this Issue shall only be in a dematerialized form (i.e., not in the form
         of physical certificates but be fungible and be represented by the statement issued through the
         electronic mode). The Issuer has made depository arrangements with National Securities
         Depository Limited (“NSDL”) and Central Depository Services (India) Limited (“CDSL”, and
         together with NSDL, the “Depositories”) for the issue of Warrants in dematerialised form. Subject
         to Condition 2.1.2, the Warrantholders will hold the Warrants in dematerialised form and deal
         with the same in accordance with the provisions of the Depositories Act, 1996 /rules as notified by
         the Depositories from time to time.

         The Warrantholders may rematerialize the Warrants at any time after allotment, in accordance
         with the provisions of the Depositories Act, 1996 /rules as notified by the Depositories from time
         to time.

         The Warrants are subject to the provisions of the Companies Act and the Memorandum of Association and
         Articles of Association of the Company. In addition, the Warrants shall also be subject to applicable laws,
         guidelines, notifications and regulations relating to the issue of capital and listing of securities issued from
         time to time by the Government of India, SEBI, RBI and/or other authorities

2.2      Denomination

         Each Warrant is exchangeable for 1 (one) Equity Share only at the Warrant Exercise Price.

         In case of Warrants that are rematerialized and held in physical form, the Issuer will issue one
         certificate to the Warrants holder for the aggregate amount of Warrants that are rematerialized and
         held by such Warrantholder (each such certificate, a “Warrant Consolidated Certificate”). In
         respect of the Warrant Consolidated Certificates, the Issuer will, upon receipt of a request from the
         Warrantholder within 5 business days of such request, split such Warrant Consolidated
         Certificates into smaller denominations in accordance with the Articles of Association, subject to a
         minimum denomination of one Warrant (“Market Lot”). No fees would be charged for splitting
         any Warrant Consolidated Certificate; however, stamp duty payable, if any, would be borne by the
         Warrantholder. The request for split of a Warrant Consolidated Certificate should be accompanied



                                                          106
      by the original Warrant Consolidated Certificate which will, upon issuance of the split Warrant
      Consolidated Certificates, be cancelled by the Issuer.

2.3   Title

      In case of: (i) Warrants held in the dematerialized form, the person for the time being appearing in
      the register of beneficial owners of a Depository as the holder of a Warrant, and (ii) Warrants held
      in physical form, the person for the time being appearing in the Register of Warrantholders as the
      holder of a Warrant shall be treated for all purposes by the Issuer, the Depositories and all other
      persons dealing with such person as the holder thereof and as its absolute owner for all purposes
      (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it or
      any writing on, theft or loss of the Warrant Consolidated Certificate issued in respect of the
      Warrant and no person will be liable for so treating the holder. In these Conditions,
      “Warrantholder” and “holder” means the person in whose name a Warrant is registered.

      Title to the Warrants shall pass only by transfer and registration as described in Condition 3.

2.4   Listing

      The Warrants are to be listed on the Bombay Stock Exchange Limited (the “BSE”) and the
      National Stock Exchange of India Limited (the “NSE”, and together with the BSE, the “Stock
      Exchanges”).

3.    Transfers of Warrants; Issue of Warrant Consolidated Certificates

3.1   Register

      The Issuer shall maintain at its registered office (or such other place as permitted by law) a register
      of Warrantholders (the “Register of Warrantholders”). The Register of Warrantholders
      maintained by a Depository for any Warrants in dematerialised form shall be deemed to be a
      Register of Warrantholders for the purposes of this Condition 3.1.

3.2   Transfers

      Subject to Conditions 3.3 and 3.4:

      In case of Warrants held in the dematerialized form, transfers of Warrants may be effected only
      through the Depository(ies) through which such Warrants to be transferred are held, in accordance
      with the provisions of the Depositories Act, 1996 /rules as notified by the Depositories from time
      to time.

      In case of Warrants held in physical form, transfers of Warrants may be effected only by delivery
      of the Warrant Consolidated Certificate issued in respect of that Warrant, with the form of
      transfer on the back thereof duly completed and signed by the Warrantholder or his duly
      authorized attorney, to the specified office of the Registrar. No transfer of title of a Warrant will
      be valid unless and until entered on the Register of Warrantholders.

      Transfers of interests in the Warrants in the dematerialized form will be effected in accordance
      with the rules of the relevant Depositories.

3.3   No transfer except on Stock Exchange for one year

      The Warrants shall not be sold for a period of one year from the date of Allotment except on the
      floor of the Stock Exchanges.

3.4   Restricted Transfer Period


                                                   107
        No Warrantholder may require the transfer of a Warrant to be registered after any Exercise Notice
        has been delivered in respect of the Warrant.

3.5     Formalities Free of Charge

        Registration of a transfer of Warrants and issuance of new Warrant Consolidated Certificates will
        be effected without charge by or on behalf of the Issuer, but upon payment (or the giving of such
        indemnity as the Issuer may require) in respect of any tax or other governmental charges which
        may be imposed in relation to such transfer, and the Issuer being satisfied that the regulations
        concerning transfers of Warrants have been complied with.

4.      Rights of Warrantholders

4.1     Subject to Conditions 3.2, 3.3 and 3.4, the Warrants shall be transferable and transmittable in the
        same manner and to the same extent and be subject to the same restrictions and limitations and
        other related matters as in the case of Equity Shares.

4.2     The Warrantholders shall have no other rights or privileges except as expressly provided in these
        Conditions.

4.3     On exercise and subsequent allotment of Equity Shares, the Warrantholders shall enjoy the rights
        and privileges of equity shareholders of the Issuer and not of Warrantholders.

4.4     The Warrants shall not confer upon the holders thereof any right to receive any notice of the
        meeting of the Shareholders of the Issuer or Annual Report of the Issuer and or to attend/vote at
        any of the general meetings of the shareholders of the Issuer.

4.5     The Warrantholders shall not be entitled to any dividend or any other corporate benefits, which
        may be declared or announced by the Issuer from time to time, until such time that the Warrants
        are converted into the underlying Equity Shares in accordance with these Conditions.

5.      Exercise Right and Exercise Period

5.1     Exercise Right

5.1.1   Each Warrant entitles the Warrantholder to subscribe, at the option of the Warrantholder by way
        of exercise of the Warrant at any time during the Warrant Exercise Period (as defined below) at
        the Warrant Exercise Price (as adjusted in accordance with Condition 6), in the manner set forth in
        Condition 5.4 and otherwise on the terms and subject to this Condition 5, to one (1) fully paid
        Equity Share (the “Exercise Right”).

5.1.2   The Exercise Right shall be available: (i) in case of Warrants held in the dematerialized form, to
        the person for the time being appearing in the register of beneficial owners of a Depository as the
        holder of a Warrant, and (ii) in case of Warrants held in physical form, to the person for the time
        being appearing in the Register of Warrantholders, at the time of exercise of the Exercise Right.

5.1.3   An Exercise Right may only be exercised in respect of one or more Warrants. Upon exercise of
        Exercise Rights in relation to any Warrant and the fulfillment by the Issuer of all its obligations in
        respect thereof, the relevant Warrantholder shall have no further rights in respect of such Warrant
        and the obligations of the Issuer in respect of the Warrant shall be extinguished

5.2     Warrant Exercise Period

5.2.1   The Exercise Right may be exercised, at the option of the Warrantholder thereof, at any time
        during normal business hours on and after [●] up to 5:00 p.m. in Mumbai on [●] (but in no event


                                                    108
        thereafter) (the “Warrant Exercise Period”). Any Warrants which have not been exercised on or
        before 5:00 p.m. on [the last date of the Warrant Exercise Period to be inserted] will lapse and
        cease to be valid and any amounts paid towards them to date will stand forfeited.

5.3     Warrant Exercise Price

        The holder for the time being of each Warrant will have the right, by way of exercise of the
        Exercise Right attaching to such Warrant, at any time during the Warrant Exercise Period, to
        subscribe for fully-paid Equity Shares at a price per Equity Share (the “Warrant Exercise Price”)
        equal to Rs. [●] or such adjusted amount as, in accordance with Condition 6, is applicable
        (disregarding any retroactive adjustment not then reflected in the Warrant Exercise Price, but
        without prejudice to the Issuer’s obligations in respect thereof) on the Warrant Exercise Date (as
        defined in Condition 5.4.1 (iv)).

        An Exercise Right may only be exercised in respect of one or more Warrants. If more than one
        Warrant held by the same holder is exercised at any one time by the same holder, the number of
        Equity Shares to be issued upon such exercise will be calculated on the basis of the aggregate
        number of Warrants to be exercised.

5.4     Procedure for Exercise of Warrants

5.4.1   Exercise Notice

        (i)     To exercise the Exercise Right, the Warrantholder thereof must complete, execute and
                deposit at his own expense during normal business hours at the registered office of the
                Issuer a notice of Exercise (a “Exercise Notice”) in the form obtainable during the
                Warrant Exercise Period from the registered office of the Issuer or the website of the
                Issuer at www.hdfc.com. The form of the Exercise Notice may be obtained from any of
                the aforesaid locations during the period from the date of Allotment of Warrants until the
                termination of the Warrant Exercise Period. The duly completed Exercise Notice must be
                accompanied with: (i) a cheque/demand draft drawn in favour of the escrow account
                opened by the Company for this purpose payable at Mumbai for the aggregate amount of
                the Warrant Exercise Price in respect of all the Warrants sought to be converted pursuant
                to the Exercise Notice and the amounts specified in Condition 5.4.1(ii) (the “Other
                Costs” and together with the Warrant Exercise Price, the “Exercise Amount”); and (ii)
                (a) in case of Warrants held in the dematerialized form, a photocopy of the delivery
                instruction referred to in Condition 5.4.2, duly authenticated by the depository
                participant; or (b) in case of Warrants held in physical form, the Warrant Consolidated
                Certificate issued in respect of that Warrant, with the form of transfer on the back thereof
                duly completed and signed by the Warrantholder or his duly authorized attorney.

        (ii)    On the Warrant Exercise Date, the Warrantholder is also required to make the payment
                of:

                (a)       all (if any) such stamp, issue, registration or other similar taxes or duties arising
                          on exercise of the relevant Warrants in the place in which such Warrants is or
                          are deposited for exercise thereof or in consequence of the delivery of Warrant
                          Consolidated Certificates for the Equity Shares to be issued on such exercise to
                          or to the order of a person other than the exercising Warrantholder or the person
                          specified in the Exercise Notice as his standing proxy or other nominee as the
                          Issuer may request at the time of the said deposit of the relevant Warrants; the
                          expenses of, and the submission of any necessary documents required in order to
                          effect, dispatch of certificates for Equity Shares and any other securities,
                          property or cash to be delivered upon exercise to a place other than the
                          Registered Office of the Issuer;



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                (b)      If the amount received by the Issuer in respect of an exercising Warrantholder’s
                         purported payment of the Exercise Amount relating to all of the relevant
                         Warrants is less than the full amount of the Exercise Amount, the Issuer shall
                         not treat the amount so received or any part thereof as payment of the Exercise
                         Amount, or any part thereof and, accordingly, the whole of such amount shall
                         remain in a escrow account opened by the Company for this purpose to be
                         maintained by the Issuer unless and until a further payment is made in an
                         amount sufficient to cover the deficiency. If the Issuer does not receive the
                         payment of the Exercise Amount relating to the exercise of particular Warrants
                         within 14 days after the Exercise Date in respect of such Warrants, the Issuer
                         may (but is not obliged to), in its discretion and without liability to itself return
                         such Warrants and the relevant Exercise Notice to the exercising Warrantholder
                         at the risk and expense of such Warrantholder.

        (iii)   A Exercise Notice deposited outside the normal business hours or on a day which is not a
                business day at the place of the specified office of the Registrar shall for all purposes be
                deemed to have been deposited with the Registrar during the normal business hours on
                the next business day following such day.

        (iv)    The exercise date in respect of a Warrant (the “Warrant Exercise Date”) must fall at a
                time when the Exercise Right attaching to that Warrant is expressed in these Conditions
                to be exercisable and will be deemed to be the date of the surrender of the Warrant
                Consolidated Certificate in respect of such Warrant and delivery of such Exercise Notice.
                A Exercise Notice once delivered shall be irrevocable and may not be withdrawn unless
                the Issuer consents to such withdrawal.

5.4.2   Delivery of Equity Shares

        (i)     Upon exercise by a Warrantholder of its Exercise Right, the Issuer will, on or with effect
                from the relevant Exercise Date and within 15 days of the Warrant Exercise Date, cause
                the relevant securities account of the Warrantholder exercising his Exercise Right or of
                his/their nominee, to be credited with such number of relevant Equity Shares to be issued
                upon exercise and shall further cause the name of the concerned Warrantholder or its
                nominee to be registered accordingly, in the record of the beneficial holders of Equity
                Shares, maintained by the depository.

        (ii)    The allotment of Equity Shares pursuant to exercise of Warrants in this Issue shall only
                be in a dematerialized form (i.e., not in the form of physical certificates but be fungible
                and be represented by the statement issued through the electronic mode). The holders
                thereof will hold the Equity Shares so allotted in dematerialised form and deal with the
                same in accordance with the provisions of the Depositories Act, 1996 /rules as notified by
                the Depositories from time to time.

        (iii)   The Equity Shareholders may rematerialize the Equity Shares at any time after allotment,
                in accordance with the provisions of the Depositories Act, 1996 /rules as notified by the
                Depositories from time to time.

        (iv)    All Equity Shares issued upon exercise of Warrants shall be fully-paid and non-
                assessable or shares of any class or classes resulting from any subdivision, consolidation
                or re-classification of those Equity Shares which as between themselves have no
                preference in respect of dividends or amounts payable in the event of any voluntary or
                involuntary liquidation or dissolution of the Issuer and shall entitle the holders thereof to
                participate in full in all dividends and other distributions paid or made on the Equity
                Shares the record date for which falls on or after the relevant Exercise Date. Such Equity
                Shares will in all other respects rank pari passu with the Equity Shares in issue on the
                relevant Exercise Date (except for any right the record date for which precedes such


                                                   110
               Exercise Date and any other right excluded by mandatory provisions of applicable law).
               The Equity Shares to be issued upon the exercise of the Exercise Right shall also be listed
               on the Stock Exchanges.

      (v)      If the Warrant Exercise Date in relation to any Warrant shall be on or after the record
               date for any issue, distribution, grant, offer or other event as gives rise to the adjustment
               of the Warrant Exercise Price pursuant to Condition 6, but before the relevant adjustment
               becomes effective under the relevant Condition, upon the relevant adjustment becoming
               effective, the Issuer shall procure the issue to the exercising Warrantholder (or in
               accordance with the instructions contained in the Exercise Notice (subject to applicable
               exchange control or other laws or other regulations)), such additional number of Equity
               Shares (in addition to the Equity Shares issued on exercise of the relevant Warrants) as is
               equal to the number of Equity Shares which would have been required to be issued on
               exercise of such Warrant if the relevant adjustment to the Warrant Exercise Price had
               been made and become effective on or immediately after the relevant record date.

      (vi)     If the Exercise Right in respect of more than one Warrant is exercised at any one time
               such that Equity Shares to be issued on exercise are to be registered in the same name, the
               number of such Equity Shares to be issued in respect thereof shall be calculated on the
               basis of the aggregate number of such Warrants being so exercised and rounded down to
               the nearest whole number of Equity Shares. Fractions of Equity Shares will not be issued
               on exercise but the Issuer will, including without limitation in the event of a
               consolidation or re-classification of Equity Shares by operation of law or otherwise
               occurring after [●] 2009 which reduces the number of Equity Shares outstanding, the
               Issuer will upon exercise of the Warrants pay in cash (in INR by means of a INR cheque
               drawn on a bank in Mumbai) the sum equal to such portion of the Warrant Exercise Price
               of the Warrant or Warrants evidenced by the Warrant Consolidated Certificate deposited
               in connection with the exercise of Exercise Rights, as corresponds to any fraction of an
               Equity Share not issued if such sum exceeds INR 10.00. Any such sum shall be paid not
               later than three business days after the relevant Warrant Exercise Date.

6.    Adjustments to Warrant Exercise Price

      The Warrant Exercise Price will be subject to adjustment in the following events (each an
      “Adjustment Event”):

6.1   Consolidation, Subdivision or Reclassification

      Adjustment: If and whenever there shall be an alteration to the nominal value of the Equity Shares
      as a result of consolidation, subdivision or reclassification, the Warrant Exercise Price shall be
      adjusted by multiplying the Warrant Exercise Price in force immediately before such alteration by
      the following fraction:


                                                   A
                                                   B

      Where:

      A        is the nominal amount of one Equity Share immediately after such alteration; and

      B        is the nominal amount of one Equity Share immediately before such alteration.

      Effective Date of Adjustment: Such adjustment shall become effective on the date the alteration
      takes effect or, in the case of an alteration to the nominal value of the Equity Shares as a result of
      consolidation, if a record date is fixed therefor immediately after such record date.


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6.2     Capitalisation of Profits or Reserves

6.2.1   Adjustment: If and whenever the Issuer shall issue any Equity Shares credited as fully paid to the
        holders of Equity Shares (“Shareholders”) by way of capitalisation of profits or reserves
        (including any share premium account) including, Equity Shares paid up out of distributable
        profits or reserves and/or share premium account (except any Scrip Dividend) and which would
        not have constituted a Capital Distribution, the Warrant Exercise Price shall be adjusted by
        multiplying the Warrant Exercise Price in force immediately before such issue by the following
        fraction:

                                                    A
                                                    B

        Where:
                 A     is the aggregate nominal amount of the issued Equity Shares immediately before
                       such issue; and

                 B     is the aggregate nominal amount of the issued Equity Shares immediately after
                       such issue.

        Effective Date of Adjustment: Such adjustment shall become effective on the date of issue of such
        Equity Shares or if a record date is fixed therefor, immediately after such record date.

6.2.2   Adjustment: In the case of an issue of Equity Shares by way of a Scrip Dividend where the Current
        Market Price of such Equity Shares on the date of the first public announcement of the terms of
        such Scrip Dividend exceeds the amount of the Relevant Cash Dividend or the relevant part
        thereof and which would not have constituted a Capital Distribution, the Warrant Exercise Price
        shall be adjusted by multiplying the Warrant Exercise Price in force immediately before the issue
        of such Equity Shares by the following fraction:

                                                  A+B
                                                  A+C

        Where:

        A        is the aggregate nominal amount of the issued Equity Shares immediately before such
                 issue;

        B        is the aggregate nominal amount of the Equity Shares issued by way of such Scrip
                 Dividend multiplied by a fraction of which (i) the numerator is the amount of the whole,
                 or the relevant part, of the Relevant Cash Dividend and (ii) the denominator is the Current
                 Market Price of the Equity Shares issued by way of Scrip Dividend in respect of each
                 existing Equity Share in lieu of the whole, or the relevant part, of the Relevant Cash
                 Dividend; and

        C        is the aggregate nominal amount of Equity Shares issued by way of such Scrip Dividend;

        or by making such other adjustment as an Independent Investment Bank shall certify to the
        Warrantholders is fair and reasonable.

        Effective Date of Adjustment: Such adjustment shall become effective on the date of issue of such
        Equity Shares or if a record date is fixed therefor, immediately after such record date.

6.3     Capital Distributions and Extraordinary Dividend



                                                    112
      Adjustment: If and whenever the Issuer shall pay or make any Capital Distribution to the
      Shareholders, the Warrant Exercise Price shall be adjusted by multiplying the Warrant Exercise
      Price in force immediately before such Capital Distribution by the following fraction:

                                                 A-B
                                                  A

      Where:

      A        is the Current Market Price of one Equity Share on the last Trading Day preceding the
               date on which the Capital Distribution is publicly announced; and

      B        is the Fair Market Value on the date of such announcement of the portion of the Capital
               Distribution attributable to one Equity Share.

      Effective Date of Adjustment: Such adjustment shall become effective on the date that such Capital
      Distribution is actually made or if a record date is fixed therefor, immediately after such record
      date. For the avoidance of doubt, when the Capital Distribution is by means of a Relevant Cash
      Dividend, only such portion of the cash dividend which exceeds the Threshold Percentage (the
      “excess portion”) shall be regarded as a Capital Distribution and only the excess portion shall be
      taken into account in determining the Fair Market Value of the portion of the Capital Distribution
      attributable to one Equity Share.

6.4   Rights Issues of Equity Shares or Options over Equity Shares

      Adjustment: If and whenever the Issuer shall issue Equity Shares to all or substantially all
      Shareholders as a class by way of rights, or issue or grant to all or substantially all Shareholders as
      a class by way of rights, of options, warrants or other rights to subscribe for or purchase or
      otherwise acquire any Equity Shares, in each case at less than 90 per cent. of the Current Market
      Price per Equity Share on the last Trading Day preceding the date of the announcement of the
      terms of the issue or grant, the Warrant Exercise Price shall be adjusted by multiplying the
      Warrant Exercise Price in force immediately before such issue or grant by the following fraction:

                                                 A+B
                                                 A+C

      Where:

      A        is the number of Equity Shares in issue immediately before such announcement;

      B         is the number of Equity Shares which the aggregate amount (if any) payable for the
                Equity Shares issued by way of rights or for the options or warrants or other rights
                issued by way of rights and for the total number of Equity Shares comprised therein
                would subscribe for or purchase or otherwise acquire at such Current Market Price per
                Equity Share; and

      C         is the aggregate number of Equity Shares issued or, as the case may be, comprised in the
                issue or grant.

      Effective Date of Adjustment: Such adjustment shall become effective on the date of issue of such
      Equity Shares or issue or grant of such options, warrants or other rights (as the case may be) or
      where a record date is set, the first date on which the Equity Shares are traded ex-rights, ex-
      options or ex-warrants (as the case may be).

6.5   Rights Issues of Other Securities



                                                   113
      Adjustment: If and whenever the Issuer shall issue any securities (other than Equity Shares or
      options, warrants or other rights to subscribe for or purchase or otherwise acquire any Equity
      Shares) to all or substantially all Shareholders as a class by way of rights or grant to all or
      substantially all Shareholders as a class by way of rights, of options, warrants or other rights to
      subscribe for or purchase any securities (other than Equity Shares or options, warrants or other
      rights to subscribe or purchase or otherwise acquire Equity Shares), the Warrant Exercise Price
      shall be adjusted by multiplying the Warrant Exercise Price in force immediately before such issue
      or grant by the following fraction:

                                                 A-B
                                                  A

      Where:

      A        is the Current Market Price of one Equity Share on the last Trading Day preceding the
               date on which such issue or grant is publicly announced; and

      B        is the Fair Market Value on the date of such announcement of the portion of the rights
               attributable to one Equity Share.

      Effective Date of Adjustment: Such adjustment shall become effective on the date of issue of such
      Equity Shares or issue or grant of such options, warrants or other rights (as the case may be) or
      where a record date is set, the first date on which the Equity Shares are traded ex-rights, ex-
      options or ex-warrants, as the case may be.

6.6   Issues at less than Current Market Price

      Adjustment: If and whenever the Issuer shall issue (otherwise than as mentioned in Condition 6.4
      (Rights Issues of Equity Shares or Options over Equity Shares) above) wholly for cash any Equity
      Shares (other than Equity Shares issued upon the exercise of the Exercise Rights or on the exercise
      of any other rights of conversion into, or exchange or subscription for, Equity Shares) or shall
      issue or grant (otherwise than as mentioned in Condition 6.4 (Rights Issues of Equity Shares or
      Options over Equity Shares) above) wholly for cash any options, warrants or other rights to
      subscribe or purchase or otherwise acquire Equity Shares in each case at a price per Equity Share
      which is less than the Current Market Price on the last Trading Day preceding the date of
      announcement of the terms of such issue or grant, the Warrant Exercise Price shall be adjusted by
      multiplying the Warrant Exercise Price in force immediately before such issue by the following
      fraction:

                                                 A+B
                                                  C

      Where:

      A         is the number of Equity Shares in issue immediately before the issue of such additional
                Equity Shares or the grant of such options, warrants or other rights to subscribe for or
                purchase or otherwise acquire any Equity Shares;

      B         is the number of Equity Shares which the aggregate consideration receivable (if any) for
                the issue of such additional Equity Shares would purchase at such Current Market Price
                per Equity Share; and

      C         is the number of Equity Shares in issue immediately after the issue of such additional
                Equity Shares.




                                                 114
      References to additional Equity Shares in the above formula shall, in the case of an issue or grant
      by the Issuer of options, warrants or other rights to subscribe or purchase or otherwise acquire
      Equity Shares, mean such Equity Shares to be issued, or otherwise made available, assuming that
      such options, warrants or other rights are exercised in full at the initial exercise price (if
      applicable) on the date of issue or grant of such options, warrants or other rights.

      Effective Date of Adjustment: Such adjustment shall become effective on the date of issue of such
      additional Equity Shares or, as the case may be, the issue or grant of such options, warrants or
      other rights.

6.7   Other Issues at less than Current Market Price

      Adjustment: Save in the case of an issue of securities arising from a conversion or exchange of
      other securities in accordance with the terms applicable to such securities themselves falling
      within this Condition 6.7 (Other Issues at less than Current Market Price), if and whenever the
      Issuer (otherwise than as mentioned in Conditions 6.4 (Rights Issues of Equity Shares or Options
      over Equity Shares), 6.5 (Rights Issues of Other Securities) or 6.6 (Issues at less than Current
      Market Price)), or (at the direction or request of or pursuant to any arrangements with the Issuer)
      any other company, person or entity shall issue any securities (other than the Warrants) which by
      their terms of issue carry rights of conversion into, or exchange or subscription for, Equity Shares
      to be issued by the Issuer on conversion, exchange or subscription at a consideration per Equity
      Share which is less than the Current Market Price on the last Trading Day preceding the date of
      announcement of the terms of issue of such securities, the Warrant Exercise Price shall be adjusted
      by multiplying the Warrant Exercise Price in force immediately before such issue by the following
      fraction:

                                                A+B
                                                A+C

      Where:

      A         is the number of Equity Shares in issue immediately before such issue;

      B         is the number of Equity Shares which the aggregate consideration (if any) receivable by
                the Issuer for the Equity Shares to be issued, or otherwise made available, on conversion
                or exchange or on exercise of the right of subscription attached to such securities would
                purchase at such Current Market Price per Equity Share; and

      C         is the maximum number of Equity Shares to be issued on conversion or exchange of
                such securities or on the exercise of such rights of subscription attached thereto at the
                initial conversion, exchange or subscription price or rate.

      Effective Date of Adjustment: Such adjustment shall become effective on the date of issue of such
      securities.

6.8   Modification of Rights of Conversion etc.

      Adjustment: If and whenever there shall be any modification of the rights of conversion, exchange
      or subscription attaching to any such securities as are mentioned in Condition 6.7 (Other Issues at
      less than Current Market Price) (other than in accordance with the terms of such securities) so that
      the consideration per Equity Share (for the number of Equity Shares available on conversion,
      exchange or subscription following the modification) is reduced and is less than the Current
      Market Price on the last Trading Day preceding the date of announcement of the proposals for
      such modification, the Warrant Exercise Price shall be adjusted by multiplying the Warrant
      Exercise Price in force immediately before such modification by the following fraction:



                                                  115
                                                        A+B
                                                        A+C

       Where:

       A           is the number of Equity Shares in issue immediately before such modification;

       B           is the number of Equity Shares which the aggregate consideration (if any) receivable by
                   the Issuer for the Equity Shares to be issued, or otherwise made available, on conversion
                   or exchange or on exercise of the right of subscription attached to the securities, in each
                   case so modified, would purchase at such Current Market Price per Equity Share or, if
                   lower, the existing conversion, exchange or subscription price of such securities; and

       C           is the maximum number of Equity Shares to be issued, or otherwise made available, on
                   conversion or exchange of such securities or on the exercise of such rights of
                   subscription attached thereto at the modified conversion, exchange or subscription price
                   or rate but giving credit in such manner as an Independent Investment Bank, consider
                   appropriate (if at all) for any previous adjustment under this Condition 6.8 (Modification
                   of Rights of Conversion etc.) or Condition 6.7 (Other Issues at less than Current Market
                   Price).

       Effective Date of Adjustment: Such adjustment shall become effective on the date of modification
       of the rights of conversion, exchange or subscription attaching to such securities.

6.9    Other Offers to Shareholders

       Adjustment: If and whenever the Issuer or (at the direction or request of or pursuant to any
       arrangements with the Issuer) any other company, person or entity issues, sells or distributes any
       securities in connection with which offer the Equity Shareholders generally (meaning for the
       purposes of these presents the holders of at least 60 per cent. of Equity Shares outstanding at the
       time such offer is made) are entitled to participate in arrangements whereby such securities may be
       acquired by them (except where the Warrant Exercise Price falls to be adjusted under Condition
       6.4 (Rights Issues of Equity Shares or Options over Equity Shares), Condition 6.5 (Rights Issues of
       Other Securities), Condition 6.6 (Issues at less than Current Market Price) or Condition 6.7
       (Other Issues at less than Current Market Price)), the Warrant Exercise Price shall be adjusted by
       multiplying the Warrant Exercise Price in force immediately before such issue by the following
       fraction:

                                                   A-B
                                                    A

       Where:

       A        is the Current Market Price of one Equity Share on the last Trading Day preceding the
                date on which such issue is publicly announced; and

       B        is the Fair Market Value on the date of such announcement of the portion of the rights
                attributable to one Equity Share.

       Effective Date of Adjustment: Such adjustment shall become effective on the date of issue, sale or
       distribution of the securities.

6.10   Delisting

       In the event the Equity Shares are no longer listed or admitted to trading on both of the Stock
       Exchanges (a “Delisting”) or if either of the Stock Exchanges is notified of a proposed open offer


                                                     116
       in relation to a Delisting, the Warrant Exercise Price shall be adjusted to the amount representing
       the difference between the Regulatory Floor Price and the Warrant Issue Price.

6.11   Other Events

       If the Issuer determines that an adjustment should be made to the Warrant Exercise Price as a
       result of one or more events or circumstances not referred to in this Condition 6 (Adjustments to
       Warrant Exercise Price), the Issuer shall, at its own expense, consult an Independent Investment
       Bank, to determine as soon as practicable what adjustment (if any) to the Warrant Exercise Price is
       fair and reasonable to take account thereof, if the adjustment would result in a reduction in the
       Warrant Exercise Price, and the date on which such adjustment should take effect and upon such
       determination by the Independent Investment Bank such adjustment (if any) shall be made and
       shall take effect in accordance with such determination, provided that where the circumstances
       giving rise to any adjustment pursuant to this Condition 6 (Adjustments to Warrant Exercise
       Price) have already resulted or will result in an adjustment to the Warrant Exercise Price or where
       the circumstances giving rise to any adjustment arise by virtue of circumstances which have
       already given rise or will give rise to an adjustment to the Warrant Exercise Price, such
       modification (if any) shall be made to the operation of the provisions of this Condition 6
       (Adjustments to Warrant Exercise Price) as may be advised by the Independent Investment Bank
       to be in their opinion appropriate to give the intended result.

       For the purposes of these Conditions:

       “Alternative Stock Exchange” means at any time, in the case of the Equity Shares, if they are not
       at that time listed and traded on at least one of the Stock Exchanges, the principal stock exchange
       or securities market on which the Shares are then listed or quoted or dealt in;

       “Capital Distribution” means any dividend or distribution (whether of cash or of assets in specie)
       by the Issuer for any financial period (whenever paid or made and however described) declared
       after the Issue Date (and for these purposes a distribution of assets in specie includes without
       limitation an issue of shares or other securities credited as fully or partly paid (other than Equity
       Shares credited as fully paid to the extent an adjustment to the Warrant Exercise Price is made in
       respect thereof under Condition 6.2.1 by way of capitalisation of reserves) and including any Scrip
       Dividend to the extent of the Relevant Cash Dividend unless:

       (i)      (and to the extent that) in the case of a Relevant Cash Dividend or a distribution in specie
                it does not, when taken together with any other dividend or distribution previously made
                or paid in respect of the same fiscal year, exceed 55 per cent. of the Issuer’s consolidated
                net profits attributable to Shareholders after deducting minority interests and tax for the
                fiscal year in relation to which the Relevant Cash Dividend or distribution is made (the
                “Threshold Percentage”); or

       (ii)     (and to the extent that) in the case of a distribution in specie only it does not, when taken
                together with any other dividend or distribution previously made or paid in respect of all
                periods after March 31, 2009, exceed the aggregate of the consolidated net profits for
                such periods (less the aggregate of any consolidated net losses) attributable to
                Shareholders after deducting minority interests and preference dividends (if any) but (1)
                deducting any amounts in respect of any asset previously credited to the Issuer’s reserves
                (in respect of any period or date up to and including March 31, 2009) pursuant to any
                revaluation of such asset, where amounts arising on the disposal of such asset have
                contributed to such profits and (2) deducting any exceptional and extraordinary items,
                (and for the avoidance of doubt after excluding any amount arising as a result of any
                reduction in registered capital, share premium account or capital redemption reserve), in
                each case calculated by reference to the audited consolidated profit and loss accounts for
                such periods of the Issuer; or



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(iii)    it comprises a purchase or redemption of Equity Shares by or on behalf of the Issuer,
         where the weighted average price (before expenses) on any one day in respect of such
         purchases does not exceed the Current Market Price of the Equity Shares on the NSE or
         the equivalent quotation sheet of an Alternative Stock Exchange, as the case may be, by
         more than 5 per cent. either (1) on that date, or (2) where an announcement has been
         made of the intention to purchase Equity Shares at some future date at a specified price,
         on the Trading Day immediately preceding the date of such announcement and, if in the
         case of either (1) or (2), the relevant day is not a Trading Day, the immediately preceding
         Trading Day.

In making any such calculation, such adjustments (if any) shall be made as an Independent
Investment Bank may consider appropriate to reflect (a) any consolidation or subdivision of the
Equity Shares, (b) issues of Shares by way of capitalisation of profits or reserves, or any like or
similar event or (c) the modification of any rights to dividends of Equity Shares.

“Closing Price” for the Equity Shares for any Trading Day shall be the last reported transaction
price on the NSE or, as the case may be, the equivalent quotation sheet of an Alternative Stock
Exchange for such day.

“Current Market Price” means, in respect of a Equity Share at a particular date, the arithmetic
average of the Closing Prices for one Equity Share (being an Equity Share carrying full
entitlement to dividend) for the five consecutive Trading Days ending on the Trading Day
immediately preceding such date; provided that if at any time during the said five Trading Day
period the Equity Shares shall have been quoted ex-dividend and during some other part of that
period the Equity Shares shall have been quoted cum-dividend then:

(i)      if the Equity Shares to be issued in such circumstances do not rank for the dividend in
         question, the quotations on the dates on which the Equity Shares shall have been quoted
         cum-dividend shall for the purpose of this definition be deemed to be the amount thereof
         reduced by an amount equal to the Fair Market Value of the amount of that dividend per
         Equity Share; or

(ii)     if the Equity Shares to be issued in such circumstances rank for the dividend in question,
         the quotations on the dates on which the Equity Shares shall have been quoted ex-
         dividend shall for the purpose of this definition be deemed to be the amount thereof
         increased by the Fair Market Value of the amount of that dividend per Equity Share;

and provided further that if the Equity Shares on each of the said five Trading Days have been
quoted cum-dividend in respect of a dividend which has been declared or announced but the
Equity Shares to be issued do not rank for that dividend, the quotations on each of such dates shall
for the purpose of this definition be deemed to be the amount thereof reduced by an amount equal
to the Fair Market Value of that dividend per Equity Share.

“Fair Market Value” means, with respect to any assets, security, option, warrants or other right
on any date, the fair market value of that asset, security, option, warrant or other right as
determined by an Independent Investment Bank provided that (i) the fair market value of a cash
dividend paid or to be paid per Equity Share shall be the amount of such cash dividend per Equity
Share determined as at the date of announcement of such dividend; (ii) where options, warrants or
other rights are publicly traded in a market of adequate liquidity (as determined by such
Independent Investment Bank) the fair market value of such options, warrants or other rights shall
equal the arithmetic mean of the daily closing prices of such options, warrants or other rights
during the period of five trading days on the relevant market commencing on the first such trading
day such options, warrants or other rights are publicly traded.




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       “Independent Investment Bank” means an independent investment bank of international repute
       (acting as expert) selected by the Issuer and notified to the Warrantholders in accordance with
       Condition 10.

       “Relevant Cash Dividend” means any cash dividend specifically declared by the Issuer.

       “Relevant Stock Exchange” means at any time, in respect of the Equity Shares, the Stock
       Exchanges or the Alternative Stock Exchange.

       “Scrip Dividend” means any Equity Shares issued in lieu of the whole or any part of any Relevant
       Cash Dividend being a dividend which the Shareholders concerned would or could otherwise have
       received and which would not have constituted a Capital Distribution (and for the avoidance of
       doubt to the extent that no adjustment is to be made under Condition 6.3 in respect of the amount
       by which the Current Market Price of the Equity Shares exceeds the Relevant Cash Dividend or
       part thereof) but without prejudice to any adjustment required in such circumstances to be made
       under Condition 6.2.

       “Trading Day” means a day when the Stock Exchanges or, as the case may be an Alternative
       Stock Exchange is open for trading business, provided that if no Closing Price is reported for one
       or more consecutive dealing days such day or days will be disregarded in any relevant calculation
       and shall be deemed not to have been dealing days when ascertaining any period of trading days.

6.12   The Warrant Exercise Price may not be reduced so that, on exercise of Warrants, Equity Shares
       would fall to be issued at a discount to their par value.

6.13   Minor Adjustments

       On any adjustment, the relevant Warrant Exercise Price, if not an integral multiple of one Rupee,
       shall be rounded down to the nearest Rupee. No adjustment shall be made to the Warrant Exercise
       Price where such adjustment (rounded down if applicable) would be less than one per cent. of the
       Warrant Exercise Price then in effect. Any adjustment not required to be made, and any amount by
       which the Warrant Exercise Price has not been rounded down, shall be carried forward and taken
       into account in any subsequent adjustment. Notice of any adjustment shall be given to
       Warrantholders in accordance with Condition 10 (Notices) as soon as practicable after the
       determination thereof.

6.14   Cumulative Adjustments

       Where more than one event which gives or may give rise to an adjustment to the Warrant Exercise
       Price occurs within such a short period of time that in the opinion of an Independent Investment
       Bank, the foregoing provisions would need to be operated subject to some modification in order to
       give the intended result, such modification shall be made to the operation of the foregoing
       provisions as may be advised by such Independent Investment Bank to be in their opinion
       appropriate in order to give such intended result.

6.15   Employee Stock Option

       No adjustment will be made to the Warrant Exercise Price when Equity Shares or other securities
       (including rights or options) are issued, offered or granted to employees (including directors) of
       the Issuer or any subsidiary of the Issuer or any other eligible persons pursuant to any Employee
       Stock Option Scheme (and which Employee Stock Option Scheme is in compliance with the
       listing rules of the Stock Exchanges).

6.16   Notice of Change in Exercise Price




                                                  119
        The Issuer shall give notice to the Warrantholders in accordance with Condition 10 of any change
        in the Warrant Exercise Price. Any such notice relating to a change in the Warrant Exercise Price
        shall ser forth the event giving rise to the adjustment, the Warrant Exercise Price prior to such
        adjustment, the adjusted Warrant Exercise Price and the effective date of such adjustment.

        For the avoidance of doubt, nothing in this Condition 6 shall obligate the Issuer to disclose any
        information which is not public information to the Warrantholders or where it is not legally
        permissible to disclose such information.

6.17    Minimum Warrant Exercise Price

        Notwithstanding the provisions of this Condition, the Warrant Exercise Price shall not be reduced
        to an amount such that the sum of the Warrant Issue Price and the adjusted Warrant Exercise Price
        is less than the Regulatory Floor Price as a result of any adjustment made hereunder, and in such
        case the reduction shall be limited to the Regulatory Floor Price.

6.18    Reference to “fixed”

        Any reference in these Conditions to the date on which a consideration is "fixed" shall, where the
        consideration is originally expressed by reference to a formula which cannot be expressed as an
        actual cash amount until a later date, be construed as a reference to the first day on which such
        actual cash amount can be ascertained.

6.19    Miscellaneous

6.1.1   No adjustment will be made to the Warrant Exercise Price when any Equity Shares are issued
        following the exercise of the Warrants.

6.1.2   No adjustment involving an increase in the Warrant Exercise Price in this Condition 6
        (Adjustments to Warrant Exercise Price) will be made, except in the case of a consolidation of the
        Equity Shares as referred to in Condition 6.1 (Consolidation, Subdivision or Reclassification)
        above.

6.20    Consolidation, Amalgamation or Merger of the Issuer

        In the case of any consolidation, amalgamation or merger of the Issuer with any other corporation
        (other than a consolidation, amalgamation or merger in which the Issuer is the continuing
        corporation), or in the case of any sale or transfer of all, or substantially all, of the assets of the
        Issuer, or in the case of any creation of a holding company owning all shares of the Issuer by way
        of exchange for all outstanding shares of the Issuer or transfer of all the outstanding shares of the
        Issuer into the holding Issuer, the Issuer shall forthwith notify the Warrantholders of such event in
        accordance with Condition 10 (Notices) and (so far as legally possible) cause the corporation or
        the holding company resulting from such consolidation, amalgamation, merger, share exchange or
        share transfer or the corporation which shall have acquired such assets, as the case may be, to
        execute such instruments or other documents or assurances as may be necessary legally to ensure
        that the holder of each Warrant then remaining unexercised shall have the right (during the period
        such Warrant shall remain unexercised) by exercising such Warrant to be issued the class and
        amount of shares and other securities and property receivable upon such consolidation,
        amalgamation, merger, sale, transfer, share exchange or share transfer by a holder of the number
        of Equity Shares which would have become liable to be issued upon exercise of such Warrant
        immediately prior to such consolidation, amalgamation, merger, sale, transfer, share exchange or
        share transfer (such instruments or other documents or assurances to provide for adjustments
        which shall be as nearly equivalent as may be practicable to the adjustments provided for in the
        foregoing provisions of this Condition 6 (Adjustments to Warrant Exercise Price)) and the above
        provisions of this Condition 6 (Adjustments to Warrant Exercise Price) shall apply in the same
        way to any subsequent consolidations, amalgamations, mergers, sales, transfers, share exchanges


                                                     120
        or share transfers. If the Issuer is a party to any transaction referred to above in which it is not the
        continuing corporation, it shall use its best endeavours to obtain all consents that may be necessary
        or appropriate under law to enable the continuing corporation to give effect to the Warrants.

7.      Undertakings

7.1     The Issuer undertakes that, so long as any Warrant remains unexercised:

7.1.1   it will use its best endeavours (a) to obtain and maintain a listing of the Warrants on the Stock
        Exchanges, (b) to maintain a listing for all the issued Equity Shares on the Stock Exchanges, and
        (c) to obtain and maintain a listing for all the Equity Shares issued on the exercise of the Exercise
        Rights attaching to the Warrants on the Stock Exchanges and if the Issuer is unable to obtain or
        maintain such listing, to use it best endeavours to obtain and maintain a listing for all the Equity
        Shares on an Alternative Stock Exchange as the Issuer may from time to time determine and will
        forthwith give notice to the Warrantholders in accordance with Condition 10 of the listing or
        delisting of the Equity Shares (as a class) by any such stock exchange;

7.1.2   it will reserve, free from any other encumbrances, pre-emptive or other similar rights, out of its
        authorised but unissued ordinary share capital the full number of Equity Shares liable to be issued
        on exercise of the Warrants and will ensure that all such Equity Shares will be duly and validly
        issued as fully-paid;

7.1.3   it will pay the expenses of the issue or delivery of, and all expenses of obtaining listing for, Equity
        Shares arising on exercise of the Warrants, including but not limited to stamp duties, issue
        expenses, registration fees and taxes;

7.1.4   it will not make any reduction of its ordinary share capital or any uncalled liability in respect
        thereof or of any share premium account or capital redemption reserve fund (except, in each case,
        as permitted by law);

7.1.5   it will not make any offer, issue or distribute or take any action the effect of which would be to
        reduce the Warrant Exercise Price below the face value of the Equity Shares, provided always that
        the Issuer shall not be prohibited from purchasing its Equity Shares to the extent permitted by law;
        and

7.1.6   it will not take any corporate or other action described in Condition 6 unless, the total aggregate
        decrease in the Warrant Exercise Price that would result from all corporate actions or other actions
        provided in Condition 6 would not result in the sum of the Warrant Issue Price and the Warrant
        Exercise Price being lower than the Regulatory Floor Price.

8.      Further Issues

        The Issuer may from time to time without the consent of the Warrantholders create and issue new
        further securities either having the same terms and conditions as the Warrants in all respects so
        that such further issue shall be consolidated and form a single series with the outstanding
        securities of any series (including the Warrants) or upon such terms as the Issuer may determine at
        the time of their issue.

9.      Notices

9.1     If, at any time prior to the expiration of the Warrants and prior to their exercise, any of the
        following events shall occur:

9.1.1   any action which would require an adjustment pursuant to Condition 6, or




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9.1.2   a dissolution, liquidation or winding up of the Issuer (other than in connection with a
        consolidation, merger, or sale of all or substantially all of its property, assets, and business as an
        entirety) shall be proposed

        then in any one or more of said events, the Issuer shall give notice in writing of such event to the
        Warrantholders in accordance with Condition 10.2. Failure to publish or mail such notice or any
        defect therein or in the publication or mailing thereof shall not affect the validity of any action
        taken in connection with such dividend, distribution, or subscription rights, or proposed
        dissolution, liquidation or winding up.

9.2     The notices to the Warrantholders required to be given by the Issuer or the Trustees shall be
        deemed to have been given if sent by ordinary post to the sole/first allottee or sole/first registered
        holder of the Warrant, as the case may be. All notices to be given by Warrantholders shall be sent
        by registered post or by hand delivery to the Issuer at its Registered Office.

10.     Replacement of Warrants

        If any rematerialized Warrant is mutilated, defaced, destroyed, stolen or lost, it may be replaced at
        the specified office of the Registrar upon payment by the claimant of such costs as may be
        incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer or
        the Registrar may require. Mutilated or defaced Warrant must be surrendered before replacements
        will be issued.

11.     Governing Law and Jurisdiction

        The Warrants are governed by, and shall be construed in accordance with, the laws of India and
        any dispute arising out of or in connection with the Warrants shall be subject to the exclusive
        jurisdiction of courts at Mumbai.




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                                              ISSUE PROCEDURE

Below is a summary intended to present a general outline of the procedure relating to the application
payment, Allocation and Allotment of the Securities. The procedure followed in the Issue may differ from
the one mentioned below and the investors are assumed to have apprised themselves of the same from the
Company or the Book Running Lead Managers. The investors are advised to inform themselves of any
restrictions or limitations that may be applicable to them. Also see “Selling Restrictions”.

Qualified Institutions Placements

The Issue is being made to QIBs in reliance upon Chapter XIII-A of the SEBI Guidelines through the
mechanism of QIP. Under Chapter XIII-A of the SEBI Guidelines, a listed company in India may issue
equity shares /fully convertible debentures/partly convertible debentures/non-convertible debentures with
warrants or any other security (other than warrants) which are convertible into or exchangeable with equity
shares at a later date to QIBs, provided that:

·    equity shares of the same class of such company are listed on a stock exchange in India that has nation-
     wide trading terminals for a period of at least one year as on the date of issuance of notice to its
     shareholders for convening the meeting; and

·    such company complies with the minimum public shareholding requirements set out in the listing
     agreement with the stock exchange referred to above.

Additionally, there is a minimum pricing requirement under the SEBI Guidelines. The Warrant Exercise
Price shall not be less than the average of the weekly high and low of the closing prices of the related
Equity Shares quoted on the stock exchange during the two weeks preceding the relevant date.

The “relevant date” referred to above, may at the option of the Issuer, be either the date of the meeting in
which the Board or the Committee of Directors duly authorized by the Board of the Company decides to
open the Issue or the date on which the holder of the Warrants exchangeable into Equity Shares becomes
entitled to apply for the Equity Shares, and “stock exchange” means any of the recognized stock exchanges
in which the equity shares of the issuer of the same class are listed and on which the highest trading volume
in such shares has been recorded during the two weeks immediately preceding the relevant date.

In terms of clause 13A.2.4A of the SEBI Guidelines, an investor can subscribe to the combined
offering of NCDs with Warrants or to the individual instrument i.e. either NCDs or Warrants.

The Company has applied for and received the in-principle approval of the Stock Exchanges under Clause
24 (a) of its Listing Agreements for the listing of the NCDs and Warrants on the Stock Exchanges. The
Company has also filed a copy of the Preliminary Placement Document with the Stock Exchanges.

Issue Procedure

1.       The Company and the Book Running Lead Managers shall circulate serially numbered copies of
         the Preliminary Placement Document and the Application Form, either in electronic form or
         physical form, to not more than 49 QIBs.

2.       The list of QIBs to whom the Application Form is delivered shall be determined by the Book
         Running Lead Managers in consultation with the Company. Unless a serially numbered
         Preliminary Placement Document along with the Application Form is addressed to a
         particular QIB, no invitation to subscribe shall be deemed to have been made to such QIB.
         Even if such documentation were to come into the possession of any person other than the
         intended recipient, no offer or invitation to offer shall be deemed to have been made to such
         person.

3.       QIBs may submit an Application Form, including any revisions thereof, during the Bidding Period


                                                     123
      to the Book Running Lead Managers.

4.    Application Form

4A.   Application Form for Warrants: QIBs will be required to indicate the following in the
      Application Form:

      a.      Name of the QIB to whom Warrants are to be Allotted;

      b.      Number of Warrants Bid for;

      c.      Price at which they are agreeable to subscribe for the Warrants, provided that QIBs may
              also indicate that they are agreeable to submit an Application Form at “Cut-off Price”;
              and

      d.      The details of the depository account(s) to which the Warrants should be credited.

4B.   Application Form for NCDs: QIBs will be required to indicate the following in the Application
      Form:

      a.      Name of the QIB to whom 0% August 2011 NCDs and/or 0% August 2012 NCDs are to
              be Allotted;

      b.      Number of 0% August 2011 NCDs and/or 0% August 2012 NCDs Bid for;

      c.      Terms at which they are agreeable to subscribe for the 0% August 2011 NCDs and/or 0%
              August 2012 NCDs; and

      d.      The details of the depository account(s) to which the 0% August 2011 NCDs and/or 0%
              August 2012 NCDs should be credited.

      Note: QIBs as defined in clause 1.2.1 (xxiv a) of the SEBI Guidelines, other than QIBs that
      are persons resident outside India, will be eligible to subscribe to the Securities being allotted
      in accordance with Chapter XIII-A under this Issue.

5.    Once a duly filled Application Form is submitted by a QIB, such Application Form constitutes an
      irrevocable offer and cannot be withdrawn after the Bid Closing Date. The Bid Closing Date shall
      be notified to the Stock Exchanges and the QIBs shall be deemed to have been given notice of
      such date after the receipt of the Application Form.

6.    Upon the receipt of the Application Form, the Company shall determine the final terms of NCDs,
      Warrant Issue Price and the number of Securities to be issued in consultation with the Book
      Running Lead Manager. On determination of the final terms of NCDs and Warrant Issue Price the
      Book Running Lead Manager will send the CAN to the QIBs who have been Allocated Securities.
      The dispatch of the CAN shall be deemed a valid, binding and irrevocable contract for the QIBs to
      pay the entire 0% August 2011 NCD Issue Price, 0% August 2012 NCD Issue Price and Warrant
      Issue Price (as applicable) for all the Securities Allocated to such QIB. The CAN shall contain
      details such as the number of Securities Allocated to the QIB and payment instructions including
      the details of the amounts payable by the QIB for Allotment of the Securities in its name and the
      Pay-In Date as applicable to the respective QIB.

      Pursuant to receiving a CAN, each QIB shall be required to make the payment of the entire
      application monies for the Securities indicated in the CAN at the applicable 0% August 2011 NCD
      Issue Price, 0% August 2012 NCD Issue Price and Warrant Issue Price (as applicable), by high
      value cheques or through electronic transfer to the designated bank account of the Company by the
      Pay- In Date as specified in the CAN sent to the respective QIBs.


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         Upon receipt of the application monies from the QIBs, the Company shall Allot Securities as per
         the details in the CAN to the QIBs. The Company shall not Allot Securities to more than 49 QIBs.
         The Company will intimate to the Stock Exchanges the details of the Allotment.

7.       After receipt of the in-principle approval of the Stock Exchanges, the Company shall credit the
         Securities into the Depository Participant accounts of the respective QIBs.

8.       The Company shall then apply for the final trading and listing permissions from the Stock
         Exchanges.

9.       The Securities that have been credited to the Depository Participant accounts of the QIBs shall be
         eligible for trading on the Stock Exchanges only upon the receipt of final trading and listing
         approvals from the Stock Exchanges.

10.      Upon receipt of intimation of final trading and listing approval from the Stock Exchanges, the
         Company shall inform the QIBs who have received an Allotment of the receipt of such approval.
         The Company shall not be responsible for any delay or non-receipt of the communication of the
         final trading and listing permissions from the Stock Exchanges or any loss arising from such delay
         or non-receipt. Final listing and trading approvals granted by the Stock Exchanges are also placed
         on their respective websites. QIBs are advised to apprise themselves of the status of the receipt of
         the permissions from the Stock Exchanges or the Company.

Qualified Institutional Buyers

Only QIBs as defined in clause 1.2.1 (xxiv a) of the SEBI Guidelines are eligible to invest. Currently these
include:

·        Public financial institutions as defined in section 4A of the Companies Act;
·        Scheduled commercial banks;
·        Mutual funds registered with SEBI;
·        Foreign institutional investors and sub-account registered with SEBI, other than a sub-account
         which is a foreign corporate or foreign individual;
·        Multilateral and bilateral development financial institutions;
·        Venture capital funds registered with SEBI;
·        Foreign venture capital investors registered with SEBI;
·        State industrial development corporations;
·        Insurance companies registered with Insurance Regulatory and Development Authority;
·        Provident Funds with minimum corpus of Rs.250 million;
·        Pension Funds with minimum corpus of Rs.250 million; and
·        National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23,
         2005 of the Government of India published in the Gazette of India.

QIBs as defined in clause 1.2.1 (xxiv a) of the SEBI Guidelines, other than QIBs that are persons
resident outside India, will be eligible to subscribe to Securities being allotted in accordance with
Chapter XIII-A under this Issue.




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The shareholders of the Company passed a special resolution dated June 24, 1997, authorizing the Board of
Directors of the Company to approve the increase in limits for shareholding by FIIs/ OCBs/ NRIs from 24
per cent to 30 per cent of its issued and paid up share capital or to such other limits as may be permitted by
law and approved by the Board. The Board of Directors of the Company at its meeting held on March 27,
2000, approved the increase in the maximum permissible limits for shareholding by FIIs/ OCBs/ NRIs from
30 per cent to 40 per cent of its issued and paid up share capital and subsequently on May 8, 2001 further
increased the limit to 49 per cent of its issued and paid up share capital. The Board of Directors of the
Company at its meeting held on October 17, 2001, further increased the said limit to 74 per cent of its
issued and paid up share capital.

No Allotment shall be made pursuant to the Issue, either directly or indirectly, to any QIB being a promoter
or any person related to the promoter(s). QIBs which have all or any of the following rights shall be
deemed to be persons related to promoter(s):

a)       rights under a shareholders agreement or voting agreement entered into with the promoters or
         persons related to the promoters;
b)       veto rights; or
c)       right to appoint any nominee director on the Board.

The Company and the Book Running Lead Managers are not liable for any amendment or
modification or change to applicable laws or regulations, which may occur after the date of this
Preliminary Placement Document. QIBs are advised to make their independent investigations and
satisfy themselves that they are eligible to apply. QIBs are advised to ensure that any single
application from them does not exceed the investment limits or maximum number of Securities that
can be held by them under applicable law or regulation or as specified in this Preliminary Placement
Document. Further, QIBs are required to satisfy themselves that their Application Forms would not
eventually result in triggering a tender offer under the Takeover Code.

A minimum of 10 per cent of each of the Securities in this Issue shall be Allotted to Mutual Funds. If
no Mutual Fund is agreeable to take up the minimum portion as specified above, such minimum
portion or part thereof may be Allotted to other QIBs by the Company.

Note: Affiliates or associates of the Book Running Lead Manager who are QIBs may participate in the
Issue in compliance with applicable laws.

Application Process

Application Form

QIBs shall only use the serially numbered Application Forms supplied by the Book Running Lead Manager
in either electronic form or by physical delivery for the purpose of making a Bid (including revision of Bid)
in terms of the Preliminary Placement Document and the Placement Document.

By making a Bid (including the revision thereof) for the Securities through Application Forms, the QIB
will be deemed to have made the following representations and warranties and the representations,
warranties and agreements:

1.       The QIB confirms that it is a QIB in terms of Clause 1.2.1 (xxiv a) of the SEBI Guidelines and is
         eligible to participate in this Issue. In addition, the QIB confirms that it is a person resident in
         India as defined in the FEMA and are eligible to invest in the Securities under applicable law;

2.       The QIB confirms that it is not a promoter and is not a person related to the promoters, either
         directly or indirectly and its Application Form does not directly or indirectly represent the
         promoter or promoter group of the Company;




                                                     126
3.       The QIB confirms that it has no rights under a shareholders agreement or voting agreement with
         the promoters or persons related to the promoters, no veto rights or right to appoint any nominee
         director on the Board of the Company other than those acquired in the capacity of a lender which
         shall not be deemed to be a person related to the promoters;

4.       The QIB has no right to withdraw its Bid after the Bid Closing Date;

5.       The QIB confirms that if Securities are Allotted through this Issue, it shall not, for a period of one
         year from Allotment, sell such Securities otherwise than on the floor of the Stock Exchanges;

6.       The QIB confirms that the QIB is eligible to apply and hold Securities so Allotted and together
         with any Securities held by the QIB prior to the Issue, the QIB further confirms that the holding of
         the QIB, does not and shall not, exceed the level permissible as per any applicable regulations
         applicable to the QIB;

7.       The QIB confirms that the Application Form would not eventually result in triggering a tender
         offer under the Takeover Code;

8.       The QIB confirms that to the best of its knowledge and belief together with other QIBs in the
         Issue that belongs to the same group or are under common control, the Allotment to the QIB shall
         not exceed 50 per cent of the applicable issue size. For the purposes of this statement:

         a.    The expression “belongs to the same group” shall derive meaning from the concept of
               “companies under the same group” as provided in sub-section (11) of Section 372 of the
               Companies Act;

         b.    “Control” shall have the same meaning as is assigned to it by clause I of Regulation 2 of the
               Takeover Code.

9.       The QIBs shall not undertake any trade in the Securities credited to its Depository Participant
         account until such time that the final listing and trading approvals for the Securities are issued by
         the Stock Exchanges.

QIBS WOULD NEED TO PROVIDE THEIR DEPOSITORY ACCOUNT DETAILS, THEIR
DEPOSITORY PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION
NUMBER AND BENEFICIARY ACCOUNT NUMBER IN THE APPLICATION FORM. QIBS
MUST ENSURE THAT THE NAME GIVEN IN THE APPLICATION FORM IS EXACTLY THE
SAME AS THE NAME IN WHICH THE DEPOSITORY ACCOUNT IS HELD.

Demographic details such as address and bank account will be obtained from the Depositories as per the
Depository Participant account details given above.

The submission of an Application Form by the QIBs shall be deemed a valid, binding and irrevocable offer
for the QIB to pay the entire NCD Issue Price and Warrant Issue Price (as applicable) for its share of
Allotment (as indicated by the CAN) and becomes a binding contract on the QIB, upon issuance of the
CAN by the Company in favour of the QIB.

Submission of Application Form

All Applicants shall clearly indicate, whether the application is for subscribing to (i) the combined offering
of NCDs with Warrants; or (ii) for subscribing to either 0% August 2011 NCDs and/or 0% August 2012
NCDs or Warrants.

All Application Forms must be duly completed with information including the name of the QIB, the final
terms and the number of 0% August 2011 NCDs and/or 0% August 2012 NCDs and/ or Warrants applied
for. The Application Form shall be submitted to the Book Running Lead Manager either through electronic


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form or through physical delivery at the following address:

Axis Bank Limited                   Citigroup Global Markets           Goldman Sachs (India)
Maker Towers F, 11th Floor,         India Private Limited              Securities Private Limited
Cuffe Parade, Colaba,               8th Floor, Bakhtawar,              Rational House
Mumbai 400 005                      Nariman Point, Mumbai 400 021      Rational House, 951-A,
Contact Person: Mr. Amith Iyer      Contact Person: Mr. Neville        Appasaheb Marathe Marg,
Email: amith.iyer@axisbank.com      Fernandes                          Prabhadevi, Mumbai 400 025
Phone: +91 22 6707 1220             Email:                             Contact Person: Mr. Nilesh Joshi
                                    neville.fernandes@citi.com         Email: nilesh.joshi@gs.com
                                    Phone: +91 22 6631 9894            Phone: +91 22 6616 9000

The Hongkong and Shanghai           JM     Financial    Consultants    Kotak     Mahindra       Capital
Banking Corporation Limited         Private Limited                    Company Limited
52/60, Mahatma Gandhi Road,         141, Maker Chambers III,           3rd Floor, Bakhtawar, 229,
Mumbai 400 001                      Nariman Point, Mumbai 400 021      Nariman Point,          Mumbai
Contact Person: Mr. Shantanu        Contact Person: Ms. Sonia          400 021
Ambedkar                            Dasgupta                           Contact Person: Mr. Sunil Amin
Email:                              Email:                             Email: sunil.amin@kotak.com
shantanu.ambedkar@hsbc.com          sonia.dasgupta@jmfinancial.in      Phone: +91 22 6634 1100
Phone: +91 22 4085 4281             Phone: +91 22 6630 3197
Nomura Financial Advisory
and Securities (India) Private
Limited
2 North Avenue, Level – 8,
Maker Maxity,
Bandra Kurla Complex, Bandra
East, Mumbai 400 050
Contact Person: Mr. Rohan
Lamba
Email:
rohan.lamba@nomura.com
Phone: +91 22 6785 5509

The Book Running Lead Manager shall not be required to provide any written acknowledgement of the
same.

Pricing and Allocation

Build up of the book

The QIBs subscribing either to NCDs or Warrants shall submit their Bids (including the revision thereof)
for the NCDs or the Warrants, as applicable, within the Bidding Period to the Book Running Lead
Manager.

The QIBs subscribing to the combined offering of NCDs with Warrants shall submit their Bids (including
the revision thereof) separately for the NCDs and the Warrants within the Bidding Period to the Book
Running Lead Manager.

Price discovery, terms and allocation

The Company, in consultation with the Book Running Lead Manager, shall determine the Warrant Issue
Price and the terms for the Warrants which shall be at or above the Floor Price to be determined in
accordance with Chapter XIII-A of the SEBI Guidelines.

The Company, in consultation with the Book Running Lead Manager, shall determine the terms for the


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NCDs.

Method of Allocation

The Company shall determine the Allocation in consultation with the Book Running Lead Manager on a
discretionary basis and in compliance with Chapter XIII-A of the SEBI Guidelines.

Application Forms received from the QIBs at or above the NCD Issue Price/Warrant Issue Price (as
applicable) shall be grouped together to determine the total demand. The Allocation of the Securities to all
such QIBs will be made at the NCD Issue Price/ Warrant Issue Price (as applicable). Allocation to Mutual
Funds for up to a minimum of 10 per cent of the applicable issue size shall be undertaken subject to valid
Bids being received at or above the applicable issue price.

THE DECISION OF THE COMPANY AND THE BOOK RUNNING LEAD MANAGERS IN
RESPECT OF ALLOCATION SHALL BE BINDING ON ALL QIBS. QIBS MAY NOTE THAT
ALLOCATION OF SECURITIES IS AT THE SOLE AND ABSOLUTE DISCRETION OF THE
COMPANY AND QIBS MAY NOT RECEIVE ANY ALLOCATION EVEN IF THEY HAVE
SUBMITTED VALID APPLICATION FORMS AT OR ABOVE THE NCD ISSUE PRICE/
WARRANT ISSUE PRICE (AS APPLICABLE). NEITHER THE COMPANY NOR THE BOOK
RUNNING LEAD MANAGER IS OBLIGED TO ASSIGN ANY REASONS FOR SUCH NON-
ALLOCATION.

All Application Forms duly completed along with payment and a copy of the PAN card or PAN allotment
letter shall be submitted to the Book Running Lead Managers as per the details provided in the respective
CAN.

Number of Allottees

The minimum number of Allottees in the Issue shall not be less than:

(a)      two, where the issue size is less than or equal to Rs. 2.5 billion; or
(b)      five, where the issue size is greater than Rs. 2.5 billion.

Provided that no single allottee shall be Allotted more than 50 per cent of the aggregate amount of the
applicable issue size.

Provided further that QIBs belonging to the same group or those who are under common control shall be
deemed to be a single Allottee for the purpose of this clause. For details of what constitutes “same group”
or “common control” see “Application Process—Application Form”.

The maximum number of Allottees of Securities shall not be greater than 49 Allottees. Further the
Allotment of the Securities shall be completed within 12 months from the date of the shareholders
resolution approving the Issue.

CAN

Based on the Application Forms received, the Company and the Book Running Lead Managers, in their
sole and absolute discretion, decide the list of QIBs to whom the serially numbered CAN shall be sent,
pursuant to which the details of the Securities Allocated to them and the details of the amounts payable for
Allotment of such Securities in their respective names shall be notified to such QIBs. Additionally, the
CAN will include details of the bank account(s) for transfer of funds if done electronically, address where
the application money needs to be sent, Pay-In Date as well as the probable designated date (“Designated
Date”), being the date of credit of the Securities to the QIB’s account, as applicable to the respective QIBs.

The eligible QIBs would also be sent a serially numbered Placement Document either in electronic form or
by physical delivery along with the serially numbered CAN.


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The dispatch of the serially numbered Placement Document and the CAN by the QIB shall be deemed a
valid, binding and irrevocable contract for the QIB to furnish all details that may be required by the Book
Running Lead Managers and to pay the entire NCD Issue Price and Warrant Issue Price (as applicable) for
all the Securities Allocated to such QIB.

Company Account for Payment of Application Money

The Company has opened special bank accounts (the “Escrow Bank Accounts”) for the NCDs and the
Warrants with HDFC Bank Limited in terms of the arrangement between the Company, the Book Running
Lead Manager and HDFC Bank Limited (acting as an escrow bank). The QIB will be required to deposit
the entire amount payable for the Securities allocated to it by the Pay-In Date as mentioned in the
respective CAN.

If the payment is not made favouring the Escrow Bank Accounts within the time stipulated in the CAN, the
Application Form and the CAN of the QIB are liable to be cancelled.

In case of cancellations or default by the QIBs, the Company and the Book Running Lead Managers has
the right to reallocate the Securities at the applicable issue price among existing or new QIBs at their sole
and absolute discretion, subject to the compliance with the requirement of ensuring that the Application
Forms are sent to not more than 49 QIBs.

Payment Instructions

The payment of application money shall be made by the QIBs in the name of “HDFC Limited– QIP NCDs
Escrow Account” and “HDFC Limited– QIP Warrants Escrow Account” (as applicable) as per the
payment instructions provided in the CAN.

QIBs may make payment through cheques or electronic fund transfer.

Note: Payment of the amounts through outstation cheques are liable to be rejected. Payments through
cheques should be only through high value cheques payable at Mumbai.

Designated Date and Allotment of Securities

1.      The Securities will not be Allotted unless the QIBs pay the NCD Issue Price and the Warrant Issue
        Price (as applicable) to the Escrow Bank Accounts as stated above.

2.      In accordance with the SEBI Guidelines, Securities will be issued and Allotment shall be made
        only in the dematerialized form to the Allottees. Allottees will have the option to re-materialize the
        Securities, if they so desire, as per the provisions of the Companies Act and the Depositories Act.

3.      The Company reserves the right to cancel the Issue at any time up to Allotment without assigning
        any reasons whatsoever.

4.      Post Allotment and credit of Securities into the QIBs Depository Participant account, the
        Company would apply for final trading/listing approvals from the Stock Exchanges.

5.      In the unlikely event of any delay in the Allotment or credit of Securities, or receipt of trading or
        listing approvals or cancellation of the Issue, no interest or penalty would be payable by the
        Company.

6.      The Escrow Bank shall not release the monies lying to the credit of the Escrow Bank Accounts to
        the Company, until such time as the Company delivers to the Escrow Bank documentation
        regarding the final approval of the Stock Exchanges, for the listing and trading of the Securities.



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After finalization of the NCD Issue Price, the terms of the NCDs and the terms of the Warrants and the
Warrant Issue Price, the Company shall update the Preliminary Placement Document with the Issue details
and file the same with the Stock Exchanges as the Placement Document.

Submission to SEBI

The Company shall submit the Placement Document to SEBI within 30 days of the date of Allotment for
record purposes.

Other Instructions

Permanent Account Number or PAN

Each QIB should mention its PAN allotted under the I.T. Act. Applications without this information will be
considered incomplete and are liable to be rejected. It is to be specifically noted that applicants should not
submit the GIR number instead of the PAN as the Application Form is liable to be rejected on this ground.

Right to Reject Applications

The Company, in consultation with the Book Running Lead Managers, may reject Bids, in part or in full,
without assigning any reasons whatsoever. The decision of the Company and the Book Running Lead
Managers in relation to the rejection of Bids shall be final and binding.

Securities in dematerialised form with NSDL or CDSL

The Allotment of each of the Securities in this Issue shall be only in dematerialized form (i.e., not in the
form of physical certificates but be fungible and be represented by the statement issued through the
electronic mode).

1.       A QIB applying for Securities must have at least one beneficiary account with a Depository
         Participant of either NSDL or CDSL prior to making the Bid.

2.       Securities Allotted to a successful QIB will be credited in electronic form directly to the relevant
         beneficiary account (with the Depository Participant) of the QIB.

3.       Securities in electronic form can be traded only on the stock exchanges having electronic
         connectivity with NSDL and CDSL. The Stock Exchanges have electronic connectivity with
         CDSL and NSDL.

4.       The trading of each of the Securities would be in dematerialized form only for all QIBs in the
         demat segment of the respective Stock Exchanges.

5.       The Company will not be responsible or liable for the delay in the credit of any of the Securities
         due to errors in the Application Form or otherwise on part of the QIBs.

Procedure for Exercise of Warrants

Warrantholders shall have the Exercise Right to convert their Warrants into Equity Shares at any time
during the Warrants Exercise Period at Warrant Exercise Price. For further details, see “Terms and
Conditions of the Warrants”.




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                                                 PLACEMENT

Placement Agreement

The Book Running Lead Managers have entered into a placement agreement with the Company dated
August 17, 2009 (the “Placement Agreement”), pursuant to which the Book Running Lead Managers have
agreed to procure subscription for the Securities on a best effort basis to Qualified Institutional Buyers
person resident in India as defined in the FEMA and are eligible to invest in the Securities under applicable
law, pursuant to Chapter XIII-A of the SEBI Guidelines outside the United States in reliance on Regulation
S under the Securities Act.

The Placement Agreement contains customary representations and warranties, as well as indemnities from
the Company and is subject to termination in accordance with the terms contained therein.

Applications shall be made to list the Securities issued pursuant to the Issue and admit them to trading on
the Stock Exchanges. No assurance can be given as to the liquidity or sustainability of the trading market
for such Securities, the ability of holders of the Securities to sell their Securities or the price at which
holders of the Securities will be able to sell their Securities.

This Placement Document has not been, and will not be, registered as a prospectus with the RoC and, no
Securities will be offered in India or overseas to the public or any members of the public in India or any
other class of investors, other than QIBs who are persons resident in India.




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                                DESCRIPTION OF THE SECURITIES

Set forth below is certain information relating to the share capital of the Company including a brief
summary of some of the provisions of the Memorandum and Articles of Association of the Company and
the Companies Act relating to the rights attached to its NCDs, the Warrants and the Equity Shares.

General

The authorized share capital of the Company is Rs. 3,250,000,000 comprising of 325,000,000 Equity
Shares of Rs. 10 each.

Articles of Association

The Company is governed by its Articles of Association.

Description of the 0% August 2011 NCDs

The 0% August 2011 NCDs constitute direct and secured obligations of the Company and shall rank pari
passu inter se and with the 0% August 2012 NCDs and without any preference or priority among
themselves. Subject to any obligations preferred by mandatory provisions of the law prevailing from time
to time, the 0% August 2011 NCDs shall also, as regards the principal amount of the 0% August 2011
NCDs, all interest, redemption premium (as applicable) and all other monies secured in respect of the 0%
August 2011 NCDs, rank pari passu with all other present direct and secured obligations of the Company.
The claims of the 0% August 2011 NCD holders shall be superior to the claims of the unsecured creditors
of the Company (subject to any obligations preferred by mandatory provisions of the law prevailing from
time to time).

Register of 0% August 2011 NCD holders

The Company shall maintain at its registered office (or such other place as permitted by law) a register of
0% August 2011 NCD holders containing such particulars as required by Section 152 of the Companies
Act. In terms of Section 152A of the Companies Act, the register of 0% August 2011 NCD holders
maintained by a Depository under Section 11 of the Depositories Act shall be deemed to be a register of 0%
August 2011 NCD holders. For further details see “Terms and Conditions of the Non-Convertible
Debentures”.

Transfers

In case of 0% August 2011 NCDs held in the dematerialized form, transfers of 0% August 2011 NCDs may
be effected only through the Depository(ies) through which such 0% August 2011 NCDs to be transferred
are held, in accordance with the provisions of the Depositories Act, 1996/ rules thereunder as notified by
the Depositories from time to time. In case of 0% August 2011 NCDs held in the physical form, transfers of
0% August 2011 NCDs may be effected only by delivery of the 0% August 2011 NCD certificate issued in
respect of that 0% August 2011 NCD. Transfer of 0% August 2011 NCDs may be subject to certain
restricted transfer periods. For further details in relation to transfers of 0% August 2011 NCDs see “Terms
and Conditions of the Non-Convertible Debentures”.

Buy back of 0% August 2011 NCDs

The Company may from time to time, subject to applicable law and necessary approvals, buyback 0%
August 2011 NCDs on terms and conditions to be decided by the Company.

Description of the 0% August 2012 NCDs

The 0% August 2012 NCDs constitute direct and secured obligations of the Company and shall rank pari
passu inter se and with the 0% August 2011 NCDs and without any preference or priority among


                                                    133
themselves. Subject to any obligations preferred by mandatory provisions of the law prevailing from time
to time, the 0% August 2012 NCDs shall also, as regards the principal amount of the 0% August 2012
NCDs, all interest, redemption premium (as applicable) and all other monies secured in respect of the 0%
August 2012 NCDs, rank pari passu with all other present direct and secured obligations of the Company.
The claims of the 0% August 2012 NCD holders shall be superior to the claims of the unsecured creditors
of the Company (subject to any obligations preferred by mandatory provisions of the law prevailing from
time to time).

Register of 0% August 2012 NCD holders

The Company shall maintain at its registered office (or such other place as permitted by law) a register of
0% August 2012 NCD holders containing such particulars as required by Section 152 of the Companies
Act. In terms of Section 152A of the Companies Act, the register of 0% August 2012 NCD holders
maintained by a Depository under Section 11 of the Depositories Act shall be deemed to be a register of 0%
August 2012 NCD holders. For further details see “Terms and Conditions of the 0% August 2012 Non-
Convertible Debentures”.

Transfers

In case of 0% August 2012 NCDs held in the dematerialized form, transfers of 0% August 2012 NCDs may
be effected only through the Depository(ies) through which such 0% August 2012 NCDs to be transferred
are held, in accordance with the provisions of the Depositories Act, 1996/ rules thereunder as notified by
the Depositories from time to time. In case of 0% August 2012 NCDs held in the physical form, transfers of
0% August 2012 NCDs may be effected only by delivery of the 0% August 2012 NCD certificate issued in
respect of that 0% August 2012 NCD. Transfer of 0% August 2012 NCDs may be subject to certain
restricted transfer periods. For further details in relation to transfers of 0% August 2012 NCDs see “Terms
and Conditions of the 0% August 2012 Non-Convertible Debentures”.

Buy back of NCDs

The Company may from time to time, subject to applicable law and necessary approvals, buyback 0%
August 2012 on terms and conditions to be decided by the Company.

The NCDs and the Debenture Trust Deed are governed by, and shall be construed in accordance with, the
laws of India.

Description of the Warrants

The Warrants entitle the Warrantholder to apply for one (1) Equity Shares for each Warrant held at the
Warrant Exercise Price at any time during the Warrant Exercise Period.

Register of Warrantholders

The Company shall maintain at its registered office (or such other place as permitted by law) a register of
Warrantholders. The register of Warrantholders maintained by a Depository shall be deemed to be a
register of Warrantholders. For further details see “Terms and Conditions of the Warrants”.

Transfers

In case of Warrants held in the dematerialized form, transfers of Warrants may be effected only through the
Depository(ies) through which such Warrants to be transferred are held, in accordance with the provisions
of the Depositories Act, 1996 /rules as notified by the Depositories from time to time. In case of Warrants
held in the physical form, transfers of Warrants may be effected only by delivery of the Warrant certificate
issued in respect of that Warrant. Transfer of the Warrants may be subject to certain restricted transfer
periods. For further details in relation to transfers of Warrants see “Terms and Conditions of the Non-
Convertible Debentures”.


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The Warrants are governed by, and shall be construed in accordance with, the laws of India.

Description of the Equity Shares to be allotted pursuant to exercise of Warrants

Dividends

Under the Companies Act, an Indian company pays dividend upon a recommendation by its board of
directors and subject to approval by a majority of the members, who have the right to decrease but not to
increase the amount of the dividend recommended by the board of directors. However, the board of
directors is not obligated to recommend a dividend. The decision of the Board of Directors and
shareholders of the Company may depend on a number of factors, including but not limited to the
Company’s profits, capital requirements and overall financial condition. According to the Articles of
Association, the profits of the Company, subject to any special rights relating thereto and subject to the
provisions of the Articles as to the reserve fund or other special funds, shall be divisible among the
members in proportion to the amount of capital paid up on the shares held by them respectively. However,
any capital paid upon a share during the period in respect of which a dividend is declared shall unless the
Directors otherwise determine entitle and shall be deemed always to have entitled the holders of such share
only to an apportioned amount of such dividend as from the date of payment. Under the equity listing
agreement listed companies are mandated to declare dividend on per share basis only. Under the Articles of
the Company, no dividend shall be paid otherwise than out of the profits of the year or any other
undistributed profits of the Company and no dividend shall carry interest as against the Company. The
Directors may from time to time pay to the members such interim dividends as in their judgment the
position of the Company justifies. Under the Companies Act, dividends can only be paid in cash to
shareholders listed on the register of shareholders or those persons whose names are entered as beneficial
owners in the record of the depository on the date specified as the “record date” or “book closure date.”

The Company shall pay the dividend to the shareholder entitled within 30 days from the date of declaration
of the dividend. No unpaid or unclaimed dividend shall be forfeited unless the claim thereto becomes
barred by law. The Company shall comply with the provisions of sections 205A of the Companies Act in
respect of unpaid or unclaimed dividend. Where the Company had declared a dividend which has not been
paid or claimed by the shareholders entitled to the payment of such dividend, the Company shall within
seven days from the expiry of 30 days from declaration of such dividend open a special account in any
scheduled bank called “the unpaid dividend of Housing Development Finance Corporation Limited” and
transfer to the same the amount that remains unpaid. Any dividend payments unclaimed by the
shareholders for a period of 7 years from the date of such transfer shall be transferred by the Company to
the Investor Education and Protection Fund (“IEPF”) established by the Central Government. No claim
shall lie against the Company or the IEPF after the said transfer.

Under the Companies Act, dividends may be paid out of profits of a company in the year in which the
dividend is declared or out of the undistributed profits or reserves of the previous fiscal years or out of both
in compliance with the provisions of Companies (Declaration of Dividend out of Reserves) Rules, 1975.
Under the Companies Act, a company may pay a dividend in excess of 10 per cent of paid-up capital in
respect of any year out of the profits of that year only after it has transferred to the reserves of the company
a percentage of its profits for that year, ranging between 2.5 per cent to 10 per cent depending on the rate of
dividend proposed to be declared in that year. The Companies Act further provides that if the profit for a
year is insufficient, the dividend for that year may be declared out of the accumulated profits earned in
previous years and transferred to reserves, subject to the following conditions: (i) the rate of dividend to be
declared may not exceed the lesser of the average of the rates at which dividends were declared in the five
years immediately preceding the year, or 10 per cent of paid-up capital; (ii) the total amount to be drawn
from the accumulated profits from previous years may not exceed an amount equivalent to 10 per cent of
paid-up capital and reserves and the amount so drawn is first to be used to set off the losses incurred in the
financial year before any dividends in respect of preference shares or shares; and (iii) the balance of
reserves after withdrawals must not be below 15 per cent of paid-up capital.

Capitalization of Profits


                                                      135
The Company may capitalise the whole or part of the amount for the time being standing in credit of any of
the Company’s reserve account or to the profit or loss account or available for distribution, upon
recommendation of the board of directors. The Articles of Association of the Company provide that such
sums are not to be paid in cash and are to be applied on behalf of such security holders in full or towards (i)
paying either at par or at premium, any unissued securities or debentures or the debenture-stock of the
Company which shall be allotted, distributed and credited as fully paid up to the members; (ii) paying up
any amount which is unpaid towards securities held by such member respectively; or (iii) paying up partly
in the way specified in (i) above and partly in that specified in (ii) and that such distribution or payment
shall be accepted by such security holders in full satisfaction of their interest in the said capitalized sum.

In addition to permitting dividends to be paid out of current or retained earnings, the Companies Act
permits the a company to distribute an amount transferred from the general reserve or surplus in its profit
and loss account to its shareholders in the form of bonus shares, which are similar to a stock dividend. The
Companies Act also permits the issue of bonus shares from a share premium account. Bonus shares are
distributed to shareholders in the proportion of the number of shares owned by them as recommended by
the board of directors. The shareholders on record on a fixed record date are entitled to receive such bonus
shares. Any issue of bonus shares is subject to guidelines issued by SEBI.

The relevant SEBI guidelines prescribe that no company shall, pending conversion of convertible
securities, issue any shares by way of bonus unless similar benefit is extended to the holders of such
convertible securities, through reservation of shares in proportion to such conversion. Further, as per the
Companies Act, for the issuance of bonus shares a company should not have defaulted in the payment of
interest or principal in respect of fixed deposits and interest on existing debentures or principal on
redemption of such debentures. The bonus issue must be made out of free reserves built out of genuine
profits or share premium account collected in cash only. The issuance of bonus shares must be
implemented within six months from the date of approval of the board of directors.

Pre-Emptive Rights and Alteration of Share Capital

The Companies Act and the Articles of the Company gives the shareholders the pre-emptive right to
subscribe for new shares in proportion to their respective existing shareholdings unless the shareholders
elect otherwise by a special resolution. The offer must include: (a) the right, exercisable by the shareholders
of record, to renounce the shares offered in favour of any person; and (b) the number of shares offered and
the period of the offer, which may not be less than 30 days from the date of offer. If the offer is not
accepted it is deemed to have been declined. The board of directors is authorised to distribute any new
shares not purchased by the pre-emptive rights holders in the manner that it deems most beneficial to the
company.

The Articles of the Company provide that the Company from time to time, by ordinary resolution:

  ·      consolidate and divide all or any of its share capital into shares of larger amount than its existing
         shares;

  ·      convert all or any of its fully paid up shares into stock and reconvert that stock into fully paid up
         shares of any denomination;

  ·      sub-divide its shares or any of them into shares of smaller amount than is fixed by the
         Memorandum so, however, that in the sub-division the proportion between the amount paid and
         the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the
         share from which the reduced share is derived; and

  ·      cancel any shares which, at the date of passing of the resolution in that behalf, have not been taken
         or agreed to be taken by any person and diminish the amount of its share capital by the amount of
         share so cancelled.



                                                     136
General Meetings of Shareholders

In accordance with section 166 of the Companies Act, a company must hold its annual general meeting
each year within 15 months of the previous annual general meeting or within six months after the end of
each accounting year, whichever is earlier, unless extended by the Registrar of Companies at the request of
the company for any special reason.

The Articles of Association of the Company provide that the board of directors may, whenever it thinks fit,
call an extraordinary general meeting. If at any time there are not within India directors capable of acting
who are sufficient in number to form a quorum, any Director or any two members of the Company may call
an extraordinary general meeting, in the same manner and as nearly as possible as that in which such a
meeting may be called by the Board Of Directors. Written notices convening a meeting setting out the date,
place, hour and agenda of the meeting must be given to members at least 21 days prior to the date of the
proposed meeting in accordance with section 171 of the Companies Act. A general meeting may be called
after giving shorter notice if consent is received from all shareholders entitled to vote in case of an Annual
General Meeting, or in case of any other meeting, by members of the Company holding not less than 95 per
cent of such part of the paid up share capital of the Company as gives them a right to vote at the meeting.
The accidental omission to give notice of any meeting to or the non-receipt of any, notice by the member or
other person to whom it should be given shall not invalidate the proceedings at the meetings. The Articles
of the Company provide that no business shall be transacted at any general meeting unless a quorum of
members is present throughout the meeting. Five members present in person shall constitute the quorum. If
the quorum is not present within half an hour of the time appointed for a meeting, the meeting, if convened
upon such requisition as aforesaid, shall be dissolved; but in any other case it shall stand adjourned in
accordance with provisions of sub-sections (3), (4) and (5) of Section 174 of the Companies Act.

Voting Rights

Every member present in person shall have one vote and on poll, the voting rights shall be as laid down in
section 87 of the Companies Act, subject to any rights or restrictions for the time being attached to any
class or classes of shares.

The instrument appointing a proxy is required to be lodged with the company at least 48 hours before the
time of the meeting. A vote given in accordance with the terms of an instrument appointing a proxy shall be
valid notwithstanding the prior death or insanity of the principal, or revocation of the instrument, or transfer
of the share in respect of which the vote is given, provided no intimation in writing of the death, insanity,
revocation or transfer of the share shall have been received by the company at the office before the vote is
given. Further no member shall be entitled to exercise any voting right personally or by proxy at any
meeting of the Company in respect of any shares registered in his name on which any calls or other sums
presently payable by him have not been paid or in regard to which the Company has exercised any right of
lien.

Registration of Transfers and Register of Members

The Company is required to maintain a register of members wherein the particulars of the members of the
Company are entered. For the purpose of determining the shareholders, entitled to corporate benefits
declared by the Company, the register may be closed for such period not exceeding 45 days in any one year
or 30 days at any one time at such times, as the Board of Directors may deem expedient in accordance with
the provisions of the Companies Act. Under the listing agreements of the stock exchanges on which the
Company’s outstanding Equity Shares are listed, the Company may, upon at least seven days’ advance
notice to such stock exchanges, set a record date and/or close the register of shareholders in order to
ascertain the identity of shareholders. The trading of Equity Shares and the delivery of certificates in
respect thereof may continue while the register of shareholders is closed.

Directors




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The Articles of the Company provide that the total number of directors of the Company (excluding the
nominee directors of financial institution and/or special directors) shall not be less than three and not be
more than fifteen. The directors shall be appointed by the Company in the general meeting subject to the
provisions of the Companies Act and the Articles of Association.

The Directors shall have power to appoint any person or persons as a Director or Directors, either to fill a
causal vacancy or as an addition to the Board but so that the total number of Directors shall not at any time
exceed the maximum number fixed. However, any Director or Directors so appointed shall hold office only
until the next following Annual General Meeting of the Company and shall then be eligible for re-election.
Subject to the provisions of section 313 of the Companies Act the board of directors shall also have the
power to appoint any person to act as an alternate director for a director during the latter’s absence for a
period of not less than three months from the state in which the meeting of the directors is ordinarily held.
A director is not required to hold any qualification shares. Pursuant to the Companies Act not less than two-
thirds of the total numbers of directors shall be persons whose period of office is subject to retirement by
rotation and one third of such directors, or if their number is not three or a multiple of three, then the
number nearest to one-third, shall retire from office at every annual general meeting. The directors to retire
are those who have been the longest in the office since their last appointment. The retiring Directors shall
be eligible for re-appointment.

Annual Report and Financial Results

The annual report must be laid before the annual general meeting of the shareholders of a company. This
includes financial information about the company such as the audited financial statements as of the date of
closing of the financial year, directors’ report, management’s discussion and analysis and a corporate
governance section, and is sent to the shareholders of the company. Under the Companies Act, a company
must file the annual report with the Registrar of Companies within 30 days from the date of the annual
general meeting. As required under the listing agreements with the stock exchanges, copies are required to
be simultaneously sent to the stock exchanges. The Company must also publish its financial results in at
least one English language daily newspaper circulating the whole or substantially the whole of India and
also in a newspaper published in the language of the region where the registered office of the Company is
situate. The Company files certain information on-line, including its Annual Report, financial statements
and the shareholding pattern statement, in accordance with the requirements of the listing agreements and
as may be specified by SEBI from time to time.

Transfer of shares

Shares held through depositories are transferred in the form of book entries or in electronic form in
accordance with the regulations laid down by SEBI. These regulations provide the regime for the
functioning of the depositories and the participants and set out the manner in which the records are to be
kept and maintained and the safeguards to be followed in this system. Transfers of beneficial ownership of
shares held through a depository are exempt from stamp duty. The Company has entered into an agreement
for such depository services with the National Securities Depository Limited and the Central Depository
Services India Limited. SEBI requires that the Company’s shares for trading and settlement purposes be in
book-entry form for all investors, except for transactions that are not made on a stock exchange and
transactions that are not required to be reported to the stock exchange. The Company shall keep a book in
which every transfer or transmission of shares will be entered.

Pursuant to the listing agreements, in the event the Company has not effected the transfer of shares within
one month or where the Company has failed to communicate to the transferee any valid objection to the
transfer within the stipulated time period of one month, the Company is required to compensate the
aggrieved party for the opportunity loss caused during the period of the delay. The Companies Act provides
that the shares or debentures of a publicly listed company shall be freely transferable. However, the board
of directors may, subject to Section 111A of the Companies Act, at any time in their discretion by giving
reasons, decline to register shares on grounds mentioned under the Companies Act. Notice of such refusal
must be sent to the transferee within one month of the date on which the transfer was lodged with the
company. According to the Company’s Articles, any person who becomes entitled to shares by reason of


                                                     138
death, lunacy, bankruptcy or insolvency of a member shall be entitled to the same dividend and other
advantages to which he would be entitled if he was a registered member.

If a company without sufficient cause refuses to register a transfer of shares within two months from the
date on which the instrument of transfer is delivered to the company, the transferee may appeal to the
Indian Company Law Board seeking to register the transfer of shares. The Company Law Board may, in its
discretion, issue an interim order suspending the voting rights attached to the relevant shares before
completing its investigation of the alleged contravention. Under the Companies (Second Amendment) Act,
2002, the Indian Company Law Board will be replaced with the National Company Law Tribunal. Further,
under the Sick Industrial Companies (Special Provisions) Repeal Act, 2003, which is expected to come into
force shortly, the SICA is sought to be repealed and the Board of Industrial and Financial Reconstruction,
as constituted under the SICA, is to be replaced with the National Company Law Tribunal.

Acquisition by the Company of its own Equity Shares

The Articles of the Company authorize the purchase of its own security by the Company subject to the
compliance of sections 77A, 77AA and section 77B of the Companies Act. Sections 77A, 77AA and 77B
empower a company to purchase its own shares or other specified securities out of its free reserves, or the
securities premium account or the proceeds of the issue of any shares or other specified securities (other
than from the proceeds of an earlier issue of the same kind of shares or other specified securities proposed
to be bought back) subject to certain conditions, including:

  ·      the buy-back should be authorized by the Articles of Association of the company;

  ·      a special resolution has been passed in the general meeting of the company authorizing the buy-
         back;

  ·      the buy-back in a financial year should be limited to 25 per cent of the total paid-up capital and
         free reserves;

  ·      all the shares or other specified securities for buy-back are fully paid-up;

  ·      the debt owed by the company is not more than twice the capital and free reserves after such buy-
         back; and

  ·      the buy-back is in accordance with the SEBI (Buy-Back of Securities) Regulations, 1998.

The requirement of special resolution mentioned above would not be applicable if the buy-back is for less
than 10 per cent of the total paid-up equity capital and free reserves of the company and provided that such
buy-back has been authorized by the board of directors of the company. A company buying back its
securities is required to extinguish and physically destroy the securities so bought back within seven days
of the last date of completion of the buy-back. Further, a company buying back its securities is not
permitted to buy back any securities for a period of one year from the buy-back and to issue securities for
six months. Every buy-back must be completed within a period of one year from the date of passing of the
special resolution or resolution of the board of directors, as the case may be. A company is also prohibited
from purchasing its own shares or specified securities through any subsidiary company, including its own
subsidiary companies, or through any investment company (other than a purchase of shares in accordance
with a scheme for the purchase of shares by trustees of or for shares to be held by or for the benefit of
employees of the company) or if the company is defaulting on the repayment of deposit or interest,
redemption of debentures or preference shares or payment of dividend to a shareholder or repayment of any
term loan or interest payable thereon to any financial institution or bank, or in the event of non-compliance
with certain other provisions of the Companies Act.

Secrecy Clause




                                                      139
Subject to the provisions of the Companies Act, no member shall be entitled except to the extent expressly
permitted under the Act or the Articles of Association of the Company, to enter upon the property of the
Company or to require discovery of or any information respecting any detail of the Company’s trading or
any matter which is or may be in the nature of a trade secret, mystery of trade or secret process which may
relate to the conduct of the business of the Company and which in the opinion of the Directors, it will be
inexpedient in the interest of the members of the Company to communicate to the public.

Liquidation Rights

The Articles of Association of the Company provide that if the Company shall be wound up, and the assets
available for distribution among the members as such are insufficient to repay the whole of the paid up
capital, such assets shall be distributed so that as nearly as may be, the losses shall be borne by the
members in proportion to the capital paid up, or which ought to have been paid up, at the commencement
of the winding up, on the shares held by them respectively. If in the winding up the assets available for
distribution among the members shall be more than sufficient to repay the whole of the capital paid up at
the commencement of the winding up, the excess shall be distributed amongst the members in proportion to
the capital, at the commencement of the winding up, paid up or which ought to have been paid up on the
shares held by them respectively. This would be without prejudice to the rights of the holders of the shares
issued upon special terms and conditions.




                                                    140
                                          SELLING RESTRICTIONS

The Securities will be offered only to persons resident in India and will not in any circumstance be offered
to investors in any jurisdiction outside India.

The distribution of this Preliminary Placement Document and the offer sale or delivery of the Warrants and
the NCDs is restricted by law in certain jurisdictions. Persons who come in possession of this Preliminary
Placement Document are advised to take legal advice with regard to any restrictions that may be applicable
to them and to observe such restrictions. This Preliminary Placement Document may not be used for the
purpose of an offer or sale in any circumstances in which such offer or sale is not authorized or permitted.

No action has been or will be taken in any jurisdiction that would permit a public offering of the Warrants
and the NCDs or the possession, circulation or distribution of this Preliminary Placement Document or any
other material relating to us or the Warrants and the NCDs in any jurisdiction where action for the purpose
is required. Accordingly, the Warrants and the NCDs may not be offered or sold, directly or indirectly and
neither this Preliminary Placement Document nor any other offering material or advertisement in
connection with the Warrants and the NCDs may be distributed or published, in or from any country or
jurisdiction except under circumstances that will result in compliance with any applicable rules and
regulations of any such country or jurisdiction. The Issue will be made in compliance with the applicable
SEBI Guidelines.




                                                    141
                                                    TAXATION

The information provided below sets out the possible tax benefits available toprospective investors in a
summary manner only and is not a complete analysis or listing of all potential tax consequences of the
subscription, ownership and disposal of securities, under the current tax laws presently in force in India.
Several of these benefits are dependent on the prospective investors fulfilling the conditions prescribed
under the relevant tax laws. Hence the ability to derive the tax benefits is dependent upon fulfilling such
conditions, which based on business imperatives it faces in the future, it may not choose to fulfil. The
following overview is not exhaustive or comprehensive and is not intended to be a substitute for
professional advice.

INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX CONSULTANT WITH RESPECT TO THE
TAX IMPLICATIONS OF AN INVESTMENT IN THE SECURITIES, PARTICULARLY IN VIEW OF THE
FACT THAT CERTAIN RECENTLY ENACTED LEGISLATION MAY NOT HAVE A DIRECT LEGAL
PRECEDENT OR MAY HAVE A DIFFERENT INTERPRETATION ON THE BENEFITS, WHICH AN
INVESTOR CAN AVAIL.

In respect of non-residents, the tax rates and the consequent taxation, mentioned in this section shall be
further subject to any benefits available under the Double Taxation Avoidance Agreement, if any, between
India and the country in which the non-resident has fiscal domicile.

The stated benefits will be available only to the sole / first named holder in case the Securities are held by
joint shareholders.

I. Tax Benefits available to debenture holders

A. Resident debenture holders

1. Interest on NCD received by Debenture Holders would be subject to tax at the normal rates of tax in
accordance with and subject to the provisions of the I.T. Act. No income tax is deductible at source as per
the provisions of section 193 of the I.T Act on interest on debentures in respect of the following:
(a) In case the payment of interest on debentures to resident individual debenture holder in the aggregate
during the financial year does not exceed Rs.2,500;
(b) When the Assessing Officer issues a certificate on an application by a debenture holder on satisfaction
that the total income of the debenture holder justifies no/lower deduction of tax at source as per the
provisions of Section 197(1) of the I.T. Act; and that Certificate is filed with the Company.
(c) When the resident debenture holder (not being a company or a firm or a senior citizen) submits a
declaration in the prescribed Form 15G verified in the prescribed manner to the effect that the tax on his
estimated total income of the previous year in which such income is to be included in computing his total
income will be nil as per the provisions of section 197A (1A) of the I.T. Act. Under section 197A (1B) of
the I.T. Act, Form 15G cannot be submitted nor considered for exemption from deduction from tax at
source if the aggregate of income of the nature referred to in the said section, viz. dividend, interest, etc as
prescribed therein, credited or paid or likely to be credited or paid during the Previous year in which such
income is to be included exceeds the maximum amount which is not chargeable to tax; as may be
prescribed in each year’s Finance Act.
(d) On any securities issued by a company in a dematerialized form listed on recognized stock exchange in
India. (w.e.f. 1.06.2008).

2. Under section 2 (29A) of the I.T. Act, read with section 2 (42A) of the I.T. Act, a listed debenture is
treated as a long term capital asset if the same is held for more than 12 months immediately preceding the
date of its transfer.

Under section 112 of the I.T. Act, capital gains arising on the transfer of long term capital assets being
listed securities are subject to tax at the rate of 10% of capital gains calculated without indexation of the
cost of acquisition The capital gains will be computed by deducting expenditure incurred in connection
with such transfer and cost of acquisition of the debenture from the sale consideration.


                                                      142
In case of an individual or HUF, being a resident, where the total income as reduced by the long term
capital gains is below the maximum amount not chargeable to tax (i.e. Rs. 160,000 in case of all
individuals, to Rs. 190,000 in case of women and to Rs.240,000 in case of senior citizens), the long term
capital gains shall be reduced to the extent of and only the balance long term capital gains will be subject to
the flat rate of taxation in accordance with and the proviso to sub-section (1) of section 112 of the I.T. Act
read with CBDT Circular 721 dated September 13, 1995.

In addition to the aforesaid tax, in the case of domestic companies where the income exceeds Rs.
10,000,000 a surcharge of 10% of such tax liability is also payable. Similarly, in the case of foreign
companies where the income exceeds Rs. 10,000,000 a surcharge of 2.5% of such tax liability is also
payable. A a 2% education cess and 1% secondary and higher education cess on the total income tax is
payable by all categories of taxpayers.

3. Short-term capital gains on the transfer of listed debentures, where debentures are held for a period of
not more than 12 months would be taxed at the normal rates of tax in accordance with and subject to the
provisions of the I.T. Act. The provisions related to minimum amount not chargeable to tax and education
cess described at para 2 above would also apply to such short-term capital gains.

4. In case the debentures are held as stock in trade, the income on transfer of debentures would be taxed as
business income or loss in accordance with and subject to the provisions of the I.T. Act.

B Non Resident Indians
1. A non resident Indian has an option to be governed by Chapter XII-A of the I.T. Act, subject to the
provisions contained therein which are given in brief as under:
(a) Under section 115E of the I.T. Act, income from debentures acquired or purchased with or subscribed
to in convertible foreign exchange will be taxable at 20% (plus, education cess and secondary & higher
education cess), whereas, long term capital gains on transfer of such Debentures will be taxable at 10%
(plus education cess and secondary & higher education cess). Short-term capital gains will be taxable at the
normal rates of tax in accordance with and subject to the provisions contained therein.
(b) Under section 115F of the I.T. Act, subject to the conditions and to the extent specified therein, long
term capital gains arising to a non-resident Indian from transfer of debentures acquired or purchased with
or subscribed to convertible foreign exchange will be exempt from capital gain tax if the net consideration
is invested within six months after the date of transfer of the debentures in any specified asset or in any
saving certificates referred to in clause (4B) of section 10 of the I.T. Act in accordance with and subject to
the provisions contained therein.
(c) Under section 115G of the I.T. Act, it shall not be necessary for a non-resident Indian to file a return of
income under section 139(1) of the I.T. Act, if his total income consists only of investment income and/or
long term capital gains earned on transfer of such investment acquired out of convertible foreign exchange,
and the tax has been deducted at source from such income under the provisions of Chapter XVII-B of the
I.T. Act in accordance with and subject to the provisions contained therein.
(d) Under section 115H of the I.T. Act, where a non-resident Indian becomes a resident in India in any
subsequent year, he may furnish to the Assessing Officer a declaration in writing along with return of
income under section 139 for the assessment year for which he is assessable, to the effect that the
provisions of Chapter XII-A shall continue to apply to him in relation to the investment income (other than
on shares in an Indian Company) derived from any foreign exchange assets in accordance with and subject
to the provisions contained therein. On doing so, the provisions of Chapter XII-A shall continue to apply to
him in relation to such income for that assessment year and for every subsequent assessment year until the
transfer or conversion into money of such assets.

2. In accordance with and subject to the provisions of section 115I of the I.T. Act, Non-Resident Indian
may opt not to be governed by the provisions of Chapter XII-A of the I.T. Act. In that case, please refer to
para A (2, 3 and 4) for the tax implications arising on transfer of debentures.

3. Under Section 195 of the I.T. Act, the company is required to deduct tax at source at the rate of 20% on
investment income and at the rate of 10% on any long-term capital gains and as referred to in section 115E.


                                                     143
At the normal rates for Short Term Capital Gains if the payee Debenture Holder is a Non Resident Indian.
The provisions related to education cess described at para 2 above would also apply to such
income/gains.

4. As per section 90(2) of the I.T. Act read with the circular no. 728 dated October 30, 1995 issued by the
CBDT, in the case of a remittance to a country with which a Double Tax Avoidance Agreement (DTAA) is
in force, the tax should be deducted at the rate provided in the Finance Act of the relevant year or at the rate
provided in the DTAA, whichever is more beneficial to the assessee.

5. Alternatively, to ensure non deduction or lower deduction of tax at source, as the case may be, the
Debenture Holder should furnish a certificate under section 197(1) or 195(3) of the I.T. Act, from the
Assessing Officer.

II. Tax Benefits available to warrant holders

A. Resident warrantholder

1. Under Section 10(32) of the IT Act, any income of minor children clubbed in the total income of the
parent under Section 64(1A) of the IT Act, will be exempt from tax to the extent of Rs.1,500 per minor
child whose income is so included.

2. The characterization of the gains/losses, arising from sale of warrants, as capital gains or business
income would depend on the nature of holding in the hands of the warrantholder and various other factors.

3. Under section 2 (29A) of the I.T. Act, read with section 2 (42A) of the I.T. Act, a listed warrant is treated
as a long term capital asset if the same is held for more than 12 months immediately preceding the date of
its transfer.

Under section 112 of the I.T. Act, capital gains arising on the transfer of long term capital assets being
listed securities are subject to tax at the rate of 10% of capital gains calculated without indexation of the
cost of acquisition or at 20% of capital gains calculated with indexation of the cost of acquisition. The
capital gains will be computed by deducting expenditure incurred in connection with such transfer and cost
of acquisition of the warrant from the sale consideration.

In case of an individual or HUF, being a resident, where the total income as reduced by the long term
capital gains is below the maximum amount not chargeable to tax (i.e. Rs. 160,000 in case of all
individuals, to Rs. 190,000 in case of women and to Rs.240,000 in case of senior citizens), the long term
capital gains shall be reduced to the extent of and only the balance long term capital gains will be subject to
the flat rate of taxation in accordance with and the proviso to sub-section (1) of section 112 of the I.T. Act
read with CBDT Circular 721 dated September 13, 1995.

In addition to the aforesaid tax, in the case of domestic companies where the income exceeds Rs.
10,000,000 a surcharge of 10% of such tax liability is also payable. Similarly, in the case of foreign
companies where the income exceeds Rs. 10,000,000, a surcharge of 2.5% of such tax liability is also
payable. A 2% education cess and 1% secondary and higher education cess on the total income tax is
payable by all categories of taxpayers.

4. Short-term capital gains on the transfer of listed warrants, where warrants are held for a period of not
more than 12 months would be taxed at the normal rates of tax in accordance with and subject to the
provisions of the I.T. Act. The provisions related to minimum amount not chargeable to tax and education
cess described at para 3 above would also apply to such short-term capital gains.

5. Warrantholders are entitled to claim exemption in respect of tax on long term capital gains under Section
54EC of the IT Act, if the amount of capital gains is invested in certain specified bonds / securities within
six months from the date of transfer, subject to the fulfillment of the conditions specified therein. The
maximum investment permissible on and after April 1, 2007 for the purposes of claiming the exemption in


                                                      144
the above bonds, by any person in a financial year, is Rs. 5 million. However, according to Section
54EC(2) of the IT Act, if the warrantholder transfers or converts the notified bonds into money within a
period of three years from the date of their acquisition, the amount of capital gains exempted earlier would
become chargeable to tax as long term capital gains in the year in which such bonds are transferred or
otherwise converted into money.

6. Warrantholders that are individuals or Hindu undivided families can avail of an exemption under Section
54F of the IT Act, by utilization of the sales consideration arising from the sale of the Company’s warrants
held for a period of more than 12 months, for purchase / construction of a residential house within the
specified time period and subject to the fulfillment of the conditions specified therein.

B Non-resident warrantholders – other than Foreign Institutional Investors

1. Under Section 10(32) of the IT Act, any income of minor children clubbed with the total income of the
parent under Section 64(1A) of the IT Act, will be exempt from tax to the extent of Rs.1,500 per minor
child whose income is so included.

2. The characterization of the gains/losses, arising from sale of warrants, as capital gains or business
income would depend on the nature of holding in the hands of the warrantholder and various other factors.

3. The long-term capital gains accruing to a warrantholder of the Company, being a non-resident, on sale of
the Company’s warrants in a transaction carried out through a recognized stock exchange in India, would
be taxed at 20% (plus applicable surcharge and education cess).

4. The short-term capital gains accruing to a warrantholder of the Company on sale of the Company’s
shares in a transaction carried out through a recognized stock exchange in India tax is chargeable at 30%
plus education cess, in the case of a non-corporate warrantholder and at 40% pluis applicable surcharge and
education cess in the case of a corporate warrantholder.

5. Under the provisions of Section 90(2) of the IT Act, if the provisions of the DTAA between India and
the country of residence of the non-resident are more beneficial, then the provisions of the DTAA shall be
applicable.

6. The warrantholders are entitled to claim exemption in respect of tax on long term capital gains of the IT
Act under Section 54EC of the IT Act, if the amount of capital gains is invested in certain specified bonds /
securities within six months from the date of transfer subject to the fulfillment of the conditions specified
therein. The maximum investment permissible for the purposes of claiming the exemption in the above
bonds by any person in a financial year is Rs. 5 million. However, according to Section 54EC(2) of the IT
Act, if the shareholder transfers or converts the notified bonds into money within a period of three years
from the date of their acquisition, the amount of capital gains exempted earlier would become chargeable to
tax as long term capital gains in the year in which such bonds are transferred or otherwise converted into
money.

7. Individual warrantholders can avail of an exemption under Section 54F by utilization of the warrants
consideration arising from the sale of company’s warrant held for a period more than 12 months, for
purchase/construction of a residential house within the specified time period and subject to the fulfillment
of the conditions specified therein.

C. Tax Deduction at Source

No income-tax is deductible at source from income by way of capital gains under the present provisions of
the IT Act, in case of residents. However, as per the provisions of section 195 of the IT Act, any income by
way of capital gains, payable to non residents, may be eligible to the provisions of with-holding tax, subject
to the provisions of the relevant tax treaty. Accordingly income tax may have to be deducted at source in
the case of a non- resident at the rate under the domestic tax laws or under the tax treaty, whichever is
beneficial to the assessee unless a lower withholding tax certificate is obtained from the tax authorities.]


                                                     145
III. Tax Benefits available to shareholders

A. Resident shareholders

1. Under Section 10(32) of the IT Act, any income of minor children clubbed in the total income of the
parent under Section 64(1A) of the IT Act, will be exempt from tax to the extent of Rs.1,500 per minor
child whose income is so included.

2. The Company is required to pay a ‘dividend distribution tax’ currently at the rate of 16.995% (including
applicable surcharge and education cess) on the total amount distributed or declared or paid as dividend.
Under Section 10(34) of the IT Act, income by way of dividend referred to in Section 115-O of the IT Act,
received on the shares of the Company is exempt from income tax in the hands of shareholders. However it
is pertinent to note that Section 14A of the IT Act restricts claims for deduction of expenses incurred in
relation to exempt income. Thus, any expenses incurred to earn the dividend income is not an allowable
expenditure.

3. The characterization of the gains/losses, arising from sale of shares, as capital gains or business income
would depend on the nature of holding in the hands of the shareholder and various other factors.

4. (a) The long-term capital gains (under section 2(29B) of the IT Act) accruing to the shareholders of the
Company on sale of the Company’s shares in a transaction carried out through a recognized stock exchange
in India, and where such transaction is chargeable to securities transaction tax (“STT”), is exempt from tax
as per provisions of Section 10(38) of the IT Act.

(b) The short-term capital gains (under section 2(42A) of the IT Act) accruing to the shareholders of the
Company on sale of the Company’s shares in a transaction carried out through a recognized stock exchange
in India, and where such transaction is chargeable to STT, tax will be chargeable at 15% (plus applicable
surcharge and education cess) as per provisions of Section 111A of the IT Act. Further no deduction under
Chapter VI-A of the IT Act, would be allowed in computing such short term capital gains subjected to tax
under Section 111A. In other cases, where the transaction is not subjected to STT, the short term capital
gains would be chargeable as a part of the total income and the tax rates would depend on the income slab.

 (c) As per the provisions of Section 112 of the IT Act, long term gains accruing to the shareholders of the
Company from the transfer of shares of the Company being listed in recognized stock exchanges, otherwise
than as mentioned in point 4(a) above, is chargeable to tax at 10% (plus applicable surcharge and education
cess) after deducting from the sale proceeds the cost of acquisition without indexation. However, the
shareholders claiming the benefit of indexation would be subject to tax at 20% plus applicable surcharge
and education cess on the long term gains. Further no deduction under Chapter VI-A would be allowed in
computing such long term capital gains subject to tax under Section 112 of the IT Act.

(d) Shareholders are entitled to claim exemption in respect of tax on long term capital gains (other than
those exempt under Section 10(38) of the IT Act) under Section 54EC of the IT Act, if the amount of
capital gains is invested in certain specified bonds / securities within six months from the date of transfer,
subject to the fulfillment of the conditions specified therein. The maximum investment permissible on and
after April 1, 2007 for the purposes of claiming the exemption in the above bonds, by any person in a
financial year, is Rs. 5 million. However, according to Section 54EC(2) of the IT Act, if the shareholder
transfers or converts the notified bonds into money within a period of three years from the date of their
acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term
capital gains in the year in which such bonds are transferred or otherwise converted into money.

(e) Shareholders that are individuals or Hindu undivided families can avail of an exemption under Section
54F of the IT Act, by utilization of the sales consideration arising from the sale of the Company’s share
held for a period of more than 12 months (which is not exempt under Section 10(38)), for purchase /
construction of a residential house within the specified time period and subject to the fulfillment of the
conditions specified therein.


                                                     146
B Non-resident shareholders – other than Foreign Institutional Investors

1. Under Section 10(32) of the IT Act, any income of minor children clubbed with the total income of the
parent under Section 64(1A) of the IT Act, will be exempt from tax to the extent of Rs.1,500 per minor
child whose income is so included.

2. The Company is required to pay a ‘dividend distribution tax’ currently at the rate of 16.995 percent.
(including applicable surcharge and education cess) on the total amount distributed or declared or paid as
dividend. Dividend (whether interim or final) declared, distributed or paid, under Section 115-O of the IT
Act, by the Company are exempt in the hands of shareholders as per the provisions of Section 10(34) of the
IT Act. However it is pertinent to note that Section 14A of the IT Act restricts claim for deduction of
expenses incurred in relation to exempt income. Thus, any expenses incurred to earn the dividend income is
not an allowable expenditure.

3. The characterization of the gains/losses, arising from sale of shares, as capital gains or business income
would depend on the nature of holding in the hands of the shareholder and various other factors.

4. The long-term capital gains accruing to a shareholder of the Company, being a non-resident, on sale of
the Company’s shares in a transaction carried out through a recognized stock exchange in India, and where
such transaction is chargeable to STT, is exempt from tax as per provisions of Section 10(38) of the IT Act.

5. The short-term capital gains accruing to a shareholder of the Company on sale of the Company’s shares
in a transaction carried out through a recognized stock exchange in India, and where such transaction is
chargeable to STT, tax is chargeable at 15% plus applicable surcharge and education cess as per provisions
of Section 111A of the IT Act. Further, no deduction under Chapter VI-A would be allowed in computing
such short term capital gains subjected to tax under Section 111A. In other case, i.e. where the transaction
is not subjected to STT, the short term capital gains would be chargeable as a part of the total income and
the tax rate would depend on the income slab.

6. As per the provisions of Section 112 of the IT Act, long term gains accruing to the shareholders of the
Company, being non-residents, from the transfer of shares of the Company being listed in recognized stock
exchanges, otherwise than as mentioned in point 4 above, are chargeable to tax at 20% plus applicable
surcharge and education cess after deducting from the sale proceeds the cost of acquisition. Such non-
resident shareholders are allowed to adjust the cost of acquisition by the amount of foreign exchange rate
fluctuations in computing long-term capital gains. Further, no deduction under Chapter VI-A would be
allowed in computing such long term capital gains subjected to tax under Section 112.

7. Under the provisions of Section 90(2) of the IT Act, if the provisions of the Double Taxation Avoidance
Agreement (“DTAA”) between India and the country of residence of the non-resident are more beneficial,
then the provisions of the DTAA shall be applicable.

8. The shareholders are entitled to claim exemption in respect of tax on long term capital gains other than
those exempt under Section 10(38) of the IT Act under Section 54EC of the IT Act, if the amount of capital
gains is invested in certain specified bonds / securities within six months from the date of transfer subject to
the fulfillment of the conditions specified therein. The maximum investment permissible for the purposes
of claiming the exemption in the above bonds by any person in a financial year is Rs. 5 million. However,
according to Section 54EC(2) of the IT Act, if the shareholder transfers or converts the notified bonds into
money within a period of three years from the date of their acquisition, the amount of capital gains
exempted earlier would become chargeable to tax as long term capital gains in the year in which such
bonds are transferred or otherwise converted into money.

9. Individual shareholders can avail of an exemption under Section 54F by utilization of the sales
consideration arising from the sale of company’s share held for a period more than 12 months (which is not
exempt under Section 10(38)), for purchase/construction of a residential house within the specified time
period and subject to the fulfillment of the conditions specified therein.


                                                      147
C. Tax Deduction at Source

No income-tax is deductible at source from income by way of capital gains under the present provisions of
the IT Act, in case of residents. However, as per the provisions of section 195 of the IT Act, any income by
way of capital gains, payable to non residents (long-term capital gains exempt under section 10(38) of the
IT Act), may be eligible to the provisions of with-holding tax, subject to the provisions of the relevant tax
treaty. Accordingly income tax may have to be deducted at source in the case of a non- resident at the rate
under the domestic tax laws or under the tax treaty, whichever is beneficial to the assessee unless a lower
withholding tax certificate is obtained from the tax authorities.

IV. Tax Benefits available to the shareholders under the Wealth-Tax Act, 1957

The Securities will not be treated as an asset within the meaning of Section 2(ea) of Wealth Tax Act, 1957.
Hence no Wealth Tax will be payable on the market value of Securities held.

V. Tax Benefits available to the shareholders under the Gift Tax Act, 1958

Gift Tax is not leviable in respect of any gifts made on or after 1st October, 1998. Therefore, any gift of
Securities will not attract gift tax.

VI. Benefits available to Mutual Funds

As per the provisions of Section 10(23D) of the IT Act, any income of Mutual Funds registered under the
SEBI Act, 1992 or regulations made thereunder, Mutual Funds set up by public sector banks or public
financial institutions and Mutual Funds authorised by the Reserve Company of India would be exempt from
income tax, subject to the conditions as the Central Government may by notification in the Official Gazette
specify in this behalf. However, Mutual Funds will be liable to pay tax on distributed income to unit
holders under Section 115R of the IT Act.




                                                    148
                                        LEGAL PROCEEDINGS

Save as described below, the Company is not involved in any legal proceedings and in the opinion of the
Company no proceedings are threatened, which may have, or have had during the 12 months preceding the date
of this Preliminary Placement Document, material adverse effect on the Company’s business, financial position,
profitability or results of operations. A summary of litigation involving the Company is set forth below.

Pursuant to amendment of Article 6 of the schedule of the Indian Stamps Act, 1899 whereby stamp duty
was levied on any letter, note, memorandum relating to deposit of title deeds (whether made before or after
the deposit of title deeds), the Government of Uttar Pradesh issued an order seeking imposition of stamp
duty on certain declaration and writings relating to banks and non-banking finance companies and
consequently Assistant Commissioner of Stamps, Ghaziabad issued an order dated July 1, 2005 levying
stamp duty on the document evidencing grant of loan to a customer by the Company. The Company filed a
writ petition (W.P. No 58682 of 2005) before the High Court of Allahabad challenging the validity of the
order dated July 1, 2005 on the grounds that no declarations are signed by the customers/ borrowers of the
Company, that loan documents do not qualify as instruments evidencing agreements relating to deposit of
title deeds and that the impugned order is arbitrary. The Petitioner also filed an application for stay of
recovery proceedings pending final hearing and the disposal of the petition. The High Court of Allahabad
has granted the stay by its order dated September 2, 2005. The matter is currently pending.

Additionally, the Company has also initiated various legal proceedings which arise in the ordinary course
of its operations including, inter alia, suits for recovery of money.




                                                     149
                                  GENERAL INFORMATION

1.    The Company was incorporated as an Indian public limited company on October 17, 1977. The
      Company’s registered office is located at Ramon House, H.T. Parekh Marg, 169 Backbay
      Reclamation Churchgate, Mumbai – 400 020, India. The Company is registered with the Registrar
      of Companies, Maharashtra under CIN L70100MH1977PLC019916.

2.    The Issue was authorised and approved by the Board of Directors on June 9, 2009 and approved
      by the shareholders in their meeting on July 22, 2009.

3.    The Company has obtained in-principle approval to list the NCDs and the Warrants on the NSE
      and the BSE.

4.    Copies of Memorandum and Articles of Association of the Company will be available for
      inspection during usual business hours on any weekday between 10.00 A.M. to 12.00 P.M. (except
      Saturdays, Sundays and public holidays as may be notified under the Negotiable Instrument Act,
      1881) at the Company’s registered office.

5.    The Company has obtained all consents, approvals and authorizations required in connection with
      this Issue.

6.    There has been no material change in the Company’s financial or trading position since March 31,
      2009, the date of the latest financial statements prepared in accordance with Indian GAAP
      included in this Preliminary Placement Document, except as disclosed herein.

7.    Except as disclosed in this Preliminary Placement Document, there are no litigation or arbitration
      proceedings against or affecting the Company or its assets or revenues, nor is the Company aware
      of any pending or threatened litigation or arbitration proceedings, which are or might be material
      in the context of this Issue of Securities.

8.    The Company’s auditors are M/s Deliotte Haskins and Sells, who have (i) audited unconsolidated
      financial statements of the Company as of and for the year ended March 31, 2009, 2008 and 2007;
      (ii) audited consolidated financial statements of the Company as of and for the year ended March
      31, 2009, 2008 and 2007; and (iii) undertaken a limited review of the standalone financial
      statements of the Company as of and for the three months ended June 30, 2009.

9.    The Company confirms that it is in compliance with the minimum public shareholding
      requirements as required under the terms of the listing agreements with the Stock Exchanges.

10.   IDBI Trusteeship Services Limited is acting as the Debenture Trustees. IDBI Trusteeship Services
      Limited and have consented in writing to be include their name in this Preliminary Placement
      Document in its capacity as Debenture Trustee.

11.   Rating: The NCDs proposed to be issued have been rated by CRISIL and ICRA and the rating
      details are as below:

       Rating Agency              Rating                  Category             Meaning of the Rating
       CRISIL                     “AAA”                   NCDs                 Highest degree of safety
                                                                               with regard to timely
                                                                               payment of interest and
                                                                               principal     on      the
                                                                               instrument.
       ICRA                       “LAAA”                  NCDs                 Highest-credit-quality
                                                                               rating.



                                                 150
12.   The Floor Price for the issue of Equity Shares pursuant to exercise of Warrants is Rs. 2,391.91,
      calculated in accordance with Chapter XIII-A of the SEBI Guidelines, as certified by M/s Deliotte
      Haskins and Sells, statutory auditors of the Company.




                                                151
                                            FINANCIAL STATEMENTS

LIMITED REVIEW REPORT

To,

The Board of Directors
Housing Development Finance Corporation Limited
Ramon House
H.T. Parekh Marg
169, Backbay Reclamation
Churchgate
Mumbai 400 020

Dear Sirs / Madam,


      1.   We have reviewed the accompanying statement of unaudited financial results of HOUSING
           DEVELOPMENT FINANCE CORPORATION LIMITED (“the Corporation”) for the quarters
           ended June 30, 2008 and June 30, 2009 as set out in the Offering Circular, expressed in Indian
           Rupees. This statement is the responsibility of the Corporation’s Management.

      2.   The figures disclosed in the statement are extracted/ reformatted from the unaudited financial results
           for the quarters then ended prepared in accordance with Clause 41 of the Listing Agreement with the
           Stock Exchanges, which have been approved by the Board of Directors and have been reviewed by us
           in accordance with standards generally accepted in India for such engagements and our opinion stated
           herein is as stated in the opinion for each of the quarters. (Note 1 of the Unaudited Non-Consolidated
           Financial Results for the quarters ended June 30, 2008 and June 30, 2009). Accordingly, any event
           subsequent to the dates as stated in the note has not been considered / adjusted for the said purpose.

      3.   A limited review of interim financial information requires that we plan and perform the review to
           obtain moderate assurance as to whether the financial statements are free of material
           misstatements. A review is limited primarily to inquiries of Corporation’s personnel and analytical
           procedures applied to financial data and thus provides less assurance than an audit. We have not
           performed an audit and accordingly we do not express an opinion.


      4.   Based on our review, nothing has come to our attention that causes us to believe that the
           accompanying statement of unaudited financial results prepared in accordance with the accounting
           standards referred to in Section 211 (3C) of the Companies Act, 1956 and other recognised
           accounting practices and policies has not disclosed the information required to be disclosed in
           terms of Clause 41 of the Listing Agreements with stock exchanges including the manner in which
           it is to be disclosed, or that it contains any material misstatement.


                                                                        For DELOITTE HASKINS & SELLS
                                                                                   Chartered Accountants

                                                                                                  P. R. Ramesh

                                                                                                    Partner
                                                                                        Membership No. 70928

MUMBAI, 17th August, 2009
PRR/ZFB



                                                       152
               HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED

UNAUDITED FINANCIAL RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2009 AND
                                 2008

                                                                 Three months           Three months
                                                                 ended June 30,         ended June 30,
                                                                      2008                   2009
Particulars                                                      Rs. In Million         Rs. In Million
Income from Operations                                                   23,134.8               27,928.9
Profit on Sale of Investments                                                   -                   513.1
Other Income                                                                 51.4                    48.7
Total Income                                                             23,186.2               28,490.7
Expenditure :
- Interest and Other Charges                                              15,683.5                19,628.0
- Staff Expenses                                                             380.5                   425.2
- Other Expenses                                                             586.9                   598.6
- Depreciation                                                                36.7                    39.7
Total Expenditure                                                         16,687.6                20,691.5

Profit Before Tax                                                          6,498.6                 7,799.2
Tax Expense                                                                1,817.5                 2,150.0
Profit After Tax                                                           4,681.1                 5,649.2
Paid- up Equity Share Capital (Face Value Rs. 10)                          2,842.1                 2,845.6
Earning per Share - Basic (Rs.) (not annualised)                              16.4                    19.8
Earning per Share - Diluted (Rs.) (not annualised)                            16.1                    19.2

Notes:
1.     As the figures disclosed in the Unaudited Financial Results for the quarter ended June 30, 2008
       and June 30, 2009 are taken on record in the Board meetings on July 16, 2008 and July 22, 2009
       respectively, and filed with Indian Stock Exchange as required by Clause 41 of the Listing
       Agreement on which the statutory auditors of the Corporation have carried out a Limited Review
       and issued their reports dated July 16, 2008 and July 22, 2009 respectively, and event subsequent
       to the said dates has not been considered.
2.      Income from Operations includes Dividend Income of Rs. 598.5 million and Rs. 561.7 million, for
        the periods ended June 30, 2008 and 2009 respectively.
3.      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, for the Corporation, as per the Accounting Standard on
        Segment Reporting (AS 17), notified by the Companies (Accounting Standards) Rules, 2006.
4.      Figures for the quarter ended June 30, 2008, have been regrouped whereever necessary, in order to
        make them comparable.




                                                     153
                            REPORT ON THE FINANCIAL STATEMENT

To,
The Board of Directors
HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED
Ramon House
H. T. Parekh Marg
169, Backbay Reclamation
Churchgate
Mumbai 400 020

Dear Sirs / Madam,

1.      We have examined the attached Balance Sheet of HOUSING DEVELOPMENT FINANCE
        CORPORATION LIMITED as at March 31, 2007, March 31, 2008 and March 31, 2009, the Profit
        and Loss Account and the Cash Flow Statement of the Corporation for the years ended on those dates
        and the accompanying schedules and notes (together comprising the “Financial Statements”). These
        financial statements are the responsibility of the Corporation’s Management. Our responsibility is to
        express an opinion on these financial statements based on our examination.

2.      The figures disclosed in the Financial Statements are extracted / reformatted from the Accounts for
        the respective years and our opinion on the Financial Statements stated herein is as stated in the
        opinion for each of the years (Note 32 of the Notes forming part of the Financial Statements).
        Accordingly any event subsequent to the dates as stated in the Note have not been considered /
        adjusted for the said purpose. In forming our opinion, we conducted our audit in accordance with
        the auditing standards generally accepted in India. These Standards require that we plan and
        perform the audit to obtain reasonable assurance about whether the financial statements are free of
        material misstatements. An audit includes examining, on a test basis, evidence supporting the
        amounts and disclosures in the financial statements. An audit also includes assessing the
        accounting principles used and significant estimates made by the Management, as well as
        evaluating the overall financial statement presentation. We believe that our audit provides a
        reasonable basis for our opinion.

3.      In our opinion on the basis stated in paragraph 2 above, and to the best of our information and
        according to the explanations given to us, the said Financial Statements give a true and fair view
        in conformity with the accounting principles generally accepted in India:

        (i)      in the case of the Balance Sheet, of the state of affairs of the Corporation as at March 31,
                 2007, March 31, 2008 and March 31, 2009 respectively;

        (ii)     in the case of the Profit and Loss Account, of the profit of the Corporation for the years
                 ended on March 31, 2007, March 31, 2008 and March 31, 2009 respectively; and

        (iii)    in the case of the Cash Flow Statement, of the cash flows of the Corporation for the years
                 ended on March 31, 2007, March 31, 2008 and March 31, 2009 respectively.

                                                                     For DELOITTE HASKINS & SELLS
                                                                                Chartered Accountants


                                                                                             P. R. Ramesh
                                                                                                   Partner
                                                                                   (Membership No. 70928)
MUMBAI, 17th August, 2009
PRR/PG



                                                    154
                HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED
                                BALANCE SHEET

                                                                                As at
                                             Schedules       March 31,      March 31,        March 31,
                                                               2007            2008            2009
                                                                          (Rs. In Million)
SOURCES OF FUNDS
SHAREHOLDERS' FUNDS:
Share Capital                                            1      2,530.0          2,840.3         2,844.5

Reserve and Surplus                                      2     52,983.9       116,633.1        128,529.4

LOAN FUNDS                                               3    571,930.3       691,512.2        838,560.8

                                                              627,444.2       810,985.6        969,934.7

APPLICATION OF FUNDS

LOANS                                                    4    569,043.6       733,277.8        851,981.1

INVESTMENTS                                              5     36,662.3        69,150.1        104,687.5

Deferred tax asset (net) [Note 26]                              1,231.0          1,466.4         2,158.2

CURRENT ASSETS, LOANS AND                                6     46,645.5        38,226.1         55,708.3
ADVANCES
Less : CURRENT LIABILITIES AND                           7     28,268.9        33,219.7         46,634.5
PROVISIONS
NET CURRENT ASSETS                                             18,376.6          5,006.4         9,073.8

FIXED ASSETS                                             8
Gross Block                                                     4,931.0          4,885.7         4,938.5
Less : Depreciation                                             2,800.3          2,800.8         2,904.4
Net Block                                                       2,130.7          2,084.9         2,034.1

                                                              627,444.2       810,985.6        969,934.7

Notes forming part of the Accounts                   14
Significant Accounting Policies                      15

Schedules 1 to 15 annexed hereto form part of the Financial Statements.




                                                   155
HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED
PROFIT AND LOSS ACCOUNT

                                                           Schedule           For the Year ended
                                                                      March       March        March 31,
                                                                      31, 2007    31, 2008     2009
                                                                                (Rs. In Million)
INCOME
Operating Income                                           9           54,816.4     79,798.7   108,546.2
Fees and Other Charges                                                    685.7        632.2     1,149.4
Profit on Sale of Investments [Note 11 ]                                2,923.0      1,332.6       252.3
Other Income                                                              207.6        197.1       228.7
                                                                       58,632.7     81,960.6   110,176.6
EXPENDITURE AND CHARGES
Interest and Other Charges                                 10          36,668.5     51,428.8    74,324.5
Staff Expenses                                             11             912.7      1,177.9     1,386.1
Establishment Expenses                                     12             257.5        303.1       359.6
Other Expenses                                             13           1,021.5      1,192.4     1,241.4
Depreciation and Amortisation                                             174.5        166.0       174.6
Provision for Contingencies [Note 18]                                     250.0        320.0       500.0
                                                                       39,284.7     54,588.2    77,986.2

PROFIT BEFORE TAX AND EXCEPTIONAL                                      19,348.0     27,372.4    32,190.4
ITEMS
Exceptional Items [Note 11]                                               329.8      6,362.6           -
PROFIT BEFORE TAX                                                      19,677.8     33,735.0    32,190.4
Less : Provision for Tax [Note 26]                                      3,950.0      9,350.0     9,340.0
Less : Provision for Fringe Benefit Tax                                    24.0         22.5        25.0
PROFIT AFTER TAX AVAILABLE FOR                                         15,703.8     24,362.5    22,825.4
APPROPRIATION
APPROPRIATIONS :
Special Reserve No. II                                                    4,660.0    3,550.0     4,000.0
General Reserve                                                           3,681.7    9,994.7     5,530.4
Additional Reserve (u/s 29 C of the NHB Act )                               800.0    2,450.0     3,420.0
Shelter Assistance Reserve                                                   50.0       60.0        70.0
Proposed Dividend                                                         5,566.1    7,101.0     8,533.6
[Rs. 22, Rs. 25 and Rs. 30 per share for the years
ended on March 31, 2007, 2008 and 2009,
respectively.]
Additional Tax on Proposed Dividend [Note 31]                              946.0     1,206.8     1,406.9
Additional Tax on Dividend 2007-08 - Credit taken
[Note 31]                                                                     -            -     (140.5)
Dividend pertaining to :                                                      -
FY 2007-08 paid during FY 2008-09 [Note 31]                                   -            -         5.0
                                                                       15,703.8     24,362.5    22,825.4
EARNINGS PER SHARE (Face Value Rs. 10)
[Note 25]:
- Basic                                                                     62.7       89.9         80.1
- Diluted                                                                   58.2       85.3         78.7
Notes forming part of the Accounts                         14
Significant Accounting Policies                            15

Schedules 1 to 15 annexed hereto form part of the Financial Statements.




                                                     156
HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED
CASH FLOW STATEMENT

                                                                          For the Year ended
                                                                  March 31, March 31, March 31,
                                                                  2007        2008           2009
                                                                            (Rs. In Million)
A]   CASH FLOW FROM OPERATING ACTIVITIES

     Profit before tax                                              19,677.8       33,735.0      32,190.4
     Adjustments for:
     Depreciation and Amortisation                                     249.0          166.0         174.6
     Provision for Contingencies                                       250.0          320.0         500.0
     Translation loss on foreign currency monetary assets and
     liabilities and mark to market loss on derivatives                      -             -      2,611.6
     Employee Stock Option Expense (Net of options
     exercised)                                                          (2.2)             -             -
     Provision for Employee Benefits                                    116.0          135.2         111.0
     Profit on Sale of Investments                                  (3,160.1)      (7,695.2)       (252.3)
     Profit on Sale of Freehold land and Properties acquired in
     satisfaction of debts.                                            (92.7)          (9.3)              -
     Profit on Sale of Properties acquired and leased                  (15.5)              -              -
     Surplus from deployment in Cash Management Schemes
     of Mutual Funds                                                 (387.6)       (1,117.8)     (1,579.7)
     (Profit) / Loss on Sale of Fixed Assets                          (42.6)             1.7          (5.9)
     Operating Profit before Working Capital changes                16,592.1        25,535.6      33,749.7
     Adjustments for:
     Current Assets                                                     470.8      (1,249.5)     (2,821.8)
     Current Liabilities                                              3,647.6        4,233.8       6,653.0
     Cash generated from operations                                  20,710.5       28,519.9      37,580.9
     Advance tax paid                                               (4,290.5)      (9,511.8)     (9,781.6)
     Net cash from operating activities                              16,420.0       19,008.1      27,799.3

B]   CASH FLOW FROM INVESTING ACTIVITIES

     Purchase of Fixed Assets                                         (259.9)        (157.4)       (123.5)
     Sale of Fixed Assets                                               381.4           67.7          31.9
                                                                        121.5         (89.7)        (91.6)
     Consideration received towards protection of expected loss
     on shares                                                              -          147.9             -
     Investments in Subsidiaries                                    (2,112.4)      (5,823.7)     (4,155.0)
     Investment in Cash Management Schemes of Mutual
     Funds                                                        (401,450.0)    (576,600.0)   (870,590.0)
     Other Investments                                              (3,523.2)     (22,119.0)    (10,707.0)
     Sale proceeds of Properties acquired and leased                    144.0              -             -
     Sale proceeds of Investments :
       - in subsidiary companies                                        56.6         4,737.4             -
       - in Cash Management Schemes of Mutual Funds                405,567.6       566,907.8     848,904.3
       - in other companies                                          7,020.3         9,038.1       2,493.1
     Net cash from / (used) in investing activities                  5,824.4      (23,801.2)    (34,146.2)

C]   CASH FLOW FROM FINANCING ACTIVITIES




                                                    157
                                                                     For the Year ended
                                                            March 31, March 31, March 31,
                                                            2007         2008         2009
Share Capital - Equity                                             34.4         310.3         4.2
Securities Premium                                              2,889.3      46,889.0       510.9
Premium paid on FRNs and FCCBs                                   (24.0)       (741.9)           -
Borrowings (Net)                                               98,387.7    120,939.6   138,530.1
Loans disbursed (Net)                                       (115,300.6) (165,062.3) (117,632.0)
Corporate Deposits (Net)                                        (845.7)       3,138.8     2,336.7
Dividend paid - Equity Shares                                 (4,991.3)     (5,566.1)   (7,106.0)
Tax paid on Dividend                                            (700.0)       (946.0)   (1,066.3)
Shelter Assistance Reserve - utilisation                         (46.8)        (54.3)      (52.2)
Net cash (used in) / from financing activities               (20,597.0)     (1,092.9)    15,525.4
Net Increase / (Decrease) in cash and cash equivalents          1,647.4     (5,886.0)     9,178.5

Cash and cash equivalents as at the beginning of the year     12,016.2     13,663.6       7,777.6
 [ As per Note 8 (ii) ]
Cash and cash equivalents as at the end of the year           13,663.6      7,777.6     16,956.1
 [ As per Note 8 (ii) ]
                                                               1,647.4     (5,886.0)      9,178.5




                                               158
           HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED
   SCHEDULES ANNEXED TO AND FORMING PART OF THE FINANCIAL STATEMENTS

SCHEDULE 1

SHARE CAPITAL

                                                                                      As at
                                                                     March        March        March 31,
                                                                     31, 2007     31, 2008     2009
                                                                                (Rs. In Million)
AUTHORISED
Equity Shares of Rs 10 each(Number of Shares:
FY 06-07 - 275.0 million;
FY 07-08 - 325.0 million;
FY 08-09 - 325.0 million)                                            2,750.0     3,250.0      3,250.0
                                                                     2,750.0     3,250.0      3,250.0

ISSUED, SUBSCRIBED AND PAID - UP
Equity Shares of Rs. 10 each (Number of Shares:
FY 06-07 - 253.0 million;
FY 07-08 - 284.0 million;
FY 08-09 - 284.5 million )                                           2,530.0     2,840.3      2,844.5
 (Includes 122.0 million Equity Shares of Rs. 10 each, allotted as
fully paid-up Bonus Shares out of Securities Premium Account
and Capital Redemption Reserve)
                                                                     2,530.0     2,840.3      2,844.5




                                                    159
SCHEDULE 2

RESERVES AND SURPLUS [Notes 14, 16, 18, 19 and 20]

                                                                                      As at
                                                                     March       March        March 31,
                                                                     31, 2007    31, 2008     2009
                                                                                (Rs. In Million)
SPECIAL RESERVE No. I
Opening Balance                                                        643.5         512.3        512.3
Less : Transfer to Provision for Contingencies                         131.2             -            -
[Net of Deferred Tax of Rs. 218.8 million for the year ended March
31, 2007]
                                                                       512.3         512.3        512.3
SPECIAL RESERVE No. II
Opening Balance                                                      16,749.5     21,409.5      24,959.5
Add : Transfer from Profit and Loss Account                           4,660.0      3,550.0       4,000.0
                                                                     21,409.5     24,959.5      28,959.5

GENERAL RESERVE
Opening Balance                                                      18,023.3     21,629.3      31,678.3
Add : Adjusted during the year in accordance with the Accounting            -         54.3             -
Standard on Employee Benefits (AS 15) (Revised 2005)
[Net of Deferred Tax FY 06-07 - Rs. Nil ; FY 07-08 - Rs. 27.4
million and FY 08-09 - Rs. Nil]
Less : Utilised in accordance with AS 15 (Revised)                      75.7             -                -
[Net of Deferred Tax FY 06-07 - Rs. 38.4 million ; FY 07-08 - Rs.
Nil and FY 08-09 - Rs. Nil]
                                                                     17,947.6     21,683.6      31,678.3
Add : Transfer from Profit and Loss Account                           3,681.7      9,994.7       5,530.4
                                                                     21,629.3     31,678.3      37,208.7
ADDITIONAL RESERVE (u/s 29C of the NHB Act)
Opening Balance                                                             -        800.0       2,972.8
Less : Utilised during the Year                                             -        277.2       1,188.2
[Net of Deferred Tax FY 06-07 - Rs. Nil ; FY 07-08 - Rs. 142.8
million and FY 08-09 - Rs. 611.8 million]
                                                                           -         522.8       1,784.6
Add : Transfer from Profit and Loss Account                            800.0       2,450.0       3,420.0
                                                                       800.0       2,972.8       5,204.6
SECURITIES PREMIUM
Opening Balance                                                       6,659.3      8,519.7      56,391.4
Add : Received during the year                                        2,889.3     46,889.0         510.9
Add : Premium on redemption payable on FCCBs, written back on               -      1,191.7          36.7
conversion
                                                                      9,548.6     56,600.4      56,939.0
Less : Utilised during the year                                       1,028.9        209.0         431.3
                                                                      8,519.7     56,391.4      56,507.7
EMPLOYEE STOCK OPTION OUTSTANDING
Opening Balance                                                           2.3          0.1           0.1
Less : Net Charge for the year                                            0.2            -             -
                                                                          2.1          0.1           0.1
Less : Options exercised                                                  2.0            -             -
                                                                          0.1          0.1           0.1
SHELTER ASSISTANCE RESERVE


                                                   160
                                                                   As at
                                                    March      March        March 31,
                                                    31, 2007   31, 2008     2009
Opening Balance                                        109.4        112.6        118.3
Add : Transfer from Profit and Loss Account             50.0         60.0         70.0
                                                       159.4        172.6        188.3
Less : Utilised during the year                         46.8         54.3         52.2
                                                       112.6        118.3        136.1

CAPITAL RESERVE                                          0.4         0.4           0.4
                                                    52,983.9   116,633.1     128,529.4




                                              161
SCHEDULE 3

LOAN FUNDS [ Notes 1 to 6]

                                                                                 As at
                                                               March         March        March 31,
                                                               31, 2007      31, 2008     2009
                                                                           (Rs. In Million)
LOANS
Asian Development Bank                                           3,994.1       3,779.1      3,776.7
DEG - Deutsche Investitions-Und Entwicklungsgesellschaft MbH     2,202.7       1,806.8      1,999.1
International Finance Corporation                                8,866.1       8,630.9      9,599.9
Kreditanstalt fur Wiederaufbau                                     711.3         681.9        608.8
Syndicated Loans - International                                 4,429.8             -            -
National Housing Bank                                            4,863.9       7,197.4     11,789.0
Scheduled Banks and Financial Institutions                     181,318.2     168,632.0    199,031.9
Others (Finance Lease)                                               0.1             -            -
                                                               206,386.2     190,728.1    226,805.4

FOREIGN CURRENCY CONVERTIBLE BONDS                              21,793.4       5,163.3      5,575.6
 (Redeemable in 2010) (Unsecured)

BONDS                                                            1,136.4       1,109.8      1,046.5
 (Redeemable at par between 2009 and 2022)

DEBENTURES
 Non-convertible Debentures                                    184,813.5     325,529.0    323,949.0
 Floating Rate Notes - International (Redeemable in 2007)        4,351.0             -            -

Under a Line from Kreditanstalt fur Wiederaufbau (Unsecured)       411.7         411.7        411.7
Loans from Scheduled Banks (Unsecured) - Short Term             13,443.9      20,857.8     20,926.0
Commercial Paper (Unsecured)                                    22,000.0      21,000.0     52,350.0
Non-Convertible Subordinated Debentures (Unsecured)             13,750.0      13,750.0     13,750.0

DEPOSITS (Unsecured)                                           103,693.5     112,782.3    193,586.4
Interest Accrued and Due                                           150.7         180.2        160.2

                                                               571,930.3     691,512.2    838,560.8




                                                  162
SCHEDULE 4

LOANS [Note 7]

                                                                                    As at
                                                                     March      March        March 31,
                                                                     31, 2007   31, 2008     2009
                                                                              (Rs. In Million)
Individuals                                                          373,624.5 483,781.4       548,894.4

Corporate Bodies                                                     178,585.1    231,017.8     284,165.3

Others                                                                 16,834.0    18,478.6      18,921.4
                                                                     569,043.6 733,277.8        851,981.1
Note: Investments in Debentures, Pass Through Certificates, Security Receipts and Corporate Deposits
amounting Rs.12,911.9, Rs. 11,062.9 and Rs. 14,756.9 million, as at March 31, 2007, 2008 and 2009
respectively, are towards financing Real Estate Projects. The Debentures, Pass Through Certificates and
Security Receipts are reflected in Schedule 5 and the Corporate Deposits are shown under Current Assets in
Schedule 6.




                                                   163
SCHEDULE 5

INVESTMENTS (At Cost)

                                                                                      As at
                                                                       March 31, March          March 31,
                                                                       2007        31, 2008     2009
                                                                                (Rs. In Million)
Equity Shares - Subsidiaries @                                         9,564.4     14,106.1     18,261.1
Equity Shares - Associate Companies @                                  2,860.9     15,419.5     15,417.3
Equity Shares - Other Companies @                                      6,446.9     9,090.0      9,837.6
Warrants - Associate Companies @                                       -           -            4,009.2
Convertible Preference Shares @                                        -           589.6        636.7
Cumulative Redeemable Preference Shares – Subsidiaries @               125.2       -            -
Cumulative Redeemable Preference Shares - Others @                     365.2       325.2        202.5
Convertible Debentures - Associate Companies @                         -           -            20.0
Convertible Debentures - Others @                                      20.8        -            80.0
Debentures and Bonds - for Financing Real Estate Projects –
Subsidiaries @                                                         100.0        -            -
Debentures and Bonds - for Financing Real Estate Projects -
Others @                                                               3,241.2      2,481.2      2,283.3
Debentures and Bonds - Others (See Note 1 below)                       1,721.4      2,260.9      1,595.9
Pass Through Certificates and Security Receipts - for Financing        1,089.1      1,119.6      960.9
Real Estate Projects @
Security Receipts - Others @                                           -            99.6         88.3
Government Securities @                                                3,216.5      3,092.5      6,524.6
Mutual Funds (See Note 2 below)                                        3,919.8      14,009.2     37,324.7
Venture Funds and Other Funds @                                        2,938.6      5,682.2      6,468.0
Properties (Net of Depreciation)                                       1,448.1      1,422.1      1,830.6
                                                                       37,058.1     69,697.7     105,540.7
Less : Provision for Diminution in Value of Investments                395.8        547.6        853.2
                                                                       36,662.3     69,150.1     104,687.5

                                Market      Book          Market      Book          Market      Book
                                Value       Value         Value       Value         Value       Value
                                   Rs. In million             Rs. In million            Rs. In million
Aggregate of Quoted              47,783.7     5,817.4      85,548.4     22,005.7     59,428.0     21,860.0
Investments
Aggregate of Investments                      3,436.5                     3,192.5                      7,258.0
listed but not quoted
Aggregate of Investments in      3,603.0 *    3,843.4     13,750.2 *     13,798.5   37,027.0 *        37,324.6
Unquoted Mutual Funds
Aggregate of Unquoted                        22,116.9                    28,731.3                     36,414.3
Investments (Others)
Properties                                    1,448.1                     1,422.1                      1,830.6
                                             36,662.3                    69,150.1                    104,687.5
* - Represents repurchase
price.
@ - Long Term Investments
Notes :
1) Debentures and Bonds -                       688.7                     1,228.2                       563.2
Others held as current
investments
2) Mutual Funds includes                      2,510.0                    13,220.0                     36,590.0



                                                   164
                              Market   Book          Market   Book        Market   Book
                              Value    Value         Value    Value       Value    Value
deployment in units of Cash
Management Schemes
3) Investments subject to                769.8                 16,055.1             14,918.3
lock - in period or other
restrictive covenants




                                               165
SCHEDULE 6

CURRENT ASSETS, LOANS AND ADVANCES [ Notes 2 and 8]

                                                                                        As at
                                                                      March         March        March 31,
                                                                      31, 2007      31, 2008     2009
                                                                                  (Rs. In Million)
CURRENT ASSETS

Income Accrued on Investments                                             365.3         348.5        738.2
Interest Accrued on Deposits                                              287.8         440.1        560.3
Sundry Debtors (Unsecured; Considered good)                                50.2          20.1        277.7
Cash and Bank Balances :
Cash and Cheques on Hand                                                1,014.3         837.1        694.9
With Scheduled Banks :
Current Accounts                                                        1,765.4       2,772.0      7,434.3
Deposit Accounts                                                       10,953.2       4,167.6      7,554.4
With Non - Scheduled Banks in Current Accounts                                -             -          1.8
With Reserve Bank of India                                                  0.6           0.6            -
With National Housing Bank                                                    -             -      1,500.0

                                                                       14,436.8       8,586.0     18,761.6
LOANS AND ADVANCES

Instalments due from borrowers                                          2,192.6       2,865.0      4,639.5
Advances recoverable in cash or in kind or for value to be received    10,183.5       9,459.6     17,328.4
Corporate Deposits                                                     19,832.6      17,315.5     14,978.8

                                                                       46,645.5      38,226.1     55,708.3

SCHEDULE 7

CURRENT LIABILITIES AND PROVISIONS [Notes 2, 9, 14 and 18]

                                                                      As at
                                                                      March        March        March 31,
                                                                      31, 2007     31, 2008     2009
                                                                      (Rs. In Million)
CURRENT LIABILITIES
Interest Accrued but not Due                                            9,346.2      11,473.8     15,970.0
Sundry Creditors                                                        1,650.6         894.3      6,632.6
Advance Payments                                                          636.6       3,578.0        824.8
Other Liabilities                                                       3,216.3       3,123.4      5,406.3
                                                                       14,849.7      19,069.5     28,833.7
PROVISIONS
Proposed Dividend                                                       5,566.1       7,101.0      8,533.6
Additional Tax on Dividend                                                946.0       1,206.8      1,406.9
Provision for premium payable on redemption of FCCBs                    2,302.2         577.6        972.2
Provision for Contingencies                                             4,096.7       4,703.0      6,215.2
Provision for Employee Benefits                                           508.2         561.8        672.9
                                                                       28,268.9      33,219.7     46,634.5




                                                    166
SCHEDULE 8

FIXED ASSETS              GROSS BLOCK                                     DEPRECIATION AND AMORTISATION               NET BLOCK
                          As at                            As at          As at                          As at        As at        As at
                          March     Additions Deductions   March          March       For the Deductions March        March        March
                          31, 2006                         31, 2007       31, 2006    Year               31, 2007     31, 2007     31, 2006
                                   Rs. In Million                             Rs. In Million                          Rs. In Million
TANGIBLE
Land :
Freehold                      306.9         -       94.1       212.8              -        -           -          -       212.8        306.9
Leasehold                      23.0      11.4          -        34.4            3.5      0.4           -        3.9        30.5         19.5
Buildings :
Own Use                     1,775.9     103.4      161.2      1,718.1         222.1     28.0        16.2      233.9      1,484.2     1,553.8
Under Operating Lease         140.3         -      140.3            -          10.2      1.7        11.9          -            -       130.1

Leasehold Improvements         53.7       5.6        1.5        57.8           25.3     10.8         1.3       34.8         23.0        28.4

Computer Hardware             389.0      53.7       33.1       409.6          340.7     40.1        33.1      347.7         61.9        48.3


Furniture and Fittings,
Office Equipment etc.:
Own Use                       719.5      71.1       25.4       765.2          462.3     57.8        20.5      499.6       265.6        257.2
Under Operating Lease          15.4         -          -        15.4            8.1      1.2           -        9.3         6.1          7.3

Vehicles :
Owned                          48.1      14.7        8.4        54.4           29.3      8.1         6.6       30.8         23.6        18.8
Leased                          5.1         -          -         5.1            4.8      0.2           -        5.0          0.1         0.3

Leased Assets :
Plant & Machinery           1,402.5         -       18.7      1,383.8       1,400.0      2.4        18.7    1,383.7          0.1         2.5
Vehicles                      247.7         -          -        247.7         247.6        -           -      247.6          0.1         0.1

Lease Terminal                    -         -          -              -      (96.4)        -      (74.7)     (21.7)         21.7        96.4
Adjustment




                                                                  167
FIXED ASSETS                   GROSS BLOCK                                          DEPRECIATION AND AMORTISATION                       NET BLOCK
                               As at                                  As at         As at                          As at                As at        As at
                               March     Additions Deductions         March         March       For the Deductions March                March        March
                               31, 2006                               31, 2007      31, 2006    Year               31, 2007             31, 2007     31, 2006
                                        Rs. In Million                                  Rs. In Million                                  Rs. In Million
INTANGIBLE

Computer Software                   26.7           -              -         26.7          23.2        2.5             -          25.7          1.0           3.5
                                 5,153.8       259.9          482.7      4,931.0       2,680.7      153.2          33.6       2,800.3      2,130.7       2,473.1

(*) Assets held for disposal

Notes:
1)     Buildings include Rs. 0.1 million, Rs. 0.1 million and Rs. 0.1 miilion, for the years ended March 31, 2007, 2008 and 2009 respectively, being the cost of
       shares in Co-operative Housing Societies and Limited Companies.
2)     Depreciation charge for the financial year, excludes Rs. 21.3 million, Rs. 22.9 million and Rs. 26.3 million, for the year ended March 31, 2007, 2008
       and 2009 respectively, being depreciation charge on Investment in Properties.
3)     Freehold land includes Properties amounting to Rs. 63.5 million, Rs. 7.7 million and Rs. 7.7 million, for the year ended March 31, 2007, 2008 and 2009
       respectively, acquired in satisfaction of debts.

FIXED ASSETS                   GROSS BLOCK                                          DEPRECIATION AND AMORTISATION                       NET BLOCK
                               As at                                  As at         As at                          As at                As at        As at
                               March     Additions Deductions         March         March       For the Deductions March                March        March
                               31, 2007                               31, 2008      31, 2007    Year               31, 2008             31, 2008     31, 2007
                                        Rs. In Million                                  Rs. In Million                                  Rs. In Million
TANGIBLE

Land :
Freehold                           212.8         0.2           55.9        157.1             -          -              -            -        157.1        212.8
Leasehold                           34.4           -              -         34.4           3.9        0.4            0.1          4.2         30.2         30.5

Buildings :
Own Use                          1,718.1        44.8              -      1,762.9        233.9        28.7            0.1        262.5      1,500.4       1,484.2
Under Operating Lease                  -           -              -            -            -           -              -            -            -             -

Leasehold Improvements              57.8        12.6            0.9         69.5          34.8       10.7            0.4         45.1         24.4          23.0




                                                                              168
FIXED ASSETS                   GROSS BLOCK                                     DEPRECIATION AND AMORTISATION               NET BLOCK
                               As at                            As at          As at                          As at        As at        As at
                               March     Additions Deductions   March          March       For the Deductions March        March        March
                               31, 2007                         31, 2008       31, 2007    Year               31, 2008     31, 2008     31, 2007
                                        Rs. In Million                             Rs. In Million                          Rs. In Million

Computer Hardware                  409.6      42.6       18.9       433.3          347.7     38.3        18.7      367.3         66.0        61.9


Furniture and Fittings,                -         -          -                          -        -           -
Office Equipment etc.:
Own Use                            765.2      36.5       12.0       789.7          499.6     51.7         9.4      541.9       247.8        265.6
Under Operating Lease               15.4         -          -        15.4            9.3      1.0         0.1       10.2         5.2          6.1

Vehicles :                             -         -          -                          -        -           -
Owned                               54.4      18.5        4.3        68.6           30.8     10.6         3.2       38.2         30.4        23.6
Leased                               5.1         -        5.1           -            5.0      0.1         5.1          -            -         0.1

Leased Assets :
Plant & Machinery      [*]       1,383.8         -       21.6      1,362.2       1,383.7        -        21.5    1,362.2            -         0.1
Vehicles [*]                       247.7         -       83.9        163.8         247.6        -        83.9      163.7          0.1         0.1

Lease Terminal                         -         -          -              -      (21.7)        -           -     (21.7)         21.7        21.7
Adjustment

INTANGIBLE

Computer Software                   26.7       2.2        0.1         28.8          25.7      1.6         0.1       27.2          1.6         1.0
                                 4,931.0     157.4      202.7      4,885.7       2,800.3    143.1       142.6    2,800.8      2,084.9     2,130.7

(*) Assets held for disposal




                                                                       169
FIXED ASSETS              GROSS BLOCK                                     DEPRECIATION AND AMORTISATION                 NET BLOCK
                          As at                            As at          As at                          As at          As at        As at
                          March     Additions Deductions   March          March       For the Deductions March          March        March
                          31, 2008                         31, 2009       31, 2008    Year               31, 2009       31, 2009     31, 2008
                                   Rs. In Million                             Rs. In Million                                 Rs. In Million
TANGIBLE
Land :
Freehold                      157.1         -          -       157.1              -        -           -          -         157.1        157.1
Leasehold                      34.4         -          -        34.4            4.2      0.4           -        4.6          29.8         30.2

Buildings :
Own Use                     1,762.9       0.4        0.6      1,762.7         262.5     28.7         0.3      290.9        1,471.8     1,500.4

Leasehold Improvements         69.5      15.3          -        84.8           45.1     12.3         0.1       57.3           27.5        24.4

Computer Hardware             433.3      45.3       33.7       444.9          367.3     43.2        33.5      377.0           67.9        66.0


Furniture and Fittings,
Office Equipment etc.:
Own Use                       789.7      41.1       12.5       818.3          541.9     49.2         9.9      581.2         237.1        247.8
Under Operating Lease          15.4         -          -        15.4           10.2      0.8           -       11.0           4.4          5.2

Vehicles :                        -         -          -                          -        -           -
Owned                          68.6      18.2        8.1        78.7           38.2     12.4         6.8       43.8           34.9        30.4

Leased Assets :
Plant & Machinery (*)       1,362.2         -        6.2      1,356.0       1,362.2        -         6.2    1,356.0              -           -
Vehicles          (*)         163.8         -          -        163.8         163.7        -           -      163.7            0.1         0.1

Lease Terminal                    -         -          -              -      (21.7)        -      (21.7)            -            -        21.7
Adjustment

INTANGIBLE




                                                                  170
FIXED ASSETS                   GROSS BLOCK                                     DEPRECIATION AND AMORTISATION               NET BLOCK
                               As at                              As at        As at                          As at        As at        As at
                               March       Additions Deductions   March        March       For the Deductions March        March        March
                               31, 2008                           31, 2009     31, 2008    Year               31, 2009     31, 2009     31, 2008
                                          Rs. In Million                           Rs. In Million                               Rs. In Million
Computer Software                    28.8         3.2       9.6         22.4         27.2        1.3      9.6       18.9          3.5           1.6
                                  4,885.7       123.5      70.7      4,938.5      2,800.8      148.3     44.7    2,904.4      2,034.1       2,084.9

(*) Assets held for disposal




                                                                         171
SCHEDULE 9

OPERATING INCOME [ Note 11]

                                                                            For the Year ended
                                                                    March       March        March 31,
                                                                    31, 2007    31, 2008     2009
                                                                              (Rs. In Million)
Interest Income :
  Interest on Loans                                                  48,502.3    72,541.2     99,310.4
(Includes Exchange Difference Rs. 28.8 million DR, Rs. 275.8
million DR and Rs. 32.1 million CR , for the year ended March 31,
2007, 2008 and 2009, respectively)
  Other Interest                                                      4,638.0     5,298.7      5,552.3
                                                                     53,140.3    77,839.9    104,862.7
Surplus from deployment in Cash Management Schemes of Mutual            387.6     1,117.8      1,579.7
Funds
Dividends                                                             1,179.0       686.4      1,956.6
Income from Leases                                                      109.5       154.6        147.2
                                                                     54,816.4    79,798.7    108,546.2

SCHEDULE 10

INTEREST AND OTHER CHARGES [ Note 17 ]

                                                                            For the Year ended
                                                                    March       March        March 31,
                                                                    31, 2007    31, 2008     2009
                                                                              (Rs. In Million)
INTEREST
(Includes Exchange Difference Rs. 63.8 million CR, Rs. 417.1
million CR and Rs. 2,382.7 million DR, for the year ended on
March 31, 2007, 2008 and 2009, respectively)
Loans                                                                15,795.6    18,137.4     23,316.4
Deposits                                                              8,605.2    10,051.3     14,708.0
Bonds                                                                11,891.8    22,911.2     35,704.0
                                                                     36,292.6    51,099.9     73,728.4
OTHER CHARGES                                                           375.9       328.9        596.1
(Includes Exchange Difference Rs. 0.5 million DR, Rs. 0.5 million
DR and Rs. 0.9 million DR, for the year ended on March 31, 2007,
2008 and 2009, respectively.)
                                                                     36,668.5    51,428.8     74,324.5



SCHEDULE 11




                                                  172
STAFF EXPENSES [ Note 14,16 and 19 ]

                                                               For the Year ended
                                                       March       March        March 31,
                                                       31, 2007    31, 2008     2009
                                                                 (Rs. In Million)
Salaries and Bonus                                         757.1        954.9      1,118.0
Contribution to Provident Fund and Other Funds             105.6        163.2        206.7
Staff Training and Welfare Expenses                         50.0         59.8         61.4
                                                           912.7      1,177.9      1,386.1

SCHEDULE 12

ESTABLISHMENT EXPENSES [ Note 16 ]

                                                               For the Year ended
                                                       March       March        March 31,
                                                       31, 2007    31, 2008     2009
                                                                 (Rs. In Million)
Rent                                                       126.7        161.6        200.6
Rates and Taxes                                             25.8         24.5         29.0
Repairs and Maintenance – Buildings                         26.5         27.2         29.7
General Office Expenses                                     13.9         13.5         12.1
Electricity Charges                                         58.2         70.6         83.1
Insurance Charges                                            6.4          5.7          5.1
                                                           257.5        303.1        359.6

SCHEDULE 13

OTHER EXPENSES [ Note 16 and 17]

                                                               For the Year ended
                                                       March       March        March 31,
                                                       31, 2007    31, 2008     2009
                                                                 (Rs. In Million)
Travelling and Conveyance                                   91.4        104.6        111.1
Printing and Stationery                                     44.3         49.8         58.3
Postage, Telephone and Fax                                 135.1        145.7        141.8
Advertising                                                294.8        366.1        353.8
Repairs and Maintenance - Other than Buildings              41.0         43.7         49.7
Office Maintenance                                          65.4         73.5         84.8
Legal Expenses                                              64.9        111.8        111.1
Computer Expenses                                           34.6         35.1         62.3
Directors' Fees and Commission                               3.8          6.5          6.5
Miscellaneous Expenses                                     232.6        243.4        244.1
Auditors' Remuneration                                      13.6         12.2         17.9
                                                         1,021.5      1,192.4      1,241.4




                                                 173
SCHEDULE 14

NOTES FORMING PART OF THE ACCOUNTS

1.   The Corporation has availed a loan of USD 100 million from the Asian Development Bank (Loan II).
     In respect of tranches 1 and 2 aggregating to USD 60 million, as per 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. 2,000 million by way of a term loan and Rs. 1,000 million through the
     issue of bonds which have been subscribed by the bank.

     In respect of tranche 3 of USD 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.

2.   (i) The Corporation had raised USD 500 million through the issue of zero coupon Foreign Currency
         Convertible Bonds (FCCBs).The bonds are convertible at any time into equity shares of the
         Corporation of face value of Rs. 10 each from August 24, 2006 upto July 29, 2010, at the option of
         the holders, at Rs. 1,399.1 per equity share representing a conversion premium of 50% over the
         initial reference share price. The premium payable on redemption of the bonds is charged to the
         Securities Premium Account over the life of the bonds. The bonds are redeemable on September
         27, 2010 with a yield to maturity of 4.6% per annum. Upto March 31, 2007, 2008 and 2009, Nil,
         76.4% and 77.9% respectively, of the Bonds amounting to USD Nil, USD 381.9 million and USD
         389.4 million respectively, representing Nil, 11.9 million and 12.2 million Equity shares
         respectively, have been converted pursuant to the exercise of options by the bondholders of the
         Corporation. The Corporation has undertaken currency options and forward contracts amounting
         to USD Nil, USD Nil and USD 110.6 million, for the years ended on March 31, 2007, 2008 and
         2009 respectively, to cover the net foreign currency exposure in the outstanding FCCBs.

     (ii) The Corporation has foreign currency borrowings (excluding FCCBs) of USD 1,068.5 million,
          1,079.6 million and USD 984.6 million equivalent as on March 31, 2007, 2008 and 2009,
          respectively. The Corporation has undertaken principal only swaps, currency options and forward
          contracts on a notional amount of USD 777 million, USD 808 million and USD 892.9 million
          equivalent as on March 31, 2007, 2008 and 2009 respectively to hedge the foreign currency risk.
          Further, interest rate swaps on a notional amount of USD 391 million, USD 230 million and USD
          215 million equivalent are outstanding as on March 31, 2007, 2008 and 2009, respectively, which
          have been undertaken to hedge the interest rate risk on the foreign currency borrowings. The
          Corporation’s net foreign currency exposure on borrowings net of risk management arrangements
          is USD 100.2 million, USD 447.1 million and USD Nil as on March 31, 2007, 2008 and 2009,
          respectively.

         As a part of asset liability management and on account of the increasing response to the
         Corporation’s Adjustable Rate Home Loan product as well as to reduce the overall cost of
         borrowings, the Corporation has entered into interest rate swaps wherein it has converted its fixed
         rate rupee liabilities of a notional amount of Rs. 72,650 million, Rs. 122,650 million and Rs.
         118,150 million as on March 31, 2007, 2008 and 2009, respectively for varying maturities into
         floating rate liabilities linked to various benchmarks. In addition, the Corporation has entered into
         cross currency swaps of a notional amount of USD 643 million, USD 652 million and USD 733
         million equivalent for the year ended March 31, 2007, 2008 and 2009, respectively, wherein it has
         converted its rupee liabilities into foreign currency liabilities and the interest rate is linked to the
         benchmarks of respective currencies.

     (iii) Monetary assets and liabilities in foreign currencies net of risk management arrangement are
           revalued at the rate of exchange prevailing at the year end. Cross currency swaps have been


                                                      174
          marked to market at the year end. For forward contracts or instruments that are in substance,
          forward exchange contracts, the exchange differences on such contracts are being amortised over
          the life of contracts. Loss on mark to market of cross currency interest rates swaps is recognised
          in the Profit and Loss Account and the net gains is not recognised keeping in view the principles
          of prudence as enumerated in Accounting Standard (AS1) notified by the Companies (Accounting
          Standards) Rules, 2006.

          The amount of exchange difference in respect of such contracts to be recognised as expense in the
          Profit and Loss Account over subsequent accounting periods is Rs. 455.4 million, Rs. 977.8
          million and Rs 7617.3 million respectively for the year ended March 31, 2007, 2008 and 2009,
          respectively. The period is ranging upto 3 years.

     (iv) In FY 2006-07, the net gain on year end translation of foreign currency assets and liabilities
          amounting to Rs. 43.1 million [net of loss on mark to market of derivatives of Rs. 1,030.4 million ]
          has been credited to the Provision for Contingencies Account.

         In FY 2007-08, the net gain on year end translation of foreign currency monetary assets and
         liabilities amounting to Rs. 86.7 million was credited to Provision for Contingencies Account
         and gain on mark to market of derivatives amounting to Rs. 2,935.9 million was included under
         Advance Payments (Schedule 7 ) and not recognised in the Profit and Loss account.

         In FY 2008-09, a net loss of Rs 2,611.6 million has been recognised in the Profit and Loss Account
         for the year, being net loss on year end translation of foreign currency monetary assets and
         liabilities and mark to market loss on derivatives as shown below:

                                                                                                 Rs in Million
           Amortisation of premium on Options and Forward Contracts                                    3,266.4
           Net Gain on translation of foreign currency denominated assets
           and foreign currency borrowings                                                           (1,179.9)
           Mark to Market loss on derivatives (cross currency interest rates           3,461.0
           swaps, etc.)
           Gain on derivatives revaluation not recognised in the previous year       (2,935.9)
                                                                                                        525.1
                                                                                                      2,611.6

3.    (i) Out of the total Bonds issued by the Corporation, Bond certificates aggregating to Rs.
          1,481.8 million, Rs. 1,473.3 million and Rs. 1,500 million have been purchased under a buy-back
          arrangement as on March 31, 2007, 2008 and 2009 respectively. 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 ended March
           31, 2007, 2008 and 2009 was Rs. 22,000 million, Rs. 61,500 million and Rs. 70,550 million
           respectively.

4.    Save and except the floating charge created in favour of the depositors in respect of ‘public deposits’
      as defined in Paragraph 2(1)(w) of the Housing Finance Companies (NHB) Directions, 2001, on the
      Statutory Liquid Assets maintained in terms of sub-sections (1) & (2) of Section 29B of the National
      Housing Bank Act, 1987;

      (i) Loans are secured by Promissory Notes and/or a negative lien on all the assets of the Corporation.

      (ii) Bonds are in the nature of Promissory Notes and are secured by a negative lien on all the assets of
           the Corporation.

      (iii) Non-Convertible Debentures amounting to Rs. 184,813.5 million, Rs. 325,529 million and Rs.
            323,949 million as on March 31, 2007, 2008 and 2009, respectively, are secured by a negative lien


                                                      175
         on all the assets of the Corporation and by a mortgage. These debentures are redeemable at par
         between 2009 and 2019.

5.   During the FY 2006-07, 2007-08 and 2008-09, the Corporation raised Rs. 4,750.0 million, Rs. Nil and
     Rs. Nil respectively through the issue of long term Unsecured Redeemable Non-Convertible
     Subordinated Debentures (subordinated debt). As at March 31, 2007, 2008 and 2009 the Corporation’s
     outstanding subordinated debt is Rs. 13,750 million. These Debentures are redeemable at par between
     2011 and 2017. The debt is subordinated to present and future senior indebtedness of the Corporation
     and qualifies as Tier II capital under National Housing Bank (NHB) guidelines for assessing capital
     adequacy. Based on the balance term to maturity as at March 31, 2007, 2008 and 2009, 94.18%,
     88.36% and 82.55% respectively of the book value of the subordinated debt is considered as Tier II
     capital for the purpose of capital adequacy computation.

6.   (i) Loan Funds includes Rs. 14.9 million, Rs. 30.01 million and Rs. 110.2 million, as at March 31,
         2007, 2008 and 2009, respectively from Directors.

     (ii) Deposits as at March 31, 2007, 2008 and 2009 include Rs. 61,185.4 million, Rs. 59,509.8 million
          and Rs. 113,395.8 million respectively, due within one year.

     (iii) Deposits include Rs. 20 million, Rs. 116.2 million and Rs. 318.5 million, as at March 31, 2007,
           2008 and 2009 respectively, due to subsidiary companies.

7.   (i) Loans granted by the Corporation are secured or partly secured by:

         (a)   Equitable mortgage of property and / or
         (b)   Pledge of shares, units, other securities, assignment of life insurance policies and / or
         (c)   Hypothecation of assets and / or
         (d)   Bank guarantees, company guarantees or personal guarantees and / or
         (e)   Negative lien and / or
         (f)   Assignment of hire purchase receivables and / or
         (g)   Undertaking to create a security.

     (ii) In respect of loans aggregating to Rs. 2,880 million, Rs. 2,000 million and Rs. 1,358.1 million as
          at March 31, 2007, 2008 and 2009 respectively, the Corporation has been assigned the right to
          future receivables along with a power of attorney authorising the Corporation, inter-alia, to obtain
          possession of the property in case of default.

     (iii) Loans include Rs. 181.1 million, Rs. 293.4 million and Rs. 334.1 million as at March 31, 2007,
           2008 and 2009 respectively, in respect of properties held for disposal under Securitisation and
           Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

8.   (i) There are no Sundry Debtors which are outstanding for a period over six months as at the close of
         any financial year. Sundry Debtors include amounts due from subsidiary companies Rs. Nil, Rs.
         Nil and Rs. 263.5 million as at March 31, 2007, 2008 and 2009, respectively.

     (ii) Cash and cash equivalents represents:

                                                                                    As at March 31,
                                Particulars                             2007             2008           2009
                                                                       Rs. in           Rs. in         Rs. in
                                                                       million          million        million
          Cash and Bank Balances (As per Schedule 6)                    13,733.5          7,777.3       17,185.4

          Current Accounts held for Unclaimed Dividends                    (51.1)          (55.7)          (65.1)



                                                       176
                                                                                  As at March 31,
                              Particulars                             2007             2008          2009
                                                                     Rs. in           Rs. in        Rs. in
                                                                     million          million       million
          Exchange difference on Cash and cash equivalents               (18.8)            56.0       (164.2)

          Cash and cash equivalents as at the end of the year         13,663.6          7,777.6       16,956.1



     (iii) Particulars of Bank Balance with Non-Scheduled Banks:

                 Name of the Bank             Balance as on March 31,                 Maximum amount
                                                       2009                         outstanding at any time
                                                                                        during the year

                                                    Rs. in million                       Rs. in million
          HSBC Bank Plc, London                                          0.6                               1.7
          DBS Bank Ltd., Singapore                                       1.2                               3.4
          Total                                                          1.8

     (iv) Out of the total Loans and Advances (Schedule 6), amounts aggregating to Rs.
          15,476.2 million, Rs. 20,090.1 million and Rs. 13,086.2 million are secured as at March 31,
          2007, 2008 and 2009, respectively.

         Advances recoverable in cash or in kind includes Advance Tax (net of Provision for Taxation) Rs.
         2,541.9 million, Rs. 2,555.3 million and Rs. 3,082.0 million, advances of capital nature
         amounting to Rs. 160.2 million, Rs. 403.9 million and Rs. 136.8 million, and dues from subsidiary
         companies amounting to Rs. 9.7 million, Rs. 4.6 million and Rs. 9.9 million as at March 31, 2007,
         2008 and 2009, respectively.

     (v) Corporate Deposits includes Rs. 37.5 million, Rs. 35.0 million and Rs. 4,020.5 million due from
         subsidiary companies as at March 31, 2007, 2008 and 2009, respectively.

     (vi) Interest Accrued on Deposits includes Rs. 0.1 million, Rs. Nil and Rs. 121.5 million due from
          subsidiary companies as at March 31, 2007, 2008 and 2009, respectively.

9.   (i) Sundry Creditors include Rs. Nil, Rs. 0.4 million and Rs. Nil payable to “Suppliers” registered
         under the Micro, Small and Medium Enterprises Development Act, 2006 for the year ended
         March 31, 2007, 2008 and 2009, resepectively. No interest has been paid / payable by the
         Corporation to the “Suppliers” covered under the Micro, Small and Medium Enterprises
         Development Act, 2006. The above information takes into account only those suppliers who have
         responded to inquiries made by the Corporation for this purpose.

         (ii)     As required under Section 205C of the Companies Act, 1956, the Corporation has
                  transferred Rs. 3.5 million, Rs. 7.3 million and Rs. 6.4 million to the Investor Education
                  and Protection Fund (IEPF) for the year ended March 31, 2007, 2008 and 2009,
                  respectively. No amount was due for transfer to the IEPF as at the close of any financial
                  year.

         (iii)    Sundry Creditors include Rs. 43.0 million, Rs. 40.5 million and Rs. 40.3 million due to a
                  subsidiary company as at March 31, 2007, 2008 and 2009, respectively.




                                                    177
        (iv)      Interest Accrued but not due includes Rs. 0.3 million, Rs. Nil and Rs. 48.0 million, as at
                  March 31, 2007, 2008 and 2009, respectively, due to Subsidiary Companies and Rs. 0.1
                  million, Rs. 1.2 million and Rs.4.8 million due to the Directors of the Corporation as at
                  March 31, 2007, 2008 and 2009, respectively.

10. Estimated amount of contracts remaining to be executed on capital account and not provided for (net of
    advances) is Rs. 892.7 million, Rs. 3,422.2 million and Rs. 2,790.3 million as at March 31, 2007, 2008
    and 2009, respectively.

11. (i) Exceptional Items comprises of net profit on sale of investments amounting to Rs. 329.8 million
        for the year ended March 31, 2007 on account of sale of shares of HDFC Standard Life Insurance
        Company Ltd. (Subsidiary Company) and Rockfort Estate Developers Ltd. (Associate Company),
        net profit on sale of investments amounting to Rs. 6,362.6 million for the year ended March 31,
        2008 on account of sale of shares of HDFC Standard Life Insurance Company Ltd. (Subsidiary
        Company), HDFC General Insurance Company Ltd. [erstwhile HDFC Chubb General Insurance
        Company Ltd.] (Subsidiary Company), HDFC Investments Ltd. (Subsidiary Company) and
        Intelenet Global Services Pvt. Ltd. (Joint Venture)].

    (ii) Profit on sale of investments is net of loss of Rs. 1.6 million, includes profit of Rs. 6.4 million and
         Rs. Nil in respect of investments held as current investments for the years ended March 31, 2007,
         2008 and 2009, respectively.

    (iii) Surplus from deployment in Cash Management Schemes of Mutual Funds amounting to Rs. 387.6
          million, Rs. 1,117.8 million and Rs. 1,579.7 million is in respect of investments held as current
          investments for the years ended March 31, 2007, 2008 and 2009, respectively.

    (iv) Dividend income includes Rs. 372.3 million, Rs. 152.1 million and Rs. 1,082.3 million received
         from subsidiary companies for the years ended March 31, 2007, 2008 and 2009, respectively.

    (v) Other Interest includes Interest on Investments amounting to Rs. 1,026.2 million, Rs. 1,274.0
        million and Rs. 1,462.4 million, including Rs. 136.4 million, Rs. 94.8 million and Rs. 145.2
        million in respect of current investments for the years ended March 31, 2007, 2008 and 2009,
        respectively.

    (vi) In accordance with the Guidance Note on accounting for Leases issued by the Institute of
         Chartered Accountants of India, an amount of Rs. 74.7 million, Rs. Nil and Rs. 21.7 million, for
         the years ended March 31, 2007, 2008 and 2009 respectively, towards Lease Equalisation has been
         reduced from Income from Leases, in respect of Leases entered prior to the applicability of
         Accounting Standard on ‘Leases’ (AS 19) notified by the Companies (Accounting Standards)
         Rules, 2006.

12. Other Income includes rent of Rs. 80.7 million, Rs. 97.1 million and Rs. 126.6 million for the years
    ended March 31, 2007, 2008 and 2009, respectively,of which Rs. 2.4 million, Rs. 2.2 million and Rs.
    2.4 million, respectively is in respect of rent for certain assets given on operating lease and also
    includes sub-lease payments received Rs. 6.2 million, Rs. 12.1 million and Rs. 15.4 million,
    respectively in respect of a property acquired under operating lease as per Note 24(ii).

13. (i) Earnings in foreign currency (Cash basis):
                                                                                Rupees in Millions
                                                                Year ended March 31,
                                                             2007          2008            2009
          Interest on Bank Deposits                         142.2         131.6            99.8
          Consultancy and other fees                         22.2          45.0            80.4




                                                      178
    (ii) Expenditure in foreign currency (Cash basis):
                                                                                Rupees in Millions

                                                   Year ended March 31,
                                                    2007     2008 2009
           Interest and Other Charges on Loans    1,458.2 1,154.7 857.8
           Others                                    39.6     82.0  93.5

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

    (i) Salaries and Bonus include Rs. 63.6 million Rs. 72.2 million and Rs. 87.8 million for the years
        ended on March 31, 2007, 2008 and 2009, respectively, towards provision made in respect of
        accumulated leave salary and leave travel assistance which is in the nature of Long Term
        Employee Benefits and has been actuarially determined as per the AS 15 (Revised).

   (ii)   In FY 2006-07, an amount of Rs. 75.7 million being the difference [net of tax effect of Rs. 38.4
          million] between the liability as on March 31, 2006 on Employee Benefits including defined
          benefit plans, determined based on AS 15 (Revised) and the liability as per the pre revised AS 15
          has been adjusted against the opening balance of General Reserves, in terms of AS 15 (Revised).

          In FY 2007-08, an amount of Rs. 54.3 million [net of tax effect of Rs. 27.4 million] being the
          difference between the liability as on March 31, 2007 on Employee Benefits, determined based on
          the implementation guidance issued by the Institute of Chartered Accountants of India for AS 15
          (Revised) and the liability as per the Corporation’s previous accounting policy was adjusted
          against the opening balance of General Reserve, in terms of AS 15 (Revised).

    (iii) The Corporation has recognised the following amounts in the Profit and Loss Account which are
          included under Contributions to Provident Fund and Other Funds :

                                                                                          (Rupees in Millions)
                                                               Year ended March 31,
                                                       2007           2008                   2009
           Provident Fund                               30.9           38.7                   50.3
           Superannuation Fund                          17.3           24.4                   32.6
           Employees’ Pension Scheme-1995                9.2            9.5                    9.9

          The Rules of the Corporation’s Provident Fund administered by a Trust require that if the Board of
          Trustees are unable to pay interest at the rate declared for Employees’ Provident Fund by the
          Government under para 60 of the Employees’ Provident Fund Scheme, 1952 for the reason that
          the return on investment is less or for any other reason, then the deficiency shall be made good by
          the Corporation. Having regard to the assets of the Fund and the return on the investments, the
          Corporation does not expect any deficiency in the foreseeable future. There has also been no such
          deficiency since the inception of the Fund.

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

                                                                  As at March 31,
                                                                      2007          2008               2009
                                                                     Rs. in        Rs. in             Rs. in
                                                                   Millions       Millions           Millions
           Change in the Benefit Obligations:



                                                     179
                                                      As at March 31,
                                                          2007           2008       2009
                                                         Rs. in        Rs. in      Rs. in
                                                       Millions       Millions   Millions
Liability at the beginning of the year                    324.3        426.5      558.7
Current Service Cost                                       27.3         21.5        38.3
Interest Cost                                              25.9         35.5        47.0
Past Service Cost (Vested benefit)                             -        20.8            -
Benefits Paid                                              (5.8)        (8.4)     (18.1)
Actuarial loss                                             54.8         62.8        70.1
Liability at the end of the year *                        426.5        558.7      696.0
* The Liability at the end of the year includes Rs.
  120.0 million, Rs. 153.3 million and Rs. 181.8
  million as on March 31, 2007, 2008 and 2009,
  respectively, in respect of an un-funded plan.
Fair Value of Plan Assets:
Fair Value of Plan Assets at the beginning of the
                                                          234.7        284.5      353.7
year
Expected Return on Plan Assets                             18.8          27.3       37.1
Contributions                                              41.6          60.4     119.8
Benefits Paid                                             (5.8)         (8.4)     (18.1)
Actuarial loss on Plan Assets                             (4.8)        (10.1)     (23.2)
Fair Value of Plan Assets at the end of the year         284.5         353.7      469.3
Total Actuarial loss to be recognised                    (59.6)        (72.9)     (93.3)
Actual Return on Plan Assets:
Expected Return on Plan Assets                             18.8          27.3       37.1
Actuarial loss on Plan Assets                              (4.8)       (10.1)     (23.2)
Actual Return on Plan Assets                               14.0          17.2       13.9

Amount Recognised in the Balance Sheet:
Liability at the end of the year                          426.5        558.7      696.0
Fair Value of Plan Assets at the end of the year          284.5        353.7      469.3
Amount recognised in the Balance Sheet under
“Provision for Employee Benefits”                         142.0        205.0      226.7
Expense Recognised in the Profit and Loss
Account:
Current Service Cost                                       27.3          21.5       38.3
Interest Cost                                              25.9          35.5       47.0
Expected Return on Plan Assets                           (18.8)        (27.3)     (37.1)
Net Actuarial loss to be recognised                        59.6          72.9       93.3
Past Service Cost (Vested benefit)                            -          20.8          -
Expense recognised in the Profit and Loss Account
                                                           94.0        123.4      141.5
under “Staff Expenses”.
Reconciliation of the Liability Recognised in the
Balance Sheet:
Opening Net Liability                                      89.6        142.0      205.0
Expense recognised                                         94.0        123.4      141.5
Contribution by the Corporation                            41.6         60.4      119.8
Amount recognised in the Balance Sheet under
                                                          142.0        205.0      226.7
“Provision for Employee Benefits”




                                         180
         Investment Pattern:

                                                   % Invested      % Invested        % Invested
                                                   As at March 31,
                                                   2007              2008            2009
         Central Government securities                    25.2           16.7                 25.4
         State Government securities /
         securities guaranteed by State /                    9.0            6.7                4.9
         Central Government
         Public Sector / Financial Institutional
                                                            27.8           22.1               24.2
         Bonds
         Private Sector Bonds                               13.5           21.0               17.3
         Special Deposit Scheme                              7.7            6.2                4.7
         Certificate of Deposits                               -            2.8                0.2
         Commercial Papers                                   0.4              -                0.8
         Deposits with Banks and Financial
                                                             2.9            9.0                6.2
         Institutions
         Equity Shares                                       9.8          13.1                14.2
         Others (including bank balances)                    3.7           2.4                 2.1
                                          Total           100.00        100.00              100.00

        Based on the above allocation and the prevailing yields on these assets, the long term estimate of
        the expected rate of return on fund assets has been arrived at.

        Principal Assumptions:

                                                    As at March 31,
                                                    2007       2008               2009
                                                           %                 %                %
         Discount Rate                                      8                8               7.5
         Return on Plan Assets                              8                8                 8
         Salary Escalation                                  5                5                 5

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

15. Managerial Remuneration:

                                                                         For the year ended March 31,
                                                                          2007       2008     2009
     Salaries and Commission                                                 51.1       66.1     80.5
     Corporation’s contribution to Provident and Superannuation Funds         3.3        4.2      5.3
     Perquisites and other allowances                                        14.6       19.2     21.7

    Managerial Remuneration amounting to Rs. 1.9 million, Rs. Nil and Rs. 4.7 million for the years ended
    on March 31, 2007, 2008 and 2009, respectively, was subject to the shareholders approval at the
    Annual General Meeting of the respective years.

    The above is excluding contribution to the gratuity fund and provision made for the post retirement
    pension scheme for the whole -time Directors.

    Computation of net profit in accordance with Section 198 read with section 349 of the Companies Act,
    1956 in respect of commission payable to Directors:


                                                    181
                                                                            For the year ended March
                                                                                       31,

                                                                            2007          2008 2009

        Profit Before Tax                                                   19,677.8   33,735.0 32,190.4
        Add: Provision for Contingencies                                       250.0      320.0    500.0
               Managerial Remuneration                                          69.0       89.5    107.5
               Directors’ Fees and Commission                                    3.9        6.6      6.4
               Accrued Loss on Redemption of Investments                        46.4       39.9     43.8
                                                                            20,047.1   34,191.0 32,848.1
        Less: Profit on Sale of Investments                                  3,160.1    7,695.2    252.3
               Profit on Sale of Freehold Land and Properties acquired in
                                                                               92.7         9.3         -
        Satisfaction of Debts
               Surplus from deployment in Cash Management Schemes
                                                                              387.6     1,117.8   1,579.7
        of Mutual Funds
               Amounts utilised out of Shelter Assistance Reserve              46.8       54.3      52.2
               Capital Profit on Sale of Leased Properties and other
                                                                              126.2           -         -
        assets
                                                                             3,813.4    8,876.6 1,884.2
        Net Profit as per Section 198                                       16,233.7   25,314.4 30,963.9
        i)     Commission payable to whole-time Directors :
                  At 1% of net profit for each of the three whole-time
                                                                              487.0      759.4     928.9
        Directors
                  Restricted to                                                38.8       50.6      60.7
        ii)    Commission payable to non whole-time Directors :
                  At 1% of net profit for all non whole-time Directors        162.3      253.1     309.6
                  Restricted to                                                 3.1        5.5       5.5

16. (i) Expenditure shown in Schedule 11, for the years ended March 31, 2007, 2008 and 2009, is net of
        recovery from subsidiary companies in respect of Salaries Rs. 15.7 million, Rs. 19.4 million and
        Rs. 13.2 million respectively. Expenditure shown in Schedule 12, for the years ended March 31,
        2007, 2008 and 2009, is net of recovery from subsidiary companies, in respect of Rent Rs. 0.4
        million, Rs. 0.1 million and Rs. Nil respectively and Electricity Charges Rs. 0.5 million, Rs. 0.1
        million and Rs. Nil Respectively. Expenditure shown in Schedule 13, for the years ended March
        31, 2007,2008 and 2009, is net of recovery from subsidiary companies, in respect of Repairs and
        Maintenance – Other than Buildings Rs. 0.4 million, Rs. 0.1 million and Rs. Nil respectively and
        Office Maintenance Rs. 0.1 million, Rs. Nil and Rs. Nil respectively.

    (ii) Miscellaneous Expenses under Schedule 13 exclude Rs. 46.8 million, Rs. 54.3 million and Rs.
         52.2 million in respect of amounts utilised out of Shelter Assistance Reserve during the years
         ended March 31, 2007, 2008 and 2009 respectively.

17. (i) Interest on Deposits include Rs. 0.3 million, Rs. Nil and Rs. 1.2 million payable to the Chairman
        of the Corporation for the years ended March 31, 2007,2008 and 2009 respectively.

    (ii) Other Expenses, for the years ended March 31, 2007, 2008 and 2009, include Provision for Wealth
         Tax amounting to Rs. 5.7 million, Rs. 6.1 million and Rs. 6.5 million respectively and Securities
         Transaction Tax amounting to Rs. 8.3 million, Rs. 6.5 million and Rs. 1.2 million respectively.




                                                   182
    (iii) Auditors’ Remuneration:

                                                            For the year ended March 31,
                                                               2007          2008        2009
                                                             Rs. in         Rs. in     Rs. in
                                                            Millions      Millions  Millions

         Audit Fees                                             5.3               4.7      6.3
         Tax Matters                                            3.6               1.6      5.3
         Other Matters                                          3.1               4.2      4.8
         Reimbursement of Expenses                              0.4               0.1      0.3
         Service Tax                                            1.2               1.6      1.2
         Total                                                 13.6              12.2     17.9

        Audit Fees include Rs. 0.1 million, Rs.0.2 million and Rs. 0.3 million paid to Branch Auditors for
        the years ended March 31, 2007, 2008 and 2009 respectively.

18. (i) The Corporation has only one reportable segment of business viz. Housing Finance business for
        the purposes of paragraph 25(2) of the Housing Finance Companies (NHB) Directions, 2001 and
        all other activities revolve around the main business of Housing Finance.

    (ii) As per the Housing Finance Companies (NHB) Directions, 2001, non-performing assets are
         recognised on the basis of ninety days overdue. The total provision carried by the Corporation in
         terms of paragraph 25 (2) of the Housing Finance Companies (NHB) Directions, 2001 and NHB
         circular NHB(ND)/DRS/Pol-No.09/2004-05 dated May 18, 2005 in respect of Housing and Non-
         Housing Loans is as follows:



                          Sub-Standard Assets             Doubtful Assets

                            As at March 31,               As at March 31,

                          2007      2008    2009     2007       2008      2009
                          163.6             709.0   1,051.5              1,018.3
         Housing                    191.7                      1,059.8
                          30.3              327.9    99.8                 84.2
         Non-Housing                81.2                        70.2

    (iii) During the years ended March 31, 2007, 2008 and 2009, in addition to the charge of Rs. 250
          million, Rs. 320 million and Rs. 500 million respectively, to the Profit and Loss Account, for FY
          06-07, an amount of Rs. 131.2 million (net of Deferred Tax of Rs. 218.8 million) has been
          transferred from Special Reserve No. I, for FY 07-08 and FY 08-09, amounts of Rs. 277.2 million
          (net of Deferred Tax of Rs. 142.8 million) and Rs. 1,188.2 million (net of Deferred Tax of Rs.
          611.8 million) respectively, have been transferred from Additional Reserve created as per Section
          29C of the National Housing Bank Act, 1987 pursuant to circular NHB(ND)/DRS/Pol-
          No.03/2004-05 dated August 26, 2004 to Provision for Contingencies Account.

    (iv) Provision for Contingencies debited to the Profit and Loss Account includes Provision for
         Diminution in the Value of Investments amounting to Rs. 78.3 million, Rs. 98.7 million and Rs.



                                                    183
        238 million for the years ended March 31, 2007, 2008 and 2009 respectively. The balance of the
        Provision represents provision made against non-performing assets and other contingencies.

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

    (ii) As per Section 29 C of the National Housing Bank Act, 1987, the Corporation is required to
         transfer at least 20% of its net profits every year to a reserve before any dividend is declared. For
         this purpose any Special Reserve created by the Corporation under Section 36(1)(viii) of the
         Income- tax Act, 1961 is considered to be an eligible transfer. The Corporation has transferred,
         for the years ended March 31, 2007, 2008 and 2009, an amount of Rs. 4,660.0 million, Rs. 3,550.0
         million and Rs 4,000.0 million respectively, to Special Reserve II in terms of Section 36(1) (viii)
         of the Income-tax Act, 1961 and an amount of Rs. 800.0 million, Rs. 2,450.0 million and Rs.
         3,420.0 million, respectively, to "Additional Reserve (u/s 29C of the NHB Act)”.

    (iii) During the year ended March 31, 2007, 2008 and 2009 an amount of Rs. 0.2 million, Rs. Nil and
          Rs. Nil respectively, has been written back on account of 24,285, Nil and 5,000 stock options
          lapsed under Employee Stock Option Scheme 2002 respectively. The same has been included in
          the Accounts under Salaries and Bonus.

20. During the years ended March 31, 2007, 2008 and 2009, the Corporation utilised Rs. 1,028.9 million,
    Rs. 209 million and Rs. 431.3 million, respectively out of the Securities Premium Account in
    accordance with Section 78 of the Companies Act, 1956 towards the premium payable on the
    redemption of FCCBs of the Corporation. The Corporation has written back Rs. Nil, Rs. 1,191.7
    million and Rs. 36.7 million, for the years ended March 31, 2007, 2008 and 2009 respectively, on
    conversion of FCCBs to the Securities Premium Account being the provision for premium on
    redemption of FCCBs created in the earlier years by debit to the Securities Premium Account.

21. (i) Contingent Liability in respect of guarantees provided by the Corporation aggregated to Rs. 351.4
        million, Rs. 1,520.1 million and Rs. 1,565.6 million as at March 31, 2007, 2008 and 2009,
        respectively.

    (ii) Contingent liability in respect of income-tax demands, net of amounts provided for and disputed
         by the Corporation, amounts to Rs. 1,809.6 million, Rs. 2,436.7 million and Rs. 3,151.1 million as
         at March 31, 2007, 2008 and 2009, respectively. The matters in dispute are under appeal. The said
         amount has been paid / adjusted and will be received as refund if the matters are decided in favour
         of the Corporation.

    (iii) Contingent Liability in respect of corporate undertakings provided by the Corporation for
          securitisation of receivables aggregated to Rs. 2,089.4 million, Rs. 2,201.2 million and Rs. 5,948.5
          million as at March 31, 2007, 2008 and 2009, respectively. The outflows would arise in the event
          of a shortfall, if any, in the cash flows of the pool of the securitised receivables.

22. The Corporation’s main business is to provide loans for the purchase or construction of residential
    houses in India. All other activities of the Corporation revolve around the main business. As such,
    there are no separate reportable segments, as per the Accounting Standard on ‘Segment Reporting’
    (AS 17), notified by the Companies (Accounting Standards) Rules, 2006.


23. As per the Accounting Standard on ‘Related Party Disclosures’ (AS 18), notified by the Companies
    (Accounting Standards) Rules, 2006, the related parties of the Corporation are as follows :

    A) Subsidiary Companies



                                                     184
     HDFC Developers Ltd.                             HDFC Investments Ltd.
     HDFC Holdings Ltd.                               HDFC Asset Management Company Ltd.
     HDFC Trustee Company Ltd.                        HDFC Realty Ltd.
     HDFC Standard Life Insurance Company Ltd.        HDFC ERGO General Insurance Company Ltd.
     GRUH Finance Ltd.                                HDFC Sales Pvt Ltd.
     HDFC Venture Capital Ltd.                        HDFC Property Ventures Ltd.

     HDFC Ventures Trustee Company Ltd.               Griha Investments
     HDFC      Asset    Management       Company      (w.e.f. November 26, 2008) (Subsidiary of
     (Singapore) Pte. Ltd. (w.e.f. April 10, 2008)    HDFC Holdings Ltd.)
     (Subsidiary of HDFC Asset Management
     Company Ltd.)

B) Associate Companies

    HDFC Bank Ltd.
    India Value Fund Advisors Pvt Ltd.
    Indian Association for Savings and Credit
    Rural Shores Business Services Pvt.Ltd.
    (w.e.f. March 18, 2009)

C) Entities over which control is exercised

    HDFC PROPERTY FUND – SCHEME – HDFC IT Corridor Fund
    HDFC Investment Trust

D) Joint Venture

    Intelenet Global Services Pvt. Ltd. (Up to September 19, 2007)

E) Key Management Personnel

    Mr. Deepak S Parekh
    Mr. Keki M Mistry
    Ms. Renu Sud Karnad

F) Relatives of Key Management Personnel - (where there are transactions)

     Ms. Smita D. Parekh              Mr. Aditya D. Parekh    Mr. Siddharth D. Parekh
     Ms. Amaya Ann Aditya Parekh      Ms. Harsha S. Parekh    Ms. Arnaaz K Mistry
     Mr. Rishi R. Sud                 Ms. Swarn Sud           Ms. Riti Karnad
     Mr. Ketan Karnad




                                                185
I)   The nature and volume of transactions of the Corporation with the above related parties were as follows:
                                                                                                                                                                     Rs in Million
      Particulars            Subsidiary Companies         Associates & Joint Ventures       Entities over which control is        Key Management       Relatives of Key Management
                                                                                                      exercised                      Personnel                   Personnel

                           2007      2008       2009       2007      2008       2009        2007        2008         2009        2007   2008   2009    2007       2008       2009

INCOME
 Dividend                  372.3      152.1     1,082.3    256.9      273.8      449.3             -          -            -        -      -       -          -          -         -
 Interest                   10.1        5.1       309.1     21.1      129.1       45.6          30.6       83.6        153.3        -      -       -          -          -         -
 Consultancy & Other        34.7       31.1       272.5      0.3        0.3        0.5             -          -            -        -      -       -          -          -         -
 Fees                       75.1       56.6        61.3      4.2        6.6        6.7             -          -            -        -      -       -          -          -       2.8
 Rent                       15.8       14.0         3.1        -          -          -             -          -            -        -      -       -          -          -         -
 Sale of Loans               4.2        2.7         1.6      1.9        0.2       18.7             -          -            -        -      -       -          -          -         -
 Other Income

EXPENDITURE
 Interest                   14.0       23.5      124.3         -          -          -             -           -             -    0.3      -     2.5      0.6        0.7         1.8
 Bank and Other Charges    297.5      468.5      474.8     302.7      629.3      564.9             -           -             -      -      -       -        -        0.5         0.5
 Rent Paid                     -          -          -       1.6          -          -             -           -             -      -      -       -        -          -           -
 Purchase   of    Fixed      0.5        0.5          -         -          -          -             -           -             -      -      -       -        -          -           -
Assets                         -          -          -         -          -          -             -           -             -   69.0   89.5   107.5        -          -           -
 Remuneration

ASSETS
 Investments              9,789.6   14,106.1   18,261.1   2,860.9   15,419.5   19,446.5     16,34.0     4,216.5      4,913.9        -      -       -          -          -           -
 Deposits                    37.5       35.0    4,020.5      19.4    1,497.0       49.0           -           -            -        -      -       -          -          -           -
 Bank Balance                   -          -          -         -      878.9    6,015.4           -           -            -        -      -       -          -          -           -
 Sundry Debtors                 -          -      263.5         -          -          -           -           -            -        -      -       -          -          -           -
 Others                       9.8        4.6      131.4       1.9      122.6        1.8           -           -            -        -      -       -          -          -           -


LIABILITIES
 Deposits                   20.0      116.2      318.5        0.4        0.4        0.2            -           -             -      -    0.1    55.1      7.2        8.5        26.8
 Short Term Loans              -          -          -    1,989.5          -          -            -           -             -      -      -       -        -          -           -
 Others                     43.3       40.5       88.3          -          -        0.1            -           -             -      -      -     1.9      0.6        0.1         1.7




                                                                                          186
II)    The nature and volume of material transactions of the Corporation, with the above related parties were as follows:

                                                                                                                                                                                         Rs. in Million
                Particulars                  Subsidiary Companies                      Associates               Entities over which control is          Key Management           Relatives of Key Management
                                                                                                                          exercised                        Personnel                       Personnel
                                           2007       2008       2009       2007         2008       2009       2007          2008         2009       2007    2008    2009       2007          2008       2009
INCOME
Dividend
 - HDFC Asset Management Co. Ltd.          132.3       60.7       452.9         -             -          -           -            -              -      -        -          -        -            -             -
 - HDFC Investments Ltd.                   133.9          -       320.0         -             -          -           -            -              -      -        -          -        -            -             -
 - GRUH Finance Ltd.                           -       63.9           -         -             -          -           -            -              -      -        -          -        -            -             -
 - HDFC Venture Capital Ltd.                64.4          -           -         -             -          -           -            -              -      -        -          -        -            -             -
 - HDFC Bank Ltd.                              -          -           -     213.7         272.0      445.8           -            -              -      -        -          -        -            -             -

Interest
 - HDFC Asset Management Co. Ltd.              -             -    300.4         -             -            -         -            -            -        -        -          -        -            -             -
 - Gruh Finance Ltd.                         9.5             -        -         -             -            -         -            -            -        -        -          -        -            -             -
 - HDFC Bank Ltd.                              -             -        -      19.4         122.9            -         -            -            -        -        -          -        -            -             -
 - HDFC IT Corridor Fund                       -             -        -         -             -            -      30.6         83.6        153.3        -        -          -        -            -             -
Consultancy and Other Fees
 - HDFC Asset Management Co. Ltd.            7.8       10.5       239.6            -            -          -         -            -              -      -        -          -        -            -             -
 - HDFC Standard Life Insurance Co. Ltd.    25.6       19.5           -            -            -          -         -            -              -      -        -          -        -            -             -

Rent
- HDFC Asset Management Co. Ltd.            20.1       28.5        44.3            -          -            -         -            -              -      -        -          -        -            -             -
- HDFC ERGO General Insurance Co. Ltd.      45.6       15.2           -            -          -            -         -            -              -      -        -          -        -            -             -
- HDFC Property Ventures Ltd.                  -       12.3        15.4            -          -            -         -            -              -      -        -          -        -            -             -
- HDFC Bank Ltd.                               -          -           -            -        6.6            -         -            -              -      -        -          -        -            -             -

Sale of Loans
 - GRUH Finance Ltd.                        15.8       14.0         3.1            -            -          -         -            -              -      -        -          -        -            -             -

Other Income
- HDFC Asset Management Co. Ltd              3.6        1.6             -       -               -        -           -            -              -      -        -          -        -            -             -
- HDFC ERGO General Insurance Co. Ltd.         -        0.4             -       -               -        -           -            -              -      -        -          -        -            -             -
- HDFC Sales Private Ltd.                      -        0.8             -       -               -        -           -            -              -      -        -          -        -            -             -
- Intelenet Global Services Pvt. Ltd.          -          -             -     1.5               -        -           -            -              -      -        -          -        -            -             -
- HDFC Bank Ltd.                               -          -             -       -               -     18.7           -            -              -      -        -          -        -            -             -

EXPENDITURE
Interest
 - HDFC Investments Ltd                     10.2       20.9        21.0            -            -          -         -            -              -      -        -          -        -            -             -
 - HDFC Standard Life Insurance Co. Ltd.                  -        92.3            -            -          -         -            -              -      -        -          -        -            -             -
 - HDFC ERGO General Insurance Co. Ltd.      3.5        2.6           -            -            -          -         -            -              -      -        -          -        -            -             -

Bank and Other Charges
- HDFC Sales Pvt. Ltd.                     294.2      464.3       452.2         -             -          -           -            -              -      -        -          -        -            -             -
- HDFC Bank Ltd.                               -          -           -     302.7         629.3      565.0           -            -              -      -        -          -        -            -             -

Rent Paid
- Intelenet Global Services Pvt. Ltd.             -          -          -     1.6               -          -         -            -              -      -        -          -        -            -             -




                                                                                                     187
Purchase of Fixed Assets
 - HDFC Developers Ltd.                        0.5       0.5          -         -          -          -         -         -         -      -      -      -     -   -   -

Remuneration
- Mr. Deepak S Parekh                            -         -          -         -          -          -         -         -         -   29.4   37.4   45.5     -   -   -
- Mr. Keki M Mistry                              -         -          -         -          -          -         -         -         -   20.4   26.8   32.1     -   -   -
- Ms.Renu Sud Karnad                             -         -          -         -          -          -         -         -         -   19.2   25.3   29.9     -   -   -

ASSETS
Investments
 - HDFC Standard Life Insurance Co. Ltd.   6,562.1   9,222.8   13,007.8         -          -          -         -         -         -      -      -      -     -   -   -
 - HDFC Bank Ltd.                                -         -          -   1,506.6   15,407.7   19,416.8         -         -         -      -      -      -     -   -   -
 - HDFC IT Corridor Fund                         -         -          -         -          -          -   1,634.0   4,092.6   4,504.1      -      -      -     -   -   -

Deposits
- HDFC Asset Management Co. Ltd.                -          -    3,830.0        -           -          -         -         -         -      -      -      -     -   -   -
- HDFC Sales Pvt. Ltd.                       35.0          -          -        -           -          -         -         -         -      -      -      -     -   -   -
- HDFC Bank Ltd.                                -          -          -     19.4     1,497.0          -         -         -         -      -      -      -     -   -   -

Bank Balances
- HDFC Bank Ltd.                                 -         -          -         -     878.9     6,015.4         -         -         -      -      -      -     -   -   -

Sundry Debtors
 - HDFC Asset Management Co. Ltd.                -         -     255.4          -          -          -         -         -         -      -      -      -     -   -   -

Others
- HDFC Asset Management Co. Ltd.                 -         -     120.8          -         -           -         -         -         -      -      -      -     -   -   -
- HDFC Standard Life Insurance Co. Ltd.        4.3         -         -          -         -           -         -         -         -      -      -      -     -   -   -
- HDFC ERGO General Insurance Co. Ltd.         5.1         -         -          -         -           -         -         -         -      -      -      -     -   -   -
- HDFC Bank Ltd.                                 -         -         -        1.9     122.6           -         -         -         -      -      -      -     -   -   -

LIABILITIES
Deposits
- HDFC Holdings Ltd.                            -         -      304.3          -          -          -         -         -         -      -      -      -     -   -   -
- HDFC Investments Ltd.                         -     116.2          -          -          -          -         -         -         -      -      -      -     -   -   -
- HDFC ERGO General Insurance Co. Ltd.       20.0         -          -          -          -          -         -         -         -      -      -      -     -   -   -
- Mr. Aditya Deepak Parekh                      -         -          -          -          -          -         -         -         -      -      -      -   4.9   -   -

Short Term Loans
 - HDFC Bank Ltd.                                -         -          -   1,989.5          -          -         -         -         -      -      -      -     -   -   -

Others
- HDFC Developers Ltd.                       42.3      40.4       40.3          -          -          -         -         -         -      -      -      -     -   -   -
- HDFC Standard Life Insurance Co. Ltd.         -         -       43.3          -          -          -         -         -         -      -      -      -     -   -   -




                                                                                                  188
24. In accordance with the Accounting Standard on ‘Leases’ (AS 19), notified by the Companies (Accounting
    Standards) Rules, 2006, the following disclosures in respect of Operating and Finance Leases are made :

    (i) Income from Leases net of lease terminal adjustment of Rs. 74.7million, Rs. Nil and Rs. 21.7million
        for the years ended March 31, 2007, 2008 and 2009, respectively, includes Rs. 162.4 million, Rs. 153.5
        million and Rs. 168.9 million, for the years ended March 31, 2007, 2008 and 2009 respectively, in
        respect of properties and certain assets leased out by the Corporation under Operating Leases. Out of
        the above, in respect of the non-cancellable leases, the future minimum lease payments are as follows:

                                                                      For the year ended March 31,
                             Period                               2007            2008            2009
                                                             Rs. in Millions Rs. in Millions Rs. in Millions
         Not later than one year                                      156.8           110.7           122.1
         Later than one year but not later than five                  426.2           339.7           246.0
         years
         Later than five years                                        18.0                -                -

    (ii) The Corporation has acquired properties under non-cancellable operating leases for periods ranging
         from 36 months to 108 months. The total minimum lease payments in respect thereof, included
         under Rent, amount to Rs. 18.4 million, Rs. 28.1 million and Rs. 33.0 million for the years ended
         March 31, 2007, 2008 and 2009 respectively. Out of the above, the Corporation has sub-leased a
         property, the total sub-lease payments received in respect thereof included under Other Income amount
         to Rs. 6.2 million, Rs. 12.1 million and Rs. 15.4 million for the years ended March 31, 2007, 2008 and
         2009 respectively. The future minimum lease payments in respect of the properties acquired under non-
         cancellable operating leases are as follows:

                                                                      For the year ended March 31,
                             Period                               2007            2008            2009
                                                             Rs. in Millions Rs. in Millions Rs. in Millions
         Not later than one year                                        15.7            30.0            28.6
         Later than one year but not later than five                    50.7            45.5            35.6
         years

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

    (i) In calculating the Basic Earnings Per Share for the years ended March 31, 2007, 2008 and 2009, the
        Profit After Tax of Rs. 15,703.8 million, Rs. 24,362.5 million and Rs. 22,825.4 million respectively has
        been adjusted for amounts utilised out of Shelter Assistance Reserve of Rs. 46.8 million, Rs. 54.3
        million and Rs. 52.2 million respectively.

        Accordingly the Basic Earnings Per Share for the years ended March 31, 2007, 2008 and 2009 has
        been calculated based on the adjusted Profit After Tax of Rs. 15,657 million, Rs. 24,308.2 million
        and Rs.22,773.2 million, respectively and the weighted average number of shares during the year of
        249.9 million, 270.5 million and 284.3 million, respectively.

    (ii) The reconciliation between the Basic and the Diluted Earnings Per Share is as follows:
                                                                           Rs. in Millions
                                                           For the year ended March 31,
                                                               2007      2008         2009
                                                            Rupees     Rupees      Rupees
          Basic Earnings Per Share                             62.7       89.9         80.1
          Effect of outstanding Stock Options and              (4.5)      (4.6)       (1.4)
          FCCBs
          Diluted Earnings Per Share                           58.2       85.3         78.7

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



                                                       189
            Share has been computed by dividing the adjusted Profit After Tax by the weighted average number of
            equity shares, after giving dilutive effect of the outstanding Stock Options and FCCBs for the
            respective periods. The relevant details as described above are as follows:
                                                                                                    In Millions
                                                                                        For the year ended March
                                                                                                    31,
                                                                                        2007       2008      2009
             Weighted average number of shares for computation of Basic                  249.9      270.5     284.3
             Earnings Per Share
             Diluted effect of outstanding Stock Options and FCCBs                                   18.9       14.5         5.0

             Weighted average number of shares for computation of Diluted                           268.8     285.0       289.3
             Earnings Per Share

26. In compliance with the Accounting Standard relating to ‘Accounting for Taxes on Income’ (AS 22),
    notified by the Companies (Accounting Standards) Rules, 2006, the Corporation has taken credit of Rs. 200
    million, Rs. 120 million and Rs. 80 million in the Profit and Loss Account for the years ended March 31,
    2007, 2008 and 2009, respectively, towards deferred tax asset (net) for the year, arising on account of
    timing differences.

     The major components of deferred tax assets and liabilities are:
                                                                                                           Rs. in Millions
                                                                    Assets                     Liabilities
                                                         2007       2008         2009     2007 2008 2009
       a)    Depreciation                                                                 547.3 536.4 519.0
       b)    Provision for Contingencies             1,576.7        1,743.5     2,388.5
       c)    Provision for Employee Benefits           140.4          137.8       165.7
       d)    Accrued Redemption Loss (net)              57.2           70.7        70.7
       e)    Others (net)                                4.0           50.8        52.3
             Total                                   1,778.3        2,002.8     2,677.2   547.3     536.4   519.0
             Net Deferred Tax Asset                  1,231.0        1,466.4     2,158.2

27. In compliance with the Accounting Standard relating to ‘Financial Reporting of Interests in Joint Ventures’
    (AS 27), notified by the Companies (Accounting Standards) Rules, 2006, the Corporation has interests in
    the following jointly controlled entities, which are incorporated in India :
                                                                                                  Rs in Million
Names of Companies         Percentage of      Amount of Interest based on the last Audited Accounts
                           Shareholding       for the years ended on March 31, 2007, 2008 and 2009.
                                              Assets      Liabilities Income       Expenditure   Capital            Contingent
                                                                                                 Commitment         Liability
HDFC Standard Life
Insurance Co. Ltd. : for
the FY as under:
          2007                         81.9   44,147.1      40,797.5         166.3        1,194.6           119.9           253.5
          2008                         72.6   70,306.2      65,409.2         599.2        2,366.1            41.0           193.9
          2009                         72.4   82,744.3      77,060.6         814.5        4,457.3             8.7         1,084.6
HDFC ERGO General
Insurance Co. Ltd. : for
the FY as under:
          2007                        74.00    1,790.9          1,091.1      24.6             6.0            19.5                -
          2008                        74.00    2,075.5          1,311.9   (120.8)             3.3             3.8                -
          2009                        74.00    3,121.1          2,180.1   (186.6)               -            21.1                -
Intelenet Global
Services Pvt. Ltd. : for
the FY as under:
          2007                         50.0    1,720.6           928.5    1,490.8         1,472.6           499.9                -

28. (i) Provision for Contingencies as on March 31, 2007, 2008 and 2009 amounting to Rs. 4,096.7 million,
        Rs. 4,703.0 million and Rs. 6,215.2 million respectively, includes provisions for non-performing assets,
        Standard Assets and all other contingencies. In addition to the provisions against non performing
        assets, vide the National Housing Bank circular No. NHB(ND)/DRS/DIR-18-07/1336/2007 dated
        March 26, 2007, all housing finance companies are required to carry a general provision at the rate of


                                                                  190
          0.40% of the total outstanding amount of non-housing loans which are Standard Assets. Accordingly,
          the Corporation is required to carry a minimum provision of Rs. 1,512.9 million, Rs. 2,249.1 million
          and Rs. 3,166.4 million, for the years ended on March 31, 2007, 2008 and 2009 respectively, towards
          non-performing assets and standard assets, as per the prudential norms of the National Housing Bank.

      (i) Movement in Provision for Contingencies Account is as under:

                                                                                                   Rs in Million
                                                                                      For the year ended on March
                                                                                                   31,
                                                                                       2007       2008      2009
                                    Opening Balance                                   3,804.6 4,096.7 4,703.0
                                 Additions during the year                                600      740.0 2,300.0
           Utilised during the year – towards loans write offs, Dimunition in
           Value of Investments, Foreign Currency Revaluation, Provision               (307.9)    (133.7)    (787.8)
                                 for Securitisation etc.
                                      Closing Balance                                 4,096.7     4,703.0    6,215.2


29.       During the year ended March 31, 2008 the shareholders of the Corporation approved an issue of 5.7
          million stock options under Employees Stock Option Scheme – 2008 (ESOS–08). The Compensation
          Committee of the Corporation at its meeting held on November 25, 2008 granted the said options along
          with 0.1 million options lapsed under ESOS-07, in all aggregating to 5.8 million stock options at an
          exercise price of Rs. 1,350.6 per option representing 5.8 million equity shares of Rs. 10 each to the
          employees and directors of the Corporation. The said price was determined in accordance with the
          pricing formula approved by the shareholders i.e. at the latest available closing price of the equity share
          of the Corporation on the stock exchange having higher trading volume.

          In terms of ESOS - 08, the options would vest over a period of 1-3 years from the date of grant, but not
          later than November 24, 2011, depending upon the option grantee completing continuous service of
          three years with the Corporation. Accordingly, no options have vested in FY 2008-09. The options can
          be exercised over a period of five years from the date of respective vesting.

          During the year ended March 31, 2007, under Employees Stock Option Scheme – 2007 (ESOS – 07),
          the Corporation had on September 12, 2007, granted 5.5 million stock options at an exercise price of
          Rs. 2,149.0 per option representing 5.5 million equity shares of Rs. 10/- each to the employees and
          directors of the Corporation. The said price was determined in accordance with the pricing formula
          approved by the shareholders i.e. at the latest available closing price on the stock exchange having
          higher trading volume.

          In terms of ESOS - 07, the options would vest over a period of 1-3 years from the date of grant, but not
          later than September 11, 2010, depending upon grantee completing continuous service of three years
          with the Corporation. Accordingly, during the year 5.2 million were vested. The options can be
          exercised over a period of five years from the date of respective vesting.

          Under Employees Stock Option Scheme – 2005 (ESOS – 05), the Corporation had on October 25,
          2005, granted 7.5 million stock options at an exercise price of Rs. 912.9 per option representing 7.5
          million equity shares of Rs. 10/- each to the employees and directors of the Corporation. The said price
          was determined in accordance with the pricing formula approved by the shareholders i.e. at the latest
          available closing price on the stock exchange having higher trading volume.

          In terms of ESOS - 05, the options would vest over a period of 2-3 years from the date of grant, but not
          later than October 24, 2008, depending upon grantee completing continuous service of three years with
          the Corporation. Accordingly, during the years ended March 31, 2007, 2008 and 2009, 3.5 million, 3.6
          million and 0.2 million options, respectively were vested. The options can be exercised over a period of
          five years from the date of respective vesting.




                                                         191
Method used for accounting for share based payment plan:


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

Movement in the options under ESOS-08, ESOS-07 and ESOS-05:
                                                                                                    In Millions
                                  ESOS-08           ESOS-07                                ESOS-05
                                  Options      Options   Options              Options       Options     Options
                                   2009         2008      2009                 2007          2008        2009
 Outstanding      at   the                -            -      5.4                  7.4           4.2           3.1
 beginning of the year
 Granted during the year                 5.8         5.5              -              -             -              -
 Exercised during the                      -           -              -            3.1           1.1            0.2
 year
 Lapsed during the year                    -         0.1           0.1             0.1             -              -
 Outstanding at the end of               5.8         5.4           5.3             4.2           3.1            2.9
 the year
 Unvested at the end of                  5.8         5.4           0.1             3.8           0.1              -
 the year
 Exercisable at the end of                 -            -          5.2             0.4           3.0            2.9
 year
 Weighted average price           Rs.1,350.6                Rs. 2,149.0                    Rs. 912.9
 per option

Fair Value Methodology:

The fair value of options used to compute proforma net income and earnings per equity shares have been
estimated on the date of grant using Black-Scholes model.

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



                                                                 ESOS-2008        ESOS-2007      ESOS-2005

 Risk-free interest rate (p.a.)                                     6.9%             7.7%              6.4%

 Expected life                                                   Upto 2 years     Upto 2 years   2 to 3 years

 Expected volatility of share price                                 29%              19%               30%

 Expected growth in dividend (p.a.)                                 20%              20%               20%

 The weighted average fair value, as on the date of grant (per    Rs. 238.8        Rs. 307.3      Rs. 105.5
 Stock Option)

Had the compensation cost for the stock options granted under ESOS-08, ESOS-07 and ESOS-05 been
determined based on fair value approach, the Corporation’s net profit and earnings per share would have
been as per the pro forma amounts indicated below:




                                                     192
                                                                                                    Rs in million

                                                                                2007       2008       2009

      Net profit (as reported)                                               15,703.8   24,362.5   22,825.4

      Less : Stock-based compensation expense determined under fair            271.2      673.7      796.0
      value based method, net of tax: [Gross Rs. 408.8 million, Rs.
      1,020.7 million and Rs.1,205.9 Million, for the years ended on
      March 31, 2007, 2008 and 2009 respectively (pro forma)

      Net profit (pro forma)                                                 15,432.6   23,688.8   22,029.4

      Less : Amounts utilised out of Shelter Assistance Reserve                 46.8       54.3       52.2

      Net Profit considered for computing EPS (pro forma)                    15,385.8   23,634.5   21,977.2

                                                                 2007              2008             2009
                                                            Rs. In Million    Rs. In Million   Rs. In Million
      Basic earnings per share (as reported)                     62.7              89.9             80.1
      Basic earnings per share (pro forma)                       61.6              87.4             77.3
      Diluted earnings per share (as reported)                   58.2              85.3             78.7
      Diluted earnings per share (pro forma)                     57.2              82.9             76.0


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

                                                            Annual              Annual             Annual
      Year to which the dividend relates                    2005-06             2006-07            2007-08
      Number of non-resident shareholders                     1,161               1,325              2,259
      Number of shares held by them in                        196.4               199.5              216.2
      million
      Gross amount of dividend          Rs. In              3,928.4             4,389.9             5,404.1
      Miilion

31   (i) Additional Tax on Proposed Dividend, Rs. 946.0 million, Rs. 1,206.8 million and Rs. 1,406.9 million,
         for the years ended on March 31, 2007, 2008 and 2009, respectively, has been calculated @16.995%
         on the Proposed Dividend after netting off an amount of Rs. Nil, Rs. Nil and Rs. 43.4 Million, for the
         years ended on March 31, 2007, 2008 and 2009, respectively, being the dividend tax paid by the
         Subsidiary companies of the Corporation on the dividends paid to the Corporation as per Section
         115(O)(1A) of the Income Tax Act, 1961.

     (ii) Additional Tax on dividend 2007-08 Credit taken, Rs. 140.5 million, pertains to the dividend tax paid
          by the subsidiary companies of the Corporation on the dividend paid to the Corporation as per Section
          115(O) (1A) of the Income Tax Act, 1961.

     (iii) In respect of equity shares issued pursuant to Employee Stock Option Schemes and conversion of
           FCCBs, the Corporation paid dividend of Rs. 4.3 million for the year 2007-08 and tax on dividend of
           Rs. 0.7 million as approved by the shareholders at the Annual General Meeting held on July 16, 2008.

32. Other Notes :

     (i) As the figures disclosed in the Financial Statements are extracted from the audited accounts for the
         years ended March 31, 2007, 2008 and 2009, approved by the Board of Directors on May 03, 2007,
         April, 30, 2008 and May 04, 2009 respectively, and on which auditors have based their opinions dated


                                                      193
    May 03, 2007, April, 30, 2008 and May 04, 2009 respectively, any events subsequent to the said dates
    has not been considered / adjusted.

(ii) These financial statements have been prepared on the basis of the format of the financial statements for
     2009. The financial statements for 2007 and 2008 have been reformatted to conform to 2009
     presentations.




                                                  194
Schedule 15

SIGNIFICANT ACCOUNTING POLICIES

1   ACCOUNTING CONVENTION

    These accounts have been prepared in accordance with historical cost convention, applicable Accounting
    Standards notified by the Companies (Accounting Standards) Rules, 2006 and relevant provisions of the
    Companies Act, 1956 and the guidelines issued by the National Housing Bank.

    The preparation of financial statements requires the Management to make estimates and assumptions
    considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of
    the financial statements and the reported income and expenses during the reporting period. Management
    believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future
    results could differ from these estimates.

2   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 1956, read with Schedule VI there to and the
    approvals granted under the section by the Company Law Board.

3   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.

4   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.

5   INCOME FROM LEASES

    Lease rental income in respect of leases is recognised in accordance with the Accounting Standard on
    ‘Leases’ (AS 19) notified by the Companies (Accounting Standards) Rules, 2006.

6   INCOME FROM INVESTMENTS

    In respect of Investments in Schemes of 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.

7   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.

8   TRANSLATION OF FOREIGN CURRENCY

    Assets and liabilities in foreign currencies are converted at the rates of exchange prevailing at the year-end,
    where not covered by forward contracts. Wherever the Corporation has entered into a forward contract or an


                                                        195
    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. Cross currency swaps and other derivatives have been marked to market at the year end. The net
    loss on translation of assets and liabilities in foreign currencies and mark to market of derivatives is debited
    to Profit and Loss Account.

9   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) notified by the Companies (Accounting Standards) Rules, 2006, and
    is recognised through the Provision for Contingencies Account. The investment in properties is net of
    provision for depreciation.

10 FIXED ASSETS

    Fixed Assets are capitalised at cost inclusive of legal and/or installation expenses. Leased Assets are
    accounted in accordance with the Accounting Standard on ‘Leases’ (AS 19) notified by the Companies
    (Accounting Standards) Rules, 2006.

11 INTANGIBLE ASSETS

    Intangible Assets comprising of system software are stated at cost of acquisition, including any cost
    attributable for bringing the same to its working condition, less accumulated amortisation. Any expenses on
    such software for support and maintenance payable annually are charged to revenue account.

12 DEPRECIATION AND AMORTISATION

    Fixed Assets

    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.

    Intangible Assets

    Capitalised software is amortised over a period of four years on a straight-line basis.


13 INVESTMENT IN PROPERTIES

    Depreciation on Investment in properties is provided on a pro-rata basis from the date of acquisition.


14 PROVISION FOR CONTINGENCIES

    The Corporation’s policy is to carry adequate amounts in the Provision for Contingencies account to cover
    the principal amount outstanding in respect of all non-performing assets, standard assets as also all other
    contingencies. All loans and other credit exposures where the instalments are over due for Ninety days and


                                                        196
   more are classified as non-performing assets in accordance with the prudential norms prescribed by the
   National Housing Bank. The provisioning policy of the Corporation covers the minimum provisioning
   required as per the NHB guidelines.

15 EMPLOYEE BENEFITS

   Provident Fund and Superannuation Fund Contributions

   The Corporation’s contributions paid / payable during the year towards Provident Fund and Superannuation
   Fund are charged in the Profit and Loss Account every year. These funds and the schemes thereunder are
   recognised by the Income-tax authorities and administered by various trustees.

   Gratuity and Post Retirement Pension

   The net present value of the Corporation’s obligation towards gratuity to employees and post retirement
   pension scheme for whole time Directors is actuarially determined based on the projected unit credit
   method, except in the case of Dubai branch where the provision for gratuity is made in accordance with the
   prevalent local laws. Actuarial gains and losses are immediately recognised in the Profit and Loss Account.

   Other Employee Benefits

   Compensated absences in the form of short term benefits are determined on an undiscounted basis and
   recognised over the period of service, which entitles the employees to such benefits. Any such benefits
   which are long term in nature are actuarially determined.

16 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) notified by the Companies (Accounting Standards)
   Rules, 2006. 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 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. Credit Enhancement provided by the Corporation by way of investments in
   subordinate Class B Pass Through Certificates is included under Investments in Pass Through Certificates
   in Schedule 5.




                                                       197
198
CONSOLIDATED GROUP ACCOUNTS
Auditors’ Report

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

1.   We have examined the attached Consolidated Balance Sheet of HOUSING DEVELOPMENT FINANCE
     CORPORATION LIMITED, its subsidiaries, jointly controlled entity and the entities over which control
     is exercised (“the Group”) as at March 31, 2008, the Consolidated Profit and Loss Account and the
     Consolidated Cash Flow Statement of the Group for the year ended on that date, both annexed thereto. The
     Consolidated Accounts include investments in affiliates accounted for on the equity method in accordance
     with Accounting Standard 23 (Accounting for Investments in Associates in Consolidated Financial
     Statements) and the jointly controlled entity accounted for in accordance with Accounting Standard 27
     (Financial Reporting of Interests in Joint Ventures). These financial statements are the responsibility of the
     Corporation’s Management. Our responsibility is to express an opinion on these financial statements based
     on our audit.

2.   We conducted our audit in accordance with the generally accepted auditing standards in India. These
     Standards require that we plan and perform the audit to obtain reasonable assurance whether the financial
     statements are free of material misstatements. An audit includes, examining on a test basis, evidence
     supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
     accounting principles used and significant estimates made by the Management, as well as evaluating the
     overall financial statement presentation. We believe that our audit provides a reasonable basis for our
     opinion.

3.   We did not audit the financial statements of four subsidiaries, whose financial statements reflect total assets
     (net) of Rs.11,325.09 crores as at March 31, 2008, total revenue of Rs. 591.14 crores and net cash flows
     amounting to Rs. 429.48 crores for the year ended on that date. We have also not audited the accounts of
     two affiliates. The financial statements of these subsidiaries and affiliates have been audited by other
     auditors whose reports have been furnished to us, and in our opinion, insofar as it relates to the amounts
     included in respect of these subsidiaries and affiliates, is based solely on the reports of the other auditors.

4.   We report that the consolidated financial statements have been prepared by the Corporation in accordance
     with the requirements of Accounting Standard 21 (Consolidated Financial Statements), Accounting
     Standard 23 (Accounting for Investments in Associates in Consolidated Financial Statements) and
     Accounting Standard 27 (Financial Reporting of Interests in Joint Ventures), notified by the Companies
     (Accounting Standards) Rules, 2006.

5.   Based on our audit and on consideration of reports of other auditors on separate financial statements and on
     the other financial information of the subsidiaries and affiliates referred to in paragraph 3 above, and to the
     best of our information and according to the explanations given to us, we are of the opinion that the
     aforesaid consolidated financial statements, give a true and fair view in conformity with the accounting
     principles generally accepted in India :

     (a) in the case of the Consolidated Balance Sheet, of the consolidated state of affairs of the Group as at
         March 31, 2008;

     (b) in the case of the Consolidated Profit and Loss Account, of the consolidated profit of the Group for the
         year ended on that date and

     (c) in the case of the Consolidated Cash Flow Statement, of the consolidated cash flows of the Group for
         the year ended on that date.

                                                                             For DELOITTE HASKINS & SELLS
                                                                                         Chartered Accountants
                                                                                                  P. R. Ramesh
MUMBAI,                                                                                                 Partner
June 10, 2008                                                                          (Membership No. 70928)




                                                         199
Housing Development Finance Corporation Limited Consolidated Balance Sheet as at March
31, 2008

                                          Schedule                                                March 31,
                                                                                                    2007
                                                           Rupees in          Rupees in           Rupees in
                                                            crores             crores              crores
 SOURCES OF FUNDS
SHAREHOLDERS’ FUNDS
Share Capital                                 1                  284.03                                253.00
Reserves and Surplus                          2               12,517.37                              6,195.93
                                                                                 12,801.40           6,448.93
POLICY LIABILITIES                                                                8,425.90            4,605.9
(Policyholders’ Funds) [Note 5(ii)]
LOAN FUNDS                                    3                                  70,915.42          58,590.16
MINORITY INTEREST                                                                   440.29             286.91
DEFERRED TAX LIABILITY [Note                                                             -               0.59
15]
                                                                                 92,583.01          69,932.49
APPLICATION OF FUNDS

LOANS                                         4                                  74,773.53          57,892.71
INVESTMENTS                                   5                                  15,443.34           8,750.38
DEFERRED TAX ASSET [Note 15]                                                        156.51             133.46
CURRENT ASSETS, LOANS AND                     6                6,073.84                              6,159.54
ADVANCES
Less : CURRENT LIABILITIES                    7                4,515.81                              3,600.11
AND PROVISIONS
NET CURRENT ASSETS                                                                 1,558.03          2,559.43
FIXED ASSETS                                  8
Gross Block                                                      991.15                              1,022.89
Less : Depreciation                                              499.81                                493.47
Net Block                                                                           491.34             529.42

GOODWILL ON CONSOLIDATION                                                           159.90              66.10
MISCELLANEOUS EXPENDITURE
(to the extent not written off or
adjusted)
Preliminary Expenditure                                                               0.36               0.99
                                                                                 92,583.01          69,932.49
Notes forming part of the Accounts            14
Significant Accounting Policies               15

Schedules 1 to 15 annexed hereto form part of the Balance Sheet and the Profit and Loss Account

As per our report attached.



For Deloitte Haskins & Sells                  Deepak S. Parekh              Keki M. Mistry
Chartered Accountants                         Chairman                      Vice Chairman &
                                                                            Managing Director
P. R. Ramesh
Partner                                                                     Renu Sud Karnad
                                                                            Jt. Managing Director
MUMBAI, June 10, 2008.




                                                     200
Housing Development Finance Corporation Limited

Consolidated Profit and Loss Account for the year ended March 31, 2008

                                                     Schedule                              Previous
                                                                                             Year
                                                                Rupees in     Rupees in    Rupees in
                                                                 crores        crores       crores
INCOME
Operating Income                                     9                          8,683.11     6,269.77
Fees and Other Charges                                                            115.51       102.23
Other Income                                                                       20.80        21.19
                                                                                8,819.42     6,393.19
EXPENDITURE AND CHARGES

Interest and Other Charges                           10                         5,271.96     3,761.35
Staff Expenses                                       11                           230.49       268.61
Establishment Expenses                               12                            43.61        55.60
Other Expenses                                       13                           189.76       173.10
Amounts transferred to policyholders’ account                                     263.20       143.80
Operating Loss from General Insurance Business                                     23.56         1.98
Depreciation                                                                       31.89        57.38
Preliminary expenses written off                                                    0.63         1.02
Provision for Contingencies [Note 9]                                               36.23        35.27

                                                                                6,091.33     4,498.11

PROFIT BEFORE TAX AND                                                           2,728.09     1,895.08
EXCEPTIONAL ITEMS
Exceptional Items [ Note 7 (ii) ]                                                 677.80        33.71
Profit Before Tax (before profit of associates and
adjustment for minority interest)                                               3,405.89     1,928.79
Less :Provision for Tax (net of Deferred Tax
Asset,
Rs. 11.56 crores - Previous Year Rs. 23.87                                      1,033.48       443.29
crores) [Note 15]
Less :Provision for Fringe Benefit Tax                                              3.40         3.83

Profit After Tax (before profit of associates and                               2,369.01     1,481.67
adjustment for minority interest)
Add :Net share of profit of associates (Equity                                    354.74       267.35
method)
Less :Share of profit of minority interest                                         10.75         7.04

PROFIT AFTER TAX ATTRIBUTABLE TO                                                2,713.00     1,741.98
THE CORPORATION
APPROPRIATIONS:
Special Reserve No. II                                               361.77                    474.92
Special Reserve (under Section 45-IC(1) of the                         0.04                      0.02
Reserve Bank of India Act, 1934)
General Reserve                                                      995.65                    336.32
Additional Reserve (under Section 29C of the                         245.00                     80.00
National Housing Bank Act, 1987)
Shelter Assistance Reserve                                             6.00                      5.00
Capital Redemption Reserve                                            13.71                         -
Proposed Dividend                                                    710.10                    556.61
Taxes on Dividend                                                    130.25                    100.57




                                                         201
                                                                                     2,462.52       1,553.44

BALANCE CARRIED TO SCHEDULE 2                                                          250.48        188.54
EARNINGS PER SHARE (Face Value Rs. 10)
[Note 14]:


— Basic (Rs.)                                                                          100.09         69.52
— Diluted (Rs.)                                                                         94.98         64.63
Notes forming part of the Accounts                 14
Significant Accounting Policies                    15

Schedules 1 to 15 annexed hereto form part of the Balance Sheet and the Profit and Loss Account

As per our report attached.



For Deloitte Haskins & Sells                  Deepak S. Parekh              Keki M. Mistry
Chartered Accountants                         Chairman                      Vice Chairman &
                                                                            Managing Director
P. R. Ramesh
Partner                                                                     Renu Sud Karnad
                                                                            Jt. Managing Director
MUMBAI, June 10, 2008.




                                                     202
Housing Development Finance Corporation Limited

Consolidated Cash Flow Statement for the year ended March 31, 2008

                                                                                          Previous Year
                                                                            Rupees in         Rupees in
                                                                               crores             crores
A    CASH FLOW FROM OPERATING ACTIVITIES                                     2,713.00           1,741.98
     Profit After Tax Attributable to the Corporation                        1,036.88             447.12
     Add: Provision for Taxation                                             3,749.88           2,189.10
     Profit Before Tax
     Adjustments for:
     Depreciation (including depreciation debited in amounts transferred         92.18             85.92
     to policyholders’ account)
     Preliminary expenses written off                                            0.63               1.02
     Provision for Contingencies                                                36.23             35.27
     Loss After Tax relating to the jointly controlled entity                       -               0.42
     Employee Stock Option Expense (net of options exercised)                    0.50             (0.21)
     Provision for Unexpired Risk                                               17.45                  -
     Provision for Employee Benefits                                            22.21             12.49
     Policy Liabilities (net)                                                3,820.00          2,248.42
     Surplus from Deployment in Cash Management Schemes of Mutual            (113.99)           (42.07)
     Funds
     Profit from Sale of Investments                                         (818.01)          (325.49)
     Profit on Sale of properties acquired in satisfaction of debts             (0.02)            (9.27)
     Profit on Sale of Fixed Assets                                             (0.61)          (15.23)
     Operating Profit before Working Capital changes                         6,806.45          4,180.37
     Adjustments for:
     Current Assets                                                           (376.45)         (548.04)
     Current Liabilities                                                        753.15           619.75
     Cash generated from operations                                           7,183.15         4,252.08
     Taxes Paid                                                             (1,050.83)         (486.10)
     Net cash from operating activities                                       6,132.30         3,765.98
B    CASH FLOW FROM INVESTING ACTIVITIES
     Purchase of Fixed Assets                                                 (148.82)          (105.24)
     Sale of Fixed Assets                                                         7.15             27.81
     Consideration received towards proctection of expected loss on              14.79                 -
     shares (SICAL) - HDFC Ltd.
     Goodwill (net)                                                            (93.80)                 -
     Capital Reserve on acquisition                                              12.29                 -
     Investments (net)                                                      (6,016.86)        (1,911.44)
     Net cash used in investing activities                                  (6,225.25)        (1,988.87)
C    CASH FLOW FROM FINANCING ACTIVITIES
     Share Capital - Equity                                                      31.03               3.44
     Securities Premium received during the year                              4,688.90            289.40
     Borrowings (net)                                                        12,455.43         10,680.42
     Loans disbursed (net)                                                 (16,901.47)       (11,838.30)
     Corporate Deposits (net)                                                   313.63           (83.06)
     Dividend paid - HDFC Ltd.                                                (556.61)          (499.13)
     Taxes paid on Dividend                                                    (97.12)           (78.53)
     Premium Paid on FRNs and NCDs                                             (74.31)             (2.39)
     Preliminary expenses incurred                                                    -            (0.03)
     Share and Debenture Issue expenses                                               -            (0.60)
     Increase in Minority Interest                                              151.11             70.61
     Shelter Assistance Reserve – utilization                                    (5.43)            (4.68)
     Net cash from / (used in) financing activities                                5.16       (1,462.85)
     Net (Decrease) / Increase in cash and cash equivalents                    (87.77)            314.26
     Cash and cash equivalents as at the beginning of the year                1,982.48          1,668.22


                                                    203
                                                                                Previous Year
                                                                   Rupees in        Rupees in
                                                                      crores            crores
      Cash and cash equivalents as at the end of the year           1,894.71          1,982.48
                                                                     (87.77)            314.26


As per our report attached.

For Deloitte Haskins & Sells                   Deepak S. Parekh   Keki M. Mistry
Chartered Accountants                          Chairman           Vice Chairman &
                                                                  Managing Director
P. R. Ramesh
Partner                                                           Renu Sud Karnad
                                                                  Jt. Managing Director
MUMBAI, June 10, 2008.




                                                       204
Schedules

Annexed to and forming part of the Accounts

Schedule 1

SHARE CAPITAL

                                                                                As at          As at
                                                                            March 31,      March 31,
                                                                                2008           2007
                                                                            Rupees in      Rupees in
                                                                               crores         crores
AUTHORISED
32,50,00,000 Equity Shares of Rs. 10 each                                         325.00      275.00
            (Previous Year 27,50,00,000 Equity Shares of Rs. 10 each)
                                                                                  325.00      275.00
ISSUED, SUBSCRIBED AND PAID-UP
 28,40,37,985 Equity Shares of Rs. 10 each                                        284.03      253.00
             (Previous Year 25,30,06,607 Equity Shares of Rs. 10 each)
             (Includes 12,19,60,713 Equity Share of Rs. 10 each, allotted
             as fully paid-up
             Bonus Shares out of Securities Premium Account and
             Capital Redemption Reserve)

                                                                                  284.03      253.00




                                                      205
Schedule 2

RESERVES AND SURPLUS

                                                                           As at         As at
                                                                         March 31,     March 31,
                                                                           2008          2007
                                                           Rupees in     Rupees in     Rupees in
                                                            crores        crores        crores
SPECIAL RESERVE No. I
Opening Balance                                                  51.23                       64.35
Less : Transfer to Provision for Contingencies                       -                       13.12
[Net of Deferred Tax of Rs. Nil (Previous Year Rs. 21.88
crores)] [Note 9(ii)]
                                                                               51.23         51.23
SPECIAL RESERVE No. II

Opening Balance                                               2,175.98                    1,701.06
Less: Opening Adjustments [Note 1(v)]                             0.14                          —

                                                              2,175.84                    1,701.06
Add : Transfer from the Profit and Loss Account                 361.77                      474.92
                                                                            2,537.61      2,175.98
SPECIAL RESERVE

Under Section 45-IC(1) of the RBI Act, 1934
Opening Balance                                                   0.06                        0.04
Add : Transfer from Profit and Loss Account                       0.04                        0.02
                                                                                0.10          0.06
GENERAL RESERVE
Opening Balance                                               2,451.03                    1,839.70
Less: Opening Adjustments [ Note 1(v) ]                         352.88                    (282.58)
                                                              2,098.15                    2,122.28
Add : Transfer from the Profit and Loss Account                 995.65                      336.32
                                                              3,093.80                    2,458.60
Less: Utilised during the year in accordance with the               —                         7.57
Accounting
Standard on Employee Benefits (AS 15) (Revised)
[Net of Deferred Tax of Rs. Nil (Previous Year Rs. 3.84
crores)] [Note 8(i)]

                                                              3,093.80                    2,451.03
Add: Adjusted during the year in accordance with the              5.44                          —
Accounting Standard on Employee Benefits (AS 15)
(Revised)
[Net of Deferred Tax of Rs. 2.74 crores (Previous Year
Rs. Nil)] [Note 8(i)]
                                                                            3,099.24      2,451.03

ADDITIONAL RESERVE (under Section 29C of the
National Housing Bank Act, 1987)
Opening Balance                                                  80.00                          —
Add : Transfer from Profit and Loss Account                     245.00                       80.00

                                                                325.00                       80.00
Less : Utilised during the year                                  27.72                          —
[Net of Deferred Tax of Rs. 14.28 crores (Previous Year                       297.28         80.00
Rs. Nil)] [Note 9(ii)]



                                                     206
REVALUATION RESERVE [Note 3(ii)]
                                                                   5.19
Opening Balance                                                                           5.19
Add : Credited during the year                                    39.20                     —
                                                                              44.39
SECURITIES PREMIUM                                                                        5.19
                                                                 856.12
Opening Balance                                                                         670.21
Less : Opening Adjustments [Note 1(v)]                             0.03                     —

                                                                  856.09                670.21
Add : Received during the year                                  4,688.90                289.40
Add : Premium payable on FCCB written back on                     119.17                    —
conversion [Note 3(i)]

                                                                5,664.16                959.61
Less : Utilised during the year [Note 3(i)]                        21.02                103.49
                                                                            5,643.14    856.12
EMPLOYEE STOCK OPTION OUTSTANDING
Opening Balance                                                    0.01                   0.01
Add : Net Charge for the year                                      0.50                     —
                                                                                0.51      0.01
CAPITAL REDEMPTION RESERVE
Opening Balance                                                   12.53                  12.53
Add : Transfer from the Profit and Loss Account                   13.71                     —
                                                                              26.24      12.53
SHELTER ASSISTANCE RESERVE
Opening Balance                                                   11.25                  10.93
Add : Transfer from the Profit and Loss Account                    6.00                   5.00
                                                                  17.25                  15.93
Less : Utilised during the year                                    5.43                   4.68
                                                                              11.82      11.25
CAPITAL RESERVE                                                                0.04       0.04
CAPITAL RESERVE ON CONSOLIDATION
Opening Balance                                                    3.71                   3.71
Add : Transfer during the year on acquisition                     12.29                     —
                                                                              16.00       3.71
PROFIT AND LOSS ACCOUNT (of subsidiaries, jointly                250.48                 188.54
controlled entity, associates and entities over which control
is exercised)
Add : Opening profit of subsidiaries, jointly controlled         548.78                 360.24
entity and associates (net)
                                                                 799.26                  548.78
Less : Opening Adjustments [Note 1(v)]                             9.49                      —
                                                                              789.77     548.78
                                                                           12,517.37   6,195.93




                                                        207
Schedule 3

LOAN FUNDS

                                                                               As at             As at
                                                                             March 31,         March 31,
                                                                               2008              2007
                                                           Rupees in         Rupees in         Rupees in
                                                            crores            crores            crores
LOANS
Asian Development Bank                                          377.91                               399.41
DEG - Deutsche Investitions - und                               180.68                               220.27
Entwicklungsgesellschaft mbH
International Finance Corporation                               863.09                               886.61
National Housing Bank                                           909.64                               713.72
Syndicated Loans - International                                    —                                442.98
External Commercial Borrowings                                      —                                 35.94
Scheduled Banks and Others                                   17,759.87                            18,851.14
Kreditanstalt für Wiederaufbau                                   68.19                                71.13
Others (Finance Lease)                                            2.02                                 2.18
                                                                                  20,161.40       21,623.38
FOREIGN CURRENCY CONVERTIBLE BONDS                                                   516.33        2,179.34
(Unsecured)
(Redeemable in 2010 )
BONDS                                                                               110.98           113.63
(Redeemable at par between 2008 and 2022)
DEBENTURES
Non-Convertible Debentures                                   32,712.90                            18,696.35
Floating Rate Notes - International (Redeemable in                  —                                435.10
2007)
                                                                                  32,712.90
Under a Line from Kreditanstalt für Wiederaufbau                                      41.17           41.17
(Unsecured)
Loans from Scheduled Banks (Unsecured)                                          2,086.54           1,375.86
Commercial Paper (Unsecured)                                                    2,400.00           2,200.00
Non-Convertible Subordinated Debentures                                         1,415.00           1,425.00
(Unsecured)
DEPOSITS (Unsecured)                                         11,452.75                            10,484.93
Interest Accrued and Due                                         18.35                                15.40
                                                                                  11,471.10
                                                                                  70,915.42       58,590.16

Schedule 4

LOANS

                                                As at                                    As at
                                            March 31, 2008                           March 31, 2007
                                            Rupees in crores                         Rupees in crores
Individuals                                                      50,078.34                         38,697.04
Corporate Bodies                                                 22,847.33                         17,904.26
Others                                                            1,847.86                          1,291.41

                                                                 74,773.53                        57,892.71




                                                     208
Schedule 5

INVESTMENTS

                                                                               As at          As at
                                                                             March 31,      March 31,
                                                                               2008           2007
                                                                             Rupees in      Rupees in
                                                                              crores         crores
INVESTMENT IN ASSOCIATES :
Equity Investments in Associates by the Holding Company                           431.59         151.84
Equity Investment in Associate by Subsidiaries                                     73.32          73.32

                                                                                   504.91        225.16
Add : Goodwill on acquisition of associates                                      1,110.45          0.09
    (share of pre-acquisition losses)

                                                                                 1,615.36        225.25
Less: Capital Reserve on acquisition of an associate                                 0.13          0.13
     (Share of pre-acquisition profit)
                                                                                 1,615.23         225.12
Add : Adjustments for post-acquisition share of profit of associates             1,140.32       1,171.87
(Equity method)

                                                                       (A)       2,755.55       1,396.99
OTHER INVESTMENTS :

Other than Insurance Companies
Equity Shares                                                                     915.52         651.15
Preference Shares                                                                  32.52          36.52
Convertible Preference Shares                                                      58.96              -
Convertible Bonds                                                                      -           2.08
Debentures & Bonds                                                                861.68         502.15
Pass Through Certificates and Security Receipts - For Financing Real              111.96         108.91
Estate Projects
Securities Receipts – Others                                                         9.96             -
Government Securities                                                              321.87        334.48
Mutual Funds and Other Funds                                                     1,814.61        790.93
Properties                                                                         142.21        144.81

                                                                                 4,269.29       2,571.03
Less : Provision for Diminution in Value of Investments                             60.29          40.84

                                                                       (B)       4,209.00       2,530.19
Insurance Companies

Equity Shares                                                                    4,531.23       2,265.14
Debentures and Bonds                                                             1,603.87         844.98
Pass Through Securities                                                             75.91          82.33
Government and other Approved Securities                                         1,756.76       1,007.01
Mutual Funds                                                                       192.07         111.47
Commercial Paper                                                                    72.51          61.82
Certificate of Deposits                                                            166.76          66.02
Treasury Bills                                                                       4.61         357.43
Properties                                                                          75.75          27.06

                                                                                 8,479.47       4,823.26
Less : Fair Value Change                                                             0.68           0.06


                                                       209
                                                                                As at           As at
                                                                              March 31,       March 31,
                                                                                2008            2007
                                                                              Rupees in       Rupees in
                                                                               crores          crores

                                                                  (C)             8,478.79        4,823.20

                                                         [(A)+(B)+(C)]           15,443.34        8,750.38

Schedule 6

CURRENT ASSETS, LOANS AND ADVANCES

                                                                                 As at          As at
                                                                               March 31,      March 31,
                                                                                 2008           2007
                                                               Rupees in       Rupees in      Rupees in
                                                                crores          crores         crores
CURRENT ASSETS
Income Accrued on Investments                                                        172.82        112.21
Interest Accrued on Deposits                                                          44.14         28.94
Sundry Debtors (Unsecured)                                                           191.71        141.90
Cash and Bank Balances :
     Cash and Cheques on Hand                                        138.97                         194.29
     With Scheduled Banks - Current Accounts                         576.15                         330.73
                       - Deposit Accounts                          1,169.53                       1,447.35
     With Reserve Bank of India                                       10.06                          10.06
     With Non-Scheduled Banks - Current Accounts                         —                            0.05
                                                                                   1,894.71
                                                                                   2,303.38       2,265.53

LOANS AND ADVANCES
Instalments due from borrowers                                       298.52                         227.51
Advances recoverable in cash or in kind or for value to be         1,413.60                       1,294.63
received [Note 4]
Stock in trade                                                         0.46                           0.36
Corporate Deposits                                                 2,057.88                       2,371.51
                                                                                   3,770.46
                                                                                   6,073.84       6,159.54

Schedule 7

CURRENT LIABILITIES AND PROVISIONS [Notes 5, 8 and 9]

                                                                                As at           As at
                                                                              March 31,       March 31,
                                                                                2008            2007
                                                             Rupees in        Rupees in       Rupees in
                                                              crores           crores          crores
CURRENT LIABILITIES
Interest Accrued but not Due                                     1,161.28                           951.44
Sundry Creditors                                                   634.58                           491.59
Advance Payments                                                   394.54                           124.85
Other Liabilities                                                  659.85                           529.22
                                                                                  2,850.25        2,097.10
PROVISIONS
Proposed Dividend - HDFC Ltd.                                     710.10                           556.61



                                                      210
                                                                        As at         As at
                                                                      March 31,     March 31,
                                                                        2008          2007
                                                        Rupees in     Rupees in     Rupees in
                                                         crores        crores        crores
Additional Tax on Proposed Dividend                          129.45                        96.32
Provision for premium payable on redemption of FRNs           57.76                      230.22
and FCCB
Provision for Contingencies                                  490.84                      431.55
Provision for Tax (Net of Advance Tax)                       122.77                       65.15
Provision for Employee Benefits                               69.47                       55.44
Reserve for Unexpired Risk                                    85.17                       67.72
                                                                         1,665.56
                                                                         4,515.81       3,600.11




                                                  211
Schedule 8

FIXED ASSETS
                                                                                                                                       Rupees in crores
                                         GROSS BLOCK                                              DEPRECIATION AND                     NET BLOCK
                                                                                                    AMORTISATION
                    As at                    (3)                     As at         As at        (3)                            As at    As at     As at
                    March    Additions   Adjustments    Deductions   March         March    Adjustments For the Deductions    March    March     March
                     31,                                              31,           31,                  Year                    31,      31,       31,
                    2007                                             2008          2007                                        2008     2008      2007
TANGIBLE
Land :
   Freehold          22.26        0.02            —           5.61    16.67            —            —        —          —         —     16.67    22.26
   Leasehold          3.44          —             —             —      3.44          0.38           —      0.04         —       0.42     3.02     3.06
Buildings :
   (2)
       Own Use      180.50        4.56         (2.57)         0.09   182.40         24.51        (0.19)    2.95      (0.02)    27.29   155.11   155.99
Leasehold            33.45        6.89        (13.66)         0.16    26.52         14.12        (3.42)    4.01      (0.10)    14.81    11.71    19.33
Improvements
Computer            211.22       44.12        (90.44)         3.73   161.17        132.41       (45.18)    5.42     (17.55)   110.20    50.97    78.81
Hardware
Furniture &
Fittings / Office
Equipment etc.
   Own Use          205.67       82.46        (39.44)         1.50   247.19         96.33       (11.52)    7.45     (28.50)   120.76   126.43   109.34
   Under              1.55          —              —            —      1.55          0.93            —     0.10          —      1.03     0.52     0.62
   Operating
   Lease
Vehicles :
   Owned              7.76        1.94         (0.16)         0.77     8.77          4.05        (0.09)    1.52       0.51      4.97     3.80      3.71
   Leased             1.40        0.03         (0.45)         0.58     0.40          0.90        (0.26)    0.02       0.51      0.15     0.25      0.50
Leased Assets :
   Plant &          139.85         —              —           2.17   137.68        139.85           —       —         2.17    137.68      —         —
   Machinery
   Vehicles          24.76          —             —           8.39    16.37        24.76            —       —          8.39   16.37        —         —
   Computers          1.70        1.19            —             —      2.89          0.37           —       —        (0.90)     1.27     1.62      1.33
Lease Terminal          —           —             —             —        —         (2.18)           —       —            —    (2.18)     2.18      2.18
Adjustment
INTANGIBLE


                                                                             212
                                             GROSS BLOCK                                                  DEPRECIATION AND                                    NET BLOCK
                                                                                                            AMORTISATION
                    As at                         (3)                        As at         As at        (3)                                       As at    As at      As at
                    March       Additions     Adjustments      Deductions    March         March    Adjustments For the Deductions               March    March      March
                     31,                                                      31,           31,                  Year                               31,      31,        31,
                    2007                                                     2008          2007                                                   2008     2008       2007
Computer
Software
  Owned               33.85           7.61            (6.86)           —       34.60        22.22         (2.99)           0.63         (8.11)    27.97     6.63      11.63
  Leased               0.68             —                 —            —        0.68         0.10             —              —          (0.23)     0.33     0.35       0.58
Goodwill             153.39             —             (3.98)           —      149.41        33.31         (3.44)           7.46             —     37.33   112.08     120.08
Website                1.41             —                 —            —        1.41         1.41             —              —              —      1.41       —          —
Development
                                                                                                                    (2)           (1)
                   1,022.89         148.82         (157.56)          23.00     991.15      493.47        (67.09)          29.60    (43.83)     499.81      491.34    529.42
Previous Year        939.09         131.82            13.02          61.04   1,022.89      415.32           0.49          55.25    (22.41)     493.47      529.42    523.77
Notes
(1)     Net of depreciation for the year amounting to Rs. 60.29 crores (Previous Year Rs. 28.54 crores) included in amounts transferred to policyholders’ account.

(1)     Depreciation for the financial year excludes Rs. 2.29 crores (Previous Year Rs. 2.13 crores) being depreciation charge on Investment in Properties.

(2)     Represents sale of stake of the jointly controlled entity.




                                                                                     213
Schedule 9

OPERATING INCOME [Note 7]

                                                                         For the year
                                                                            ended
                                                                        March 31, 2008     Previous Year
                                                          Rupees in       Rupees in          Rupees in
                                                           crores          crores             crores
INTEREST INCOME
Interest on Loans                                            7,403.86
     (Net of Loss on Exchange Rs. 27.57 crores                                                  4,978.95
     - Previous Year Rs. 2.88 crores)
Other Interest                                                 625.12                             480.03
                                                                               8,028.98         5,458.98
Dividends                                                                         42.06            61.82
Management and Trusteeship Fees                                                  342.39           206.91
Call Centre and Data Processing Charges                                               -           187.99
Other Operating Income                                                           155.69           312.00
Surplus from deployment in Cash Management Schemes
of Mutual Funds                                                                   113.99           42.07

                                                                               8,683.11         6,269.77

Schedule 10

INTEREST AND OTHER CHARGES

                                                             For the year ended
                                                              March 31, 2008            Previous Year
                                                              Rupees in crores         Rupees in crores
INTEREST
Loans                                                                    1,897.81               1,643.27
(Net of Gain on Exchange Rs. 41.71 crores
- Previous Year Rs. 6.38 crores)
Deposits                                                                 1,015.85                 867.41
Bonds                                                                    2,311.80               1,203.92
Others                                                                       0.19                   0.02
                                                                         5,225.65               3,714.62

OTHER CHARGES                                                               46.31                  46.73
(includes Loss / Gain on Exchange Rs. 0.05 crores
- Previous Year Loss on Exchange Rs. 0.39 crores)
                                                                         5,271.96               3,761.35

Schedule 11

STAFF EXPENSES [Note 8]

                                                            For the year ended
                                                             March 31, 2008             Previous Year
                                                             Rupees in crores          Rupees in crores
Salaries and Bonus                                                            200.22              234.87
Contribution to Provident Fund and Other Funds                                 20.85               18.29
Staff Training and Welfare Expenses                                             9.42               15.45
                                                                              230.49              268.61




                                                    214
Schedule 12

ESTABLISHMENT EXPENSES

                                                             For the year ended
                                                              March 31, 2008                  Previous Year
                                                              Rupees in crores               Rupees in crores
Rent                                                                          26.42                        13.98
Rates and Taxes                                                                2.56                        16.89
Repairs and Maintenance - Buildings                                            3.23                         9.09
General Office Expenses                                                        1.42                         1.45
Electricity Charges                                                            9.30                        13.10
Insurance Charges                                                              0.68                         1.09
                                                                              43.61                        55.60

Schedule 13

OTHER EXPENSES

                                                                        For the year ended
                                                                        March 31, 2008          Previous Year
                                                                          Rupees in crores      Rupees in crores
Travelling and Conveyance                                                          15.62                  19.78
Printing and Stationery                                                             7.73                    8.16
Postage, Telephone and Fax                                                         18.53                  32.09
Advertising                                                                        38.92                  31.58
Repairs and Maintenance - Other than Buildings Office Maintenance                   6.65                    7.93
Legal Expenses                                                                      9.11                    7.51
Computer Expenses                                                                  11.18                    6.88
Directors’ Fees and Commission                                                      3.52                    3.47
Miscellaneous Expenses                                                              1.16                    1.04
Auditors’ Remuneration                                                             75.75                  53.02
                                                                                    1.59                    1.64
                                                                                  189.76                 173.10

Schedule 14

NOTES FORMING PART OF THE ACCOUNTS

1.   The consolidated financial statements comprise the individual financial statements of Housing
     Development Finance Corporation Limited (HDFC Ltd.), its subsidiaries, jointly controlled entity,
     associates and the entities over which control is exercised as on March 31, 2008 and for the year ended on
     that date. The consolidated financial statements have been prepared on the following basis:

         The financial statements of the Corporation, its subsidiaries and the entities over which control is
         exercised have been combined on a line-by-line basis by consolidating the book values of like items of
         assets, liabilities, income and expenses, after eliminating intra-group balances and intra-group
         transactions, resulting in unrealised profits or losses as per Accounting Standard 21 on ‘Consolidated
         Financial Statements’ notified by the Companies (Accounting Standards) Rules, 2006.

     •   The financial statements of the jointly controlled entity, in the previous year, have been consolidated on
         a line-by-line basis by consolidating the book values of like items of assets, liabilities, income and
         expenses, after eliminating intra-group balances and intra-group transactions, resulting in unrealised
         profits or losses, (using the “proportionate consolidation” method) as per Accounting Standard 27 on
         ‘Financial Reporting of Interests in Joint Ventures’ notified by the Companies (Accounting Standards)
         Rules, 2006.

     •   The Corporation’s investments in associates are accounted for under the equity method and its share of
         pre-acquisition profits / losses is reflected as goodwill / capital reserve in the carrying value of


                                                       215
    investments in accordance with the Accounting Standard 23 on ‘Accounting for Investments in
    Associates in Consolidated Financial Statements’ notified by the Companies (Accounting Standards)
    Rules, 2006.

•   The financial statements of the subsidiaries, the jointly controlled entity, the associates and the entities
    over which control is exercised used in the consolidation are drawn up to the same reporting date as
    that of the Corporation, i.e. March 31, 2008.

•   The excess of cost to the Corporation, of its investment in the subsidiaries, jointly controlled entity and
    the entities over which control is exercised over the Corporation’s portion of equity is recognised in the
    financial statements as Goodwill.

•   The excess of the Corporation’s portion of equity of the subsidiaries on the acquisition date over its
    cost of investment is treated as Capital Reserve.

•   Minority Interest in the net assets of consolidated subsidiaries and the entities over which control is
    exercised consists of:

    a)   The amount of equity attributable to minorities at the date on which investment in a subsidiary or
         the entities over which control is exercised is made; and

    b)   The minorities’ share of movements in equity since the date the relationship came into existence.

•   Minority interest’s share of net profit/loss for the year of the consolidated subsidiaries and the entities
    over which control is exercised is identified and adjusted against the profit after tax of the group.

    (i) The financial statements of the following subsidiary companies, all incorporated in India, have
        been consolidated as per Accounting Standard 21 on ‘Consolidated Financial Statements’ notified
        by the Companies (Accounting Standards) Rules, 2006 :

                               Name of Subsidiary                               Proportion of Ownership
                                                                                      Interest (%)
                                                                                Current         Previous
                                                                                  Year           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.                                               60.00            50.10
          HDFC Trustee Co. Ltd.                                                      100.00            100.00
          HDFC Realty Ltd.                                                           100.00            100.00
          GRUH Finance Ltd.                                                            61.50            61.52
          HDFC Venture Capital Ltd.                                                    80.50            80.50
          HDFC Ventures Trustee Co. Ltd.                                             100.00            100.00
          HDFC Sales Pvt. Ltd. (Formerly Home Loan Services India                    100.00            100.00
          Pvt. Ltd.)
          HDFC Property Ventures Ltd.                                                100.00            100.00

    (ii) The financial statements of the following entities, over which control is exercised, both
         incorporated in India, have been consolidated as per Accounting Standard 21 on ‘Consolidated
         Financial Statements’ notified by the Companies (Accounting Standards) Rules, 2006 :

                                Name of the Entity                               Proportion of Ownership
                                                                                      Interest (%)
                                                                                 Current        Previous
                                                                                   Year          Year
          HDFC Investment Trust                                                      100.00             Nil



                                                   216
                            Name of the Entity                             Proportion of Ownership
                                                                                Interest (%)
                                                                           Current        Previous
                                                                             Year          Year
     HDFC PROPERTY FUND – Scheme - HDFC IT Corridor                             91.36           35.19
     Fund

    a)    Current year being first year of operation, the financial statements of HDFC Investment Trust
          are for the period August 24, 2007 to March 31, 2008.

    b) Consequent to the investment in the above entities, the consolidated net worth is higher by Rs.
       471.32 crores and the consolidated profit is lower by Rs. 1.68 crores.

(iii) The financial statements of the following subsidiary companies, both incorporated in India, which
      are in the nature of jointly controlled entities, have been consolidated as per Accounting Standard
      21 on ‘Consolidated Financial Statements’ notified by the Companies (Accounting Standards)
      Rules, 2006.

         Name of Subsidiary (Jointly Controlled Entity)       Proportion of Ownership
                                                                     Interest (%)
                                                             Current Year Previous Year
     HDFC Standard Life Insurance Co. Ltd.                            72.56            79.06
     HDFC ERGO General Insurance Co. Ltd.
     (Formerly HDFC Chubb General Insurance Co. Ltd.)                 74.00            74.00

    Minority interest in HDFC Standard Life Insurance Co. Ltd. is adjusted for Rs. Nil (Previous Year
    Rs. 28.74 crores) being share application money received pending allotment of Nil (Previous Year
    2.87 crores) shares. Consequently, HDFC Ltd.’s share in HDFC Standard Life Insurance Co. Ltd.
    is calculated at 72.56% (Previous Year 79.06%).

(iv) In previous year, Intelenet Global Services Pvt. Ltd. (IGSL) had been consolidated as a jointly
     controlled entity in accordance with Accounting Standard 27 on ‘Financial Reporting of Interests
     in Joint Ventures’ notified by the Companies (Accounting Standards) Rules, 2006.

    IGSL had made investments in the following wholly owned subsidiaries, which have been
    consolidated in the previous year as per Accounting Standard 21 on ‘Consolidated Financial
    Statements’ notified by the Companies (Accounting Standards) Rules, 2006.

                 Name of Subsidiary                 Proportion of Ownership
                                                       Interest (%)
                                                    Current Year Previous Year
    Intelenet Inc., USA                                         -              100
    Intelenet America Inc., USA                                 -              100
    Intelenet (UK) Limited, UK                                  -              100
    Sparsh BPO Services Limited, India (SBSL)                   -               51

    During the current year the Corporation has sold its entire shareholding in IGSL; accordingly the
    same has not been considered for consolidation in the current year.

(v) Consequent to the above changes in the ownership interest, certain previous year balances have
    been considered based on current ownership and accordingly the same is reflected in the ‘General
    Reserve’.

(vi) The following amounts are included in the financial statements in respect of the jointly controlled
     entity, referred to in Note 1(iv) above, based on the proportionate consolidation method:



                                              217
                                                                        Rupees in crores
                                                      Current Year      Previous Year
               ASSETS
               Net Block                                            -            90.47
               Current Assets                                       -            62.06
               Loans & Advances                                     -            71.72
                                                                    -           224.25
               LIABILITIES

               Reserves & Surplus                                   -            40.97
               Secured Loans                                        -            70.38
               Unsecured Loans                                      -            31.17
               Current Liabilities                                  -            39.77
               Provisions                                           -             4.12
                                                                    -           186.41
               INCOME

               Call Center and Data Processing Fees                 -           187.99
               Interest Income                                      -             0.30
               Other Income                                         -             3.06
                                                                    -           191.35
               EXPENSES

               Interest and Other Charges                           -             5.29
               Staff Expenses                                       -            96.47
               Establishment Expenses                               -            26.76
               Other Expenses                                       -            35.35
               Depreciation                                         -            26.79
               Provision for Contingencies                          -             1.85
               Taxes – Current                                      -             0.55
               Share of Minority Interest                           -             0.21


2.   HDFC Ltd.’s investments in the following associates, have been accounted for, under the equity method, in
     accordance with the Accounting Standard 23 on ‘Accounting for Investments in Associates in Consolidated
     Financial Statements’ notified by the Companies (Accounting Standards) Rules, 2006:

                 Name of Associate               Nature of Business       Proportion of Ownership
                                                                                Interest (%)
                                                                        Current Year Previous Year

      HDFC Bank Ltd.                             Banking Services                23.26          21.56

      Indian Association for Savings and Credit Micro Finance                    49.99          49.99
      India Value Fund Advisors Pvt. Ltd.        Venture Capital                 21.51          21.51

     HDFC Ltd.’s share of profit in HDFC Bank Ltd. has been accounted for based on their consolidated
     financial statements.

3.   (i) During the year, Rs. 21.02 crores (Previous Year Rs. 103.49 crores) has been utilised out of the
         Securities Premium Account in accordance with Section 78 of the Companies Act, 1956. Out of the
         above, Rs. 0.12 crores (Previous Year Rs. 0.60 crores) has been utilised by one of the subsidiary
         companies towards share and debenture issue expenses and Rs. 20.90 crores (Previous Year Rs.
         102.89 crores) has been utilised towards the premium payable on the redemption of Foreign Currency
         Convertible Bonds (FCCB) of HDFC Ltd. HDFC Ltd. has also written back Rs. 119.17 crores
         (Previous Year Rs.Nil) on conversion of FCCBs to the Securities Premium account being the provision
         for redemption of FCCBs created in the earlier years by debit to the Securities Premium account.




                                                      218
     (ii) The premises owned by one of the subsidiary companies (HDFC Standard Life Insurance Co. Ltd.)
          used as an office in the past had been reclassified during the year 2005-06 as Investment in Properties.
          The property has been valued by an expert during the year and the gain of Rs. 39.20 crores (Previous
          Year Rs. Nil) on revaluation arising due to change in carrying amount of the investment property is
          taken to the Revaluation Reserve.

4.   Advances recoverable in cash or in kind includes Advance Tax (net of Provision for Taxation) Rs. 394.61
     crores (Previous Year Rs. 327.47 crores).

5.   (i) Reserve for Unexpired Risk represents proportion of net premium written relating to the period of
          insurance subsequent to the Balance Sheet date, calculated on the basis of 1/365th method, or as
          required under section 64V(1)(ii)(b) of the Insurance Act, 1938, whichever is higher in respect of a
          subsidiary company [HDFC ERGO General Insurance Co. Ltd. (Formerly HDFC Chubb General
          Insurance Co. Ltd.)].

     (ii) The balance in the funds for future appropriation account amounting to Rs. 24.70 crores (Previous Year
           Rs. 5.95 crores) included under Policy Liabilities (Policyholders’ Fund) represents funds, the allocation
           of which, either to participating policyholders or to the shareholders, has not been determined at the
           balance sheet date.

6.   Estimated amount of contracts remaining to be executed on capital account and not provided for (net of
     advances) is Rs. 228.40 crores (Previous Year Rs. 244.09 crores).

7.   (i) Other Operating Income comprises of profit on sale of investments amounting to Rs. 140.21 crores
          (Previous Year Rs. 291.78 crores), income from leases amounting to Rs. 15.46 crores (Previous Year
          Rs. 10.95 crore) and towards profit on sale of properties acquired in satisfaction of debts Rs. 0.02
          crores (Previous Year Rs. 9.27 crores). The profit on sale of investments excludes Surplus from
          deployment in Cash Management Schemes of Mutual Funds.

     (ii) Exceptional Items comprises of net profit on sale of investments amounting to Rs. 677.80 crores on
          account of sale of shares of HDFC Standard Life Insurance Co. Ltd. (Subsidiary Company), HDFC
          General Insurance Co. Ltd. [Formerly HDFC Chubb General Insurance Co. Ltd. (Subsidiary
          Company)], and Intelenet Global Services Pvt. Ltd. (Jointly controlled Entity) [Previous Year Rs.
          33.71 crores on account of sale of shares of HDFC Standard Life Insurance Co. Ltd. (Subsidiary
          Company) and Rockfort Estate Developers Ltd.(Associate Company)].

     (iii) Dividend income includes Rs. 15.20 crores (Previous Year Rs. 5.96 crores) in respect of current
           investments.

     (iv) Profit on sale of investments includes Rs. 0.90 crores (Previous Year Rs. 39.35 crores) in respect of
          current investments.

     (v) Other Interest includes interest on investments amounting to Rs. 148.93 crores (Previous Year Rs.
         115.75 crores) including Rs. 9.73 crores (Previous Year Rs. 13.64 crores) in respect of current
         investments.

     (vi) Surplus from deployment in Cash Management Schemes of Mutual Funds amounting to Rs. 113.99
          crores (Previous Year Rs. 42.07 crores) is in respect of investments held as current investments.

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

     (i) An amount of Rs. 5.44 crores being the difference (net of tax effect of Rs. 2.74 crores ) between the
         liability as on March 31, 2007 on employee benefits, determined based on the implementation guidance
         issued by the Institute of Chartered Accountants of India for AS 15 (Revised) and the liability as per
         the previous accounting policy of HDFC Ltd. and one of the subsidiary companies, has been adjusted
         against the opening balance of General Reserve, in terms of AS 15 (Revised).

         In the previous year an amount of Rs. 7.57 crores being the difference [net of tax effect of Rs. 3.84
         crores] between the liability as on March 31, 2006 on Employee Benefits including defined benefit


                                                        219
         plans, determined based on the AS 15 (Revised) and the liability as per the pre revised AS 15 had been
         adjusted against the opening balance of General Reserve, in terms of AS 15 (Revised).

    (ii) The following amounts are recognised in the Profit and Loss Account which are included as under:

                                                                                                  Rupees in crores
                                             Contributions to         Amounts transferred       Operating Loss
                                                                              to                     from
                                             Provident Fund             Policyholders’         General Insurance
                                                    and                    Account
                                            Other Funds under                                       Business
                                              Staff Expenses
         Provident Fund                                   6.20                        12.69                    0.43

                                                             (3.10)                    (Nil)                   (Nil)
         Superannuation Fund                                   2.55                     0.33                    0.04

                                                             (1.73)                    (Nil)                   (Nil)
         Employees’ Pension Scheme-                            0.95                     Nil                     Nil
         1995
                                                             (0.92)                    (Nil)                   (Nil)

         Figures in brackets pertain to the Previous Year.

         The Rules of the Provident Fund in respect of certain companies which are administered by a Trust
         require that if the Board of Trustees are unable to pay interest at the rate declared for Employees’
         Provident Fund by the Government under para 60 of the Employees’ Provident Fund Scheme, 1952 for
         the reason that the return on investment is less or for any other reason, then the deficiency shall be
         made good by the respective companies. Having regard to the assets of the Fund and the return on the
         investments, the group does not expect any deficiency in the foreseeable future (except in respect of a
         subsidiary company which has made a provision of Rs. 0.11 crores in the accounts for the year towards
         difference in the opening and the closing balance of the Defined Benefit Obligation towards guaranteed
         return on Provident Fund Investments as per actuarial valuation).

     (iii) The details of the Group’s post-retirement benefit plans for its employees including whole-time
           Directors are given below which is certified by the actuaries and relied upon by the respective auditors.
           Further, since in the previous year only HDFC Ltd. had early adopted AS 15 (Revised), the previous
           year’s figure are not strictly comparable with those of the current year:
                                                                                                   Rupees in crores
                                                                                              % invested
                                                                                          Current          Previous
                                                                                              Year             Year
Change in the Benefit Obligations:
Liability at the beginning of the year                                                       47.34            32.44
Current Service Cost                                                                           4.76            2.72
Interest Cost                                                                                  3.85            2.59
Past Service Cost (Vested benefit)                                                             2.08              —
Benefits Paid                                                                                (1.25)          (0.57)
Actuarial Loss                                                                                 4.73            5.47
Liability at the end of the year *                                                           61.51            42.65
   * The Liability at the end of the year Rs. 61.51 crores
     (Previous Year Rs. 42.65 crores) includes Rs. 15.70 crores
     (Previous Year Rs. 12.00 crores) in respect of unfunded plans
Fair Value of Plan Assets:
Fair Value of Plan Assets at the beginning of the year                                       32.05            23.47
Expected Return on Plan Assets                                                                 3.00            1.87
Contributions                                                                                  7.10            4.16
Benefits Paid                                                                                (1.25)          (0.57)



                                                        220
                                                                                           % invested
                                                                                        Current       Previous
                                                                                           Year           Year
Actuarial Loss on Plan Assets                                                             (0.85)        (0.48)
Fair Value of Plan Assets at the end of the year                                          40.05          28.45
Total Actuarial Loss to be recognised                                                     (5.58)        (5.95)
Actual Return on Plan Assets:
Expected Return on Plan Assets                                                               3.00             1.87
Actuarial Loss on Plan Assets                                                              (0.85)           (0.48)
Actual Return on Plan Assets                                                                 2.15             1.39
Amount Recognised in the Balance Sheet:
Liability at the end of the year                                                            61.51           42.65
Fair Value of Plan Assets at the end of the year                                            40.05           28.45
Amount recognised in the Balance Sheet under “Provision for                                 21.46           14.20
Employee Benefits”
Expense Recognised in the Profit and Loss Account:
Current Service Cost                                                                         4.76             2.72
Interest Cost                                                                                3.85             2.59
Expected Return on Plan Assets                                                             (3.00)           (1.87)
Net Actuarial Loss to be recognised                                                          5.58             5.95
Past Service Cost (Vested benefit)                                                           2.08               —
Expense recognised in the Profit and Loss Account
     included under Contribution to Provident Fund and Other Funds         12.94                             9.39
     included under Amounts transferred to Policyholders’ Account           0.25                               —
     included under Operating Loss from General Insurance                   0.08                               —
                                                                                            13.27            9.39
Reconciliation of the Liability Recognised in the Balance Sheet:
Opening Net Liability                                                                       15.29            8.97
Expense recognised                                                                          13.27            9.39
Contribution by the Group                                                                    7.10            4.16
Amount recognised in the Balance Sheet under “Provision for                                 21.46           14.20
Employee Benefits”
Investment Pattern:
        Central Government securities                                                       14.51           14.85
        State Government securities / Securities guaranteed by State /
        Central Government                                                                   6.43            8.97
        Public Sector / Financial Institution Bonds                                         18.83           23.62
        Private Sector Bonds                                                                 1.90            3.16
        Special Deposit Scheme                                                               5.53            7.75
        Investments in Insurance Companies                                                  48.66           39.65
        Investment in Equity Shares                                                          0.86              —
        Investment in Liquid / Mutual Funds                                                  0.07              —
        Others (including bank balances)                                                     3.21            2.00

         Total                                                                            100.00           100.00

         Based on the above allocation and the prevailing yields on these assets, the long term estimate of the
         expected rate of return on fund assets has been arrived at.

          Principal Assumptions:
                                     Current Year Previous Year
                                                 %                 %
          Discount Rate                7.50 to 8.25                8
          Return on Plan Assets            8 to 9.15                8


9.   (i) As per the Housing Finance Companies (NHB) Directions 2001, non-performing assets are recognised



                                                       221
         on the basis of ninety days overdue. The total provision carried by HDFC Ltd. and one of the
         subsidiaries in terms of paragraph 25 (2) of the Housing Finance Companies (NHB) Directions 2001
         and NHB circular NHB(ND)/DRS/Pol-No.09/2004-05 dated May 18, 2005 in respect of Housing and
         Non-Housing Loans is as follows:

                                                                                         Rs. in crores
                                  Sub-Standard Assets                      Doubtful Assets
                            Current Year     Previous Year      Current Year        Previous Year
           Housing                 29.49             26.04            114.92               113.81
           Non-Housing                8.53              3.32                 7.11            10.13


    (ii) During the year, in addition to the charge of Rs. 36.23 crores (Previous Year Rs. 35.27 crores) to the
         Profit and Loss Account an amount of Rs. 27.72 crores (net of Deferred Tax of Rs. 14.28 crores)
         [(Previous Year Rs. Nil) (net of Deferred Tax of Rs. Nil)], has been transferred from Additional
         Reserve created as per Section 29C of the National Housing Bank Act, 1987 pursuant to circular
         NHB(ND)/DRS/Pol-No.03/2004-05 dated August 26, 2004 to Provision for Contingencies Account.
         [Previous Year Rs. 13.12 crores (net of Deferred Tax of Rs. 21.88 crores), has been transferred from
         Special Reserve No. I to Provision for Contingencies Account.]

    (iii) a)   Provision for Contingencies as on March 31, 2008 includes provision for non-performing assets,
               standard assets and all other contingencies amounting to Rs. 490.84 crores (Previous Year Rs.
               431.55 crores). In accordance with the prudential norms of National Housing Bank, the provision
               required to be carried forward is Rs. 229.41 crores (Previous Year Rs. 154.97 crores).

         b)    Movement in Provision for Contingencies Account during the year is as under:

                                                                                                         Rs. in crores
                                                                                            Current       Previous
                                                                                             Year           Year
                Opening Balance                                                               431.55          394.92
                Reversal on account of Sale of jointly controlled entity                       (2.95)             —

                Additions during the year                                                       78.23          68.98

                Utilised during the year towards loan write offs, Diminution in Value         (15.99)        (32.35)
                of Investments, Foreign Currency Revaluation, Provision for
                Securitisation etc.

                Closing Balance                                                                490.84        431.55


    (iv) Provision for Contingencies debited to the Profit and Loss Account includes Provision for Diminution
         in Value of Investments amounting to Rs. 10.37 crores (Previous Year Rs. 8.29 crores). The balance of
         the provision represents provision made against non-performing assets and other contingencies.

10. (i) Contingent liability in respect of guarantees provided aggregated to Rs. 152.01 crores (Previous Year
        Rs. 82.22 crores).

    (ii) Contingent liability in respect of income-tax demands, net of amounts provided for and disputed,
         amounts to Rs. 299.78 crores (Previous Year Rs. 196.05 crores). The matters in dispute are under
         appeal. Out of the above an amount of Rs. 243.67 crores (Previous Year Rs. 180.96 crores) has been
         paid/adjusted against refund and the same will be received as refund if the matters are decided in the
         favour of HDFC Ltd.

    (iii) Contingent liability in respect of Interest tax demands, net of amount provided for and disputed in
          respect of one of the subsidiary companies amounts to Rs. 0.23 Crores (Previous Year Rs. 0.96
          crores). The matter in dispute is under appeal. The Company expects to succeed in the proceedings and
          hence no additional provision is considered necessary.


                                                         222
(iv) One of the subsidiary companies has received show cause cum demand notices, amounting to Rs.
     26.21 crores (Previous Year Rs. 30.95 crores), from the Office of the Commissioner, Service Tax,
     Mumbai on the grounds of excess utilisation of service tax credit for the period September 2004 to
     March 2007. On considering the appeal filed by the Company, the Commissioner (Adjudication) has
     reduced the demand. The Company has been advised by an expert that their grounds of appeal are well
     supported in law. As a result, the Company is confident to defend the appeal against the demand and
     does not expect the demand to crystalise into liability. The Company has filed an appeal to the Tribunal
     against the order of the Commissioner (Adjudication).

(v) Contingent Liability in respect of corporate undertakings provided for securitisation of receivables
    aggregated to Rs. 220.12 crores (Previous Year Rs. 208.94 crores). The outflows would arise in the
    event of a shortfall, if any, in the cash flows of the pool of the securitised receivables.

(vi) Proportionate share of claims not acknowledged as debt in respect of an associate company amounts to
     Rs. 57.16 crores (Previous Year Rs. 87.15 crores).




                                                  223
11. As per the Accounting Standard 17 on ‘Segment Reporting’ notified by the Companies (Accounting Standards) Rules, 2006, the main segments and the relevant
    disclosure relating thereto are as follows:
                                                                                                                                                    Rupees in crores
                               Housing             Life Insurance            General             Asset          Call Centre and         Others            Inter-Segment           Unassociated                Total
                                                                            Insurance        Management         Data Processing                            adjustments
                            CY          PY         CY         PY          CY        PY       CY        PY       CY        PY         CY       PY          CY         PY          CY          PY          CY             PY
Segment Revenue           8,398.64    6,008.36      33.07      22.69       6.31      5.30   398.74   213.58      —        191.35     77.83    51.12      (95.17)    (99.21)           —          —     8,819.42       6,393.19
Segment Result            3,432.76    2,004.81   (243.51)   (125.56)    (16.77)      2.50   240.33   119.60      —         (1.16)    22.18    15.72      (29.10)    (87.12)           —          —     3,405.89       1,928.79
Income-tax (Current)                                                                                                                                                            1,045.04     467.16    1,045.04         467.16
Deferred tax                                                                                                                                                                     (11.56)    (23.87)     (11.56)        (23.87)
Fringe Benefit Tax                                                                                                                                                                  3.40       3.83        3.40           3.83
Total Result              3,432.76    2,004.81   (243.51)   (125.56)    (16.77)     2.50    240.33   119.60       —        (1.16)    22.18    15.72      (29.10)    (87.12)   (1,036.88)   (447.12)    2,369.01       1,481.67
Capital Employed
Segment Assets
Loans                    74,771.67   57,891.45       1.86       1.26        —         —         —        —        —           —         —        —            —         —             —           —   74,773.53   57,892.71
Investments               6,931.65    3,683.70   8,271.55   4,654.13    207.25    169.08    591.94    93.98       —           —      85.37    92.24     (644.42)     57.25            —           —   15,443.34    8,750.38
Current Assets
Loans and Advances
  (Net of Tax)            4,109.05    4,916.66   1,286.77    692.12      67.60     58.66    234.79    54.45       —       130.52     22.66       9.06    (41.64)    (29.40)      394.61     327.47     6,073.84    6,159.54
Fixed Assets                217.16      221.28     132.84     72.75      11.31     14.18     67.95    64.86       —        90.47      1.27       0.95      60.81      64.93          —          —        491.34      529.42
Deferred Tax Asset                                                                                                                                                               156.51     133.46       156.51      133.46
Total Assets             86,029.53   66,713.09   9,693.02   5,420.26    286.16    241.92    894.68   213.29       —       220.99    109.30   102.25     (625.25)     92.78       551.12     460.93    96,938.56   73,465.51
Segment Liabilities
Loan Funds               70,924.50   58,498.57        —             —     2.54      2.04       —       0.25       —       101.55      3.50       3.50    (15.12)    (15.75)           —           —   70,915.42   58,590.16

  Current Liabilities     3,380.70    2,879.01    630.25     420.97     180.85    145.44    259.44    70.89       —        43.10      6.34       4.40    (64.54)    (28.85)      122.77      65.15     4,515.81       3,600.11
  and Provisions (Net
  of Tax)
Deferred Tax Liability                                                                                                                                                               —        0.59           —         0.59
Policyholders’ Funds            —           —    8,425.90   4,605.90        —         —         —        —        —           —         —        —            —          —           —          —      8,425.90    4,605.90
Minority Interest            78.59       66.63     174.93      81.83     26.76     24.67    160.01   110.49       —         3.29        —        —            —          —           —          —        440.29      286.91
Total Liabilities        74,383.79   61,444.21   9,231.08   5,108.70    210.15    172.15    419.45   181.63       —       147.94      9.84     7.90      (79.66)    (44.60)      122.77      65.74    84,297.42   67,083.67
Net Segment Assets       11,645.74    5,268.88     461.94     311.56     76.01     69.77    475.23    31.66       —        73.05     99.46    94.35     (545.59)    137.38       428.35     395.19    12,641.14    6,381.84
Other Information
Capital Expenditure         17.19        26.86    115.53      37.06       2.22     10.69     12.89    10.35       —        59.49      1.06       0.59     (0.07)     (0.20)           —           —     148.82         144.84
Depreciation                17.44        18.27        —          —          —         —       9.77     7.66       —        26.79      0.63       0.60       4.05       4.06           —           —      31.89          57.38
Non cash expenses
  other than                50.16        45.53     10.58        2.57      0.44      0.81      2.00      —         —          3.96     0.33       0.12        —          —             —           —      63.51          52.99
  Depreciation
a) Asset Management segment includes portfolio management, mutual fund and property investment management.
b) Others includes project management, investment consultancy and property related services.




                                                                                                          224
12. As per the Accounting Standard 18 on ‘Related Party Disclosures’ notified by the Companies (Accounting
    Standards) Rules, 2006, the related parties are as follows :

A) Associate Companies
   HDFC Bank Ltd.                                              India Value Fund Advisors Pvt. Ltd.
   Indian Association for Savings and Credit
B) Investing Party and its Group Companies
   Standard Life Investments Ltd.                              Federal Insurance Company (Upto June 27, 2007)
   Chubb Global Pacific Services (Upto June 27, 2007)          Standard Life Assurance Company
   Chubb Pacific Underwriting Management Services
   Pte. Ltd.                                          Standard Life (Mauritius Holdings) 2006 Ltd.
   (Upto June 27, 2007)                               ERGO International AG (From February 29,
                                                      2008)
   Chubb Inc. (Upto June 27, 2007)                    ERGO AG (From February 29, 2008)
   Munich Re (From February 29, 2008)                 Barclays Bank PLC (Upto September 19, 2007)
                                                      Barclays (H & B) Mauritius Ltd. (Upto
                                                      September 19, 2007)
C) Key Management Personnel (of the companies referred to in Note 1(i), 1(ii) and 1(iii))
   Mr. Deepak S Parekh                                Ms. Renu Sud Karnad
   Mr. Keki M Mistry                                  Mr. Milind Barve
   Mr. Deepak M Satwalekar                            Mr. Sudhin Choksey
   Mr. Shrirang V Samant (Upto April 30, 2007)        Mr. Gautam Bhagat
   Mr. K G Krishnamurthy

The nature and volume of transactions during the year with the above related parties were as follows:

                                                                                                 Rs. in crores
        Particulars                  Associate          Investing Party and its Group       Key Management
                                    Companies                    Companies                     Personnel


                               Current     Previous          Current        Previous       Current      Previous
                                Year        Year              Year           Year           Year         Year
  INCOME
    Dividend                      48.38       39.63                Nil               Nil         Nil        Nil
    Interest                      13.60        2.33               0.65              2.70         Nil        Nil
    Consultancy and                0.03        0.05               0.62               Nil         Nil        Nil
    Other Fees
    Rent                           0.99        0.75                Nil               Nil         Nil        Nil
    Profit on Sale of               Nil         Nil                Nil               Nil         Nil       0.11
    Investments
    Reinsurance                     Nil         Nil               0.34             0.98          Nil        Nil
    Miscellaneous                  2.37        1.15                Nil           167.32          Nil        Nil
    Services
  EXPENDITURE
    Interest                        Nil        Nil                 Nil               Nil         Nil       0.03
    Bank and Other               254.60     111.48                 Nil              1.02         Nil        Nil
    Charges
    Remuneration                     Nil         Nil               Nil               Nil      15.88       12.56
    Reinsurance                      Nil         Nil              1.74              4.60        Nil         Nil
    Preference Dividend              Nil         Nil              1.03              1.25        Nil         Nil
  ASSETS
    Investments                1,615.27     225.17                 Nil              Nil         Nil         Nil
    Deposits                     154.08       4.59                 Nil              Nil         Nil         Nil
    Bank Balance                  96.32       2.22                 Nil              Nil         Nil         Nil
    Others                        45.01       0.36                2.63            54.22        0.03        0.03


                                                       225
        Particulars                  Associate           Investing Party and its Group       Key Management
                                    Companies                     Companies                     Personnel


                               Current     Previous           Current         Previous      Current    Previous
                                Year        Year               Year            Year          Year       Year
   LIABILITIES
     Deposits                      0.25          0.24               Nil              Nil        0.01        Nil
     Reinsurance                    Nil           Nil               Nil             2.62         Nil        Nil
     Proposed Equity                Nil           Nil             15.10             5.02         Nil        Nil
     Dividend
     Short Term Loans              0.84      203.71                 Nil              Nil         Nil        Nil
     Others                        4.76         Nil                 Nil             1.13         Nil        Nil

The nature and volume of material transactions during the year with the above related parties were as follows:

                                                                                                  Rs. in crores
        Particulars                  Associate           Investing Party and its Group       Key Management
                                    Companies                     Companies                     Personnel


                               Current     Previous           Current         Previous      Current    Previous
                                Year        Year               Year            Year          Year       Year
   INCOME
   Dividend
      - HDFC Bank Ltd.            48.20         37.87               Nil              Nil        Nil         Nil
   Interest
      - HDFC Bank Ltd.            12.97          2.17               Nil              Nil        Nil         Nil
      - CHUBB Inc.                  Nil           Nil              0.65             2.70        Nil         Nil
   Consultancy and Other
   Fees
      - HDFC Bank Ltd.             0.03          0.75               Nil              Nil        Nil         Nil
      - Standard Life               Nil           Nil              0.62              Nil        Nil         Nil
      Investments Ltd.
   Profit on sale of
   investments
      - Mr. Sudhin Choksey          Nil           Nil               Nil              Nil        Nil        0.11
   Rent
      - HDFC Bank Ltd.             0.99          0.75               Nil              Nil        Nil         Nil
   Reinsurance
      - Federal Insurance           Nil           Nil              0.32             0.98        Nil         Nil
      Company
   Miscellaneous Services
      - HDFC Bank Ltd.             2.37          1.14               Nil              Nil        Nil         Nil
      - Barclays Bank PLC           Nil           Nil               Nil           167.32        Nil         Nil


The nature and volume of material transactions during the year with the above related parties were as follows:
                                                                                                    Rs. in crores
           Particulars                    Associate            Investing Party and its       Key Management
                                         Companies               Group Companies                 Personnel


                                     Current      Previous       Current       Previous     Current    Previous
                                      Year         Year           Year          Year         Year       Year
  EXPENDITURE
  Interest
     - Mr. Deepak S Parekh                Nil           Nil             Nil          Nil        Nil        0.03



                                                        226
           Particulars                     Associate             Investing Party and its         Key Management
                                          Companies                Group Companies                  Personnel


                                     Current      Previous       Current         Previous        Current   Previous
                                      Year         Year           Year            Year            Year      Year
  Bank and Other Charges
    - HDFC Bank Ltd.                  254.60       112.09                Nil           Nil          Nil        Nil
    - CHUBB Pacific                      Nil          Nil                Nil          1.02          Nil        Nil
    Underwriting Management
    Services Pte Ltd.
  Reinsurance
    - Federal Insurance                   Nil          Nil              1.66          4.58          Nil        Nil
    Company
  Preference Dividend
    - Standard Life Investments           Nil          Nil              1.03          1.25          Nil        Nil
    Ltd.
  Remuneration
    - Mr. Deepak S Parekh                 Nil          Nil               Nil           Nil         3.74       2.94
    - Mr. Keki M Mistry                   Nil          Nil               Nil           Nil         2.68       2.04
    - Ms. Renu Sud Karnad                 Nil          Nil               Nil           Nil         2.53       1.92
    - Mr. Deepak M Satwalekar             Nil          Nil               Nil           Nil         1.84       1.45
    - Mr. Milind Barve                    Nil          Nil               Nil           Nil         3.52       2.46

The nature and volume of material transactions during the year with the above related parties were as follows:
Rs. in crores

           Particulars                     Associate             Investing Party and its         Key Management
                                          Companies                Group Companies                  Personnel


                                     Current      Previous       Current         Previous        Current   Previous
                                      Year         Year           Year            Year            Year      Year
  ASSETS
  Investments
     - HDFC Bank Ltd.                 1,614.09      223.98                Nil              Nil       Nil        Nil
  Deposits
     - HDFC Bank Ltd.                   154.08         4.59               Nil              Nil       Nil        Nil
  Bank Balance
     - HDFC Bank Ltd.                    96.32         2.22               Nil              Nil       Nil        Nil
  Others
     - HDFC Bank Ltd.                    45.01         0.36               Nil          Nil           Nil        Nil
     - Barclays Bank PLC                   Nil          Nil               Nil        51.72           Nil        Nil
     - Standard Life Assurance             Nil          Nil              2.01          Nil           Nil        Nil
     Company
     - Standard Life Investments           Nil          Nil              0.62              Nil       Nil        Nil
     Ltd.
     - Mr. Sudhin Choksey                  Nil          Nil               Nil              Nil      0.03       0.03

The nature and volume of material transactions during the year with the above related parties were as follows:

                                                                                                      Rs. in crores
         Particulars                  Associate          Investing Party and its Group           Key Management
                                     Companies                    Companies                         Personnel


                                Current     Previous          Current           Previous         Current   Previous
                                 Year        Year              Year              Year             Year      Year



                                                       227
        Particulars                   Associate            Investing Party and its Group         Key Management
                                     Companies                      Companies                       Personnel


                                Current      Previous          Current         Previous          Current   Previous
                                 Year         Year              Year            Year              Year      Year
  LIABILITIES
  Deposits
    - HDFC Bank Ltd.               0.25         0.23                  Nil             Nil           Nil       Nil
    - Ms. Renu Sud Karnad           Nil          Nil                  Nil             Nil          0.01       Nil
  Reinsurance
    - Federal Insurance             Nil           Nil                 Nil            2.48           Nil       Nil
    Company
  Proposed Equity
  Dividend
    - Standard Life                 Nil           Nil              15.10             5.02           Nil       Nil
    Investments Ltd.
  Short Term Loans
    - HDFC Bank Ltd.               0.84       203.71                  Nil             Nil           Nil       Nil
  Others
    - CHUBB Pacific
    Underwriting
      Management Services           Nil           Nil                 Nil            1.13           Nil       Nil
      Pte Ltd.
    - HDFC Bank Ltd.               4.76           Nil                 Nil             Nil           Nil       Nil

13. In accordance with the Accounting Standard on ‘Leases’ (AS 19), notified by the Companies (Accounting
     Standards) Rules, 2006, the following disclosures are made in respect of Operating and Finance Leases :

    (i) Income from Leases includes Rs. 15.35 crores (Previous Year Rs. 16.24 crores) of which Rs. Nil
        (Previous Year Rs. 1.18 crores) is towards contingent rent - in respect of properties and certain assets
        leased out under Operating Leases. Out of the above, in respect of the non-cancellable leases, the future
        minimum lease payments are as follows :

                                                                              Rs. in crores
                                                               Current Year Previous Year
          Not later than one year                                     11.07          15.68
          Later than one year but not later than five years           33.98          42.62
          Later than five years                                         Nil           1.80


    (ii) a)   Certain motor cars, Information Technology equipment and Software have been acquired under
              Finance Lease for an aggregate fair value of Rs. 2.22 crores (Previous Year Rs. 2.99 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:

                                                                                         Rs. in crores
                          Period                   Total MLP          Interest        Principal
                                                Current Previous Current Previous Current Previous
                                                 Year     Year    Year      Year    Year      Year
               Not later than one year              1.24     0.93    0.09      0.12   1.15        0.81
               Later than one year but not          0.92     1.49    0.05      0.12   0.87        1.37
               later than five years
               Total                                    2.16        2.42      0.14        0.24      2.02       2.18

        b) Certain motor cars have been acquired under Operating Lease by a subsidiary company. In respect
           of these operating leases, the lease rentals charged to the Profit and Loss Account are Rs. 0.45



                                                         228
             crores (Previous Year Rs. 0.44 crores). The minimum future lease rentals payable for specified
             duration in respect of such leases amount to the following :

                                                                                         Rs. in crores
                                  Period                          Current Year       Previous Year
              Not later than one year                             0.46               0.35
              Later than one year but not later than five years   0.42               0.51
              Total                                               0.88               0.86



    (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. 69.58 crores (Previous Year Rs. 43.23 crores).

        The future lease payments in respect of the above are as follows:

                                                                                    Rs. in crores
                             Period                          Current Year        Previous Year
         Not later than one year                                    75.20                 49.10
         Later than one year but not later than five years          103.12              128.90
         Later than five years                                           26.60          125.63


14. In accordance with the Accounting Standard 20 on ‘Earnings Per Share’ notified by the Companies
    (Accounting Standards) Rules, 2006 :

    (i) In calculating the Basic Earnings Per Share the Profit After Tax attributable to the Group of Rs.
        2,713.00 crores (Previous year Rs. 1,741.98 crores) has been adjusted for amounts utilised out of
        Shelter Assistance Reserve of Rs. 5.43 crores (Previous Year Rs.4.68 crores).

        Accordingly the Basic Earnings Per Share has been calculated based on the adjusted Profit After Tax
        attributable to Group of Rs. 2,707.57 crores (Previous Year Rs. 1,737.30 crores) and the weighted
        average number of shares during the year of 27,05,19,406 (Previous Year 24,98,95,601).

    (ii) The reconciliation between the Basic and the Diluted Earnings Per Share is as follows :

                                                                           Rupees
                                                  Current Year     Previous Year
         Basic Earnings Per Share                 100.09           69.52
         Effect of Outstanding Stock Options      (5.11)           (4.89)
         Diluted Earnings Per Share               94.98            64.63


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

                                                                                     Current          Previous
                                                                                       Year             Year
         Weighted average number of shares for computation of Basic                 27,05,19,406     24,98,95,601
         Earnings Per Share
         Diluted effect of outstanding Stock Options and FCCB                        1,45,36,562      1,88,98,539
         Weighted average number of shares for computation of Diluted               28,50,55,968     26,87,94,140
         Earnings Per Share


                                                       229
15. In compliance with the Accounting Standard 22 on ‘Accounting for Taxes on Income’ notified by the
    Companies (Accounting Standards) Rules, 2006, credit has been taken for Rs. 11.56 crores (Previous Year
    Rs. 23.87 crores) in the Profit and Loss Account for the year ended March 31, 2008 towards deferred tax
    asset (net) for the year, arising on account of timing differences.

    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                             (51.97)            (53.58)                -           5.23
     b) Provision for Contingencies                 181.33             164.04                 -         (2.04)
     c)    Provision for Employee Benefits            13.78             14.06                 -         (0.06)
     d) Accrued Redemption Loss (net)                  7.91               6.33                -               -
     e)    Sale of Home Loans                        (2.00)             (2.58)                -               -
     f)    Others (net)                                7.46               5.19                -         (2.54)
           Total                                    156.51             133.46                 -           0.59

16. (i) As on March 31, 2008, HDFC Ltd. has foreign currency borrowings (excluding FCCB) of USD
        1,079.58 million equivalent (Previous Year USD 1,068.48 million). The Corporation has undertaken
        principal only swaps, currency options and forward contracts on a notional amount of USD 808
        million equivalent (Previous Year USD 777 million) to hedge the foreign currency risk. Further,
        interest rate swaps on a notional amount of USD 230 million equivalent (Previous Year USD 391
        million) are outstanding, which have been undertaken to hedge the interest rate risk on the foreign
        currency borrowings. As on March 31, 2008, HDFC Ltd.’s net foreign currency exposure on
        borrowings net of risk management arrangements is USD 447.13 million equivalent (Previous Year
        USD 100.17 million).

    (ii) As a part of asset liability management and on account of the increasing response to HDFC’s
         Adjustable Rate Home Loan product as well as to reduce the overall cost of borrowings, HDFC Ltd.
         has entered into interest rate swaps wherein it has converted its fixed rate rupee liabilities of a notional
         amount of Rs. 12,265 crores (Previous Year Rs. 7,265 crores) as on March 31, 2008 for varying
         maturities into floating rate liabilities linked to various benchmarks. In addition, HDFC Ltd. has
         entered into cross currency swaps of a notional amount of USD 652 million equivalent (Previous Year
         USD 643 million) wherein it has converted its rupee liabilities into foreign currency liabilities and the
         interest rate is linked to the benchmarks of respective currencies.

    (iii) Gains / losses arising out of foreign exchange fluctuations in respect of foreign currency borrowings,
          net of risk management arrangements, are to the account of HDFC Ltd. Wherever HDFC Ltd. 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 expense in the Profit and Loss Account over subsequent accounting
          periods is Rs. 97.78 crores (Previous Year Rs. 45.54 crores).

          Other monetary 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. 8.67
          crores (Previous Year Rs. 4.31 crores [net of loss on mark to market of derivatives Rs.103.04 crores])
          arising upon revaluation at the year end (based on the prevailing exchange rate) has been credited to
          the Provision for Contingencies Account.

    (iv) Cross currency swaps and other derivatives have been marked to market at the year end. The net gain
         of Rs. 293.59 crores on such mark to market of derivatives is included under Advance Payments
         (Schedule No.7) and not recognised in the Profit and Loss Account in view of the recent announcement



                                                        230
        by the Institute of Chartered Accountants of India (ICAI) which requires the principle of prudence to
        be followed in accounting for mark to market gains/losses on derivatives.

17. Figures for the previous year have been regrouped wherever necessary.




                                                    231
Schedule 15

SIGNIFICANT ACCOUNTING POLICIES

1.   ACCOUNTING CONVENTION

     These accounts have been prepared in accordance with historical cost convention, except for revaluation of
     Investment in Properties of one of the subsidiaries, applicable Accounting Standards notified by the
     Companies (Accounting Standards) Rules, 2006 and relevant provisions of the Companies Act, 1956.

     The preparation of financial statements requires the management to make estimates and assumptions
     considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of
     the financial statements and the reported income and expenses during the reporting period. Management
     believes that the estimates used in preparation of the financial statements are prudent and reasonable.
     Future results could differ from these estimates.

2.   GAIN OR LOSS ON DILUTION

     The gain or loss on account of dilution of stake of HDFC Ltd. in its subsidiaries, associates and entites over
     which control is exercised is accounted through General Reserve.

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, 1956 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. 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 LEASES

     Lease rental income in respect of leases is recognised in accordance with the Accounting Standard 19 on
     ‘Leases’ notified by the Companies (Accounting Standards) Rules, 2006.

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


                                                         232
     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,
     where not covered by forward contracts. Wherever HDFC Ltd. 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. Cross currency swaps and other derivatives have been marked to market at the year end. The net
     gain on such mark to market derivatives is credited to Advance Payments Account.

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’ notified by the Companies (Accounting Standards) Rules, 2006, and
         is recognised through the Provision for Contingencies Account. The investment in properties is net of
         provision for depreciation.

     (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 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).

         In case of one of the subsidiary (HDFC Standard Life Insurance Co. Ltd.), Investment property
         represents land or building held for use other than in services or for administrative purposes. The
         investment in the real estate investment property is valued at historical cost plus revaluation if any.
         Revaluation of the investment property is done atleast once in three years. The change in the carrying
         amount of the investment property is taken to Revaluation Reserve.

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’ notified by the
     Companies (Accounting Standards) Rules, 2006.

12. INTANGIBLE ASSETS

     Intangible Assets comprise of system software are stated at cost of acquisition, including any cost
     attributable for bringing the same to its working condition, less accumulated amortisation and Goodwill
     arising on account of a scheme of amalgamation in a subsidiary company and a scheme of de-merger in a


                                                        233
   jointly controlled entity. Any expenses on such software for support and maintenance payable annually are
   charged to revenue account.

13. DEPRECIATION AND AMORTISATION

   Fixed Assets

   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 Improvement is provided on the straight line method over the primary period of the lease.

   In respect of jointly controlled entity, Fixed assets that are to be used exclusively for customers and over
   which they have a lien are depreciated over the shorter of the estimated useful life or the tenure of contract.
   Fixed assets acquired on hire purchase basis are amortised over the tenure of the agreement. Leasehold
   Improvements are amortised over the period of lease or ten years whichever is shorter.

   Intangible Assets

   Capitalised software is amortised over a period of four years on a straight-line basis. Goodwill arising on
   account of a scheme of amalgamation in a subsidiary company and a scheme of de-merger in a jointly
   controlled entity has been amortised on a straight-line basis over a period of 20 years and 10 years
   respectively.

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 over due for ninety days and more are classified as non-
   performing assets in accordance with the prudential norms prescribed by the National Housing Bank. The
   provisioning policy of HDFC Ltd. and GRUH Finance Ltd. covers the minimum provisioning required as
   per the NHB guidelines.

15. EMPLOYEE BENEFITS

   Provident Fund and Superannuation Fund Contributions

   The contributions paid / payable during the year towards Provident Fund and Superannuation Fund are
   charged in the Profit and Loss Account every year. These funds and the schemes thereunder are recognised
   by the Income-tax authorities and administered by various trustees. In case of certain subsidiaries provident
   fund contributions are made to the Regional Provident Fund Authority at prescribed rates and are expensed
   when due.

   Gratuity and Post Retirement Pension

   The net present value of the obligation towards gratuity to employees and post retirement pension scheme
   for whole time directors is actuarially determined based on the projected unit credit method, except in case
   of Dubai branch of HDFC Ltd. where the provision for gratuity is made in accordance with the prevalent
   local laws. Actuarial gains and losses are immediately recognised in the Profit and Loss Account.




                                                      234
   Other Employee Benefits

   Compensated absences in form of short term benefits are determined on an undiscounted basis and
   recognised over the period of service, which entitles the employees to such benefits. Any such benefit
   which are long term in nature are actuarially determined.

16. INCOME-TAX

   The accounting treatment for Income-tax is based on the Accounting Standard 22 on ‘Accounting for Taxes
   on Income’ notified by the Companies (Accounting Standards) Rules, 2006. 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. PRELIMINARY EXPENSES

   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.




                                                     235
236
INFORMATION WITH REGARD TO SUBSIDIARY COMPANIES

(In terms of the approval u/s 212(8) of the Companies Act, 1956 granted by the Ministry of Company Affairs vide letter No. 47/413/2007-CL - III dated
December 6, 2007)

(As on / for the year ended March 31, 2008)
         (Amount in crores)
     Name of the             HDFC      HDFC     HDFC        HDFC        GRUH       HDFC      HDFC       HDFC       HDFC      HDFC     HDFC       HDFC        HDFC
     Subsidiary            Standard     Asset   Trustee     ERGO        Finance    Develo-   Venture   Ventures   Property   Realty   Invest-   Holdings     Sales
      Company                 Life     Mana-      Co.      General        Ltd.      pers     Capital   Trustee    Venture     Ltd.     ments      Ltd.      Pvt. Ltd.
                           Insurance   gement    Ltd.        Insu-                  Ltd.      Ltd.     Co. Ltd.     Ltd.               Ltd.                (Formerly
                            Co. Ltd.     Co.              rance Co.                                                                                          Home
                                        Ltd.                  Ltd.                                                                                           Loan
                                                          (Formerly                                                                                         Services
                                                            HDFC                                                                                             India
                                                            Chubb                                                                                          Pvt. Ltd.)
                                                           General
                                                             Insu-
                                                          rance Co.
                                                              Ltd.
Capital                     1,271.00    25.66      0.10        150.00     34.65       0.05      0.50       0.05       1.00     5.75    26.67        0.80        4.01
Reserves / (Debit
balance in
Profit & Loss               7,793.23   166.60      0.06      (47.09)     155.62       4.12     16.84       0.55       8.45   (5.63)    69.42        2.11       (1.98)
Account)
Total Assets (Fixed
Assets +
Investments (*) +
Current Assets +
Deferred Tax Asset)         9,689.35   562.55      2.99       286.30    2,022.27      4.38     21.85       0.69      12.92     0.13    96.10        2.91       11.81
Total Liabilities (Debts
+
Current Liabilities +
Deferred Tax Liability)       625.12   370.29      2.83       183.39    1,832.00      0.21      4.51       0.09       3.47     0.01     0.01           -        9.78
Investments (*)             8,696.37   230.02         -       221.01       16.64         -     21.07       0.52       7.13        -    83.97        1.40           -
Total Income (**)           5,816.30   320.17      6.60      (16.33)      202.59      0.10     20.86       0.41      18.65     0.02    23.88        0.23       53.61
Profit / (Loss) before      (243.51)   176.86      0.01      (16.77)       59.26      0.05     18.49       0.38      12.97     0.01    23.84        0.22        3.69
Taxation
Provision for Taxation             -    59.12         -         0.23      16.92       0.02      6.03       0.13       4.54        -     0.89        0.04        0.08
Profit / (Loss) after       (243.51)   117.74      0.01      (17.00)      42.34       0.04     12.46       0.25       8.43     0.01    22.95        0.18        3.61




                                                                                   237
    Name of the           HDFC      HDFC     HDFC        HDFC       GRUH      HDFC      HDFC       HDFC       HDFC      HDFC     HDFC       HDFC        HDFC
    Subsidiary          Standard     Asset   Trustee     ERGO       Finance   Develo-   Venture   Ventures   Property   Realty   Invest-   Holdings     Sales
     Company               Life     Mana-      Co.      General       Ltd.     pers     Capital   Trustee    Venture     Ltd.     ments      Ltd.      Pvt. Ltd.
                        Insurance   gement    Ltd.        Insu-                Ltd.      Ltd.     Co. Ltd.     Ltd.               Ltd.                (Formerly
                         Co. Ltd.     Co.              rance Co.                                                                                        Home
                                     Ltd.                  Ltd.                                                                                         Loan
                                                       (Formerly                                                                                       Services
                                                         HDFC                                                                                           India
                                                         Chubb                                                                                        Pvt. Ltd.)
                                                        General
                                                          Insu-
                                                       rance Co.
                                                           Ltd.
Taxation
Proposed Dividend and
Tax thereon                     -    44.16         -            -     16.21      0.04         -          -          -        -         -          -            -
Notes:
* Includes Investments of Shareholders, Policyholders and Assets held to cover Linked Liability
** Includes Net Premium Income, Investment Income and other Income




                                                                              238
                                     CONSOLIDATED GROUP ACCOUNTS
                                             Auditors’ Report

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

1.   We have audited the attached Consolidated Balance Sheet of HOUSING DEVELOPMENT FINANCE
     CORPORATION LIMITED and its subsidiaries (“the Group”) as at March 31, 2009, the Consolidated
     Profit and Loss Account and the Consolidated Cash Flow Statement of the Group for the year ended on that
     date, both annexed thereto. The Consolidated Accounts include investments in affiliates accounted for on
     the equity method in accordance with Accounting Standard 23 (Accounting for Investments in Associates in
     Consolidated Financial Statements). These financial statements are the responsibility of the Corporation’s
     Management. Our responsibility is to express an opinion on these financial statements based on our audit.

2.   We conducted our audit in accordance with the generally accepted auditing standards in India. These
     Standards require that we plan and perform the audit to obtain reasonable assurance whether the financial
     statements are free of material misstatements. An audit includes, examining on a test basis, evidence
     supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
     accounting principles used and significant estimates made by the Management, as well as evaluating the
     overall financial statement presentation. We believe that our audit provides a reasonable basis for our
     opinion.

3.   We did not audit the financial statements of three subsidiaries, whose financial statements reflect total assets
     (net) of Rs.13,590.56 crores as at March 31, 2009, total revenue of Rs.477.83 crores and net cash flows
     amounting to Rs.324.44 crores for the year ended on that date, as considered in the consolidated financial
     statements. We have also not audited the accounts of three affiliates. The financial statements of these
     subsidiaries and affiliates have been audited by other auditors whose reports have been furnished to us, and
     in our opinion, insofar as it relates to the amounts included in respect of these subsidiaries and affiliates, are
     based solely on the reports of the other auditors.

4.   The consolidated financial statements include unaudited financial statements of one associate, which
     include the Corporation’s share of Profit of Rs. 0.13 crores.

5.   We report that the consolidated financial statements have been prepared by the Corporation in accordance
     with the requirements of Accounting Standard 21 (Consolidated Financial Statements) and Accounting
     Standard 23 (Accounting for Investments in Associates in Consolidated Financial Statements) as notified by
     the Companies (Accounting Standards) Rules, 2006.

6.   Based on our audit and on consideration of reports of other auditors on separate financial statements and on
     the other financial information of the subsidiaries and affiliates referred to in paragraph 3 and 4 above, and
     to the best of our information and according to the explanations given to us, we are of the opinion that the
     aforesaid consolidated financial statements give a true and fair view in conformity with the accounting
     principles generally accepted in India :

     (a) in the case of the Consolidated Balance Sheet, of the consolidated state of affairs of the Group as at
         March 31, 2009;

     (b) in the case of the Consolidated Profit and Loss Account, of the consolidated profit of the Group for the
         year ended on that date and

     (c) in the case of the Consolidated Cash Flow Statement, of the consolidated cash flows of the Group for
         the year ended on that date.

                                                                              For DELOITTE HASKINS & SELLS
                                                                                         Chartered Accountants
                        P. R. Ramesh
MUMBAI                        Partner
                     (Membership No.
May 4, 2009                    70928)


                                                          239
Housing Development Finance Corporation Limited

Consolidated Balance Sheet as at March 31, 2009

                                          Schedule                                                March 31,
                                                                                                    2008
                                                            Rupees in         Rupees in           Rupees in
                                                             crores            crores              crores
 SOURCES OF FUNDS
 SHAREHOLDERS’ FUNDS
 Share Capital                                1                  284.45                                284.03
 Reserves and Surplus                         2               13,559.29                             12,517.37

                                                                                 13,843.74          12,801.40
 POLICY LIABILITIES                                                               9,869.68           8,425.90
 (Policyholders’ Funds) [Note 5(ii)]
 LOAN FUNDS                                   3                                  85,940.64          70,915.42
 MINORITY INTEREST                                                                  455.07             440.29

                                                                                110,109.13          92,583.01
 APPLICATION OF FUNDS


 LOANS                                        4                                  87,292.57          74,773.53
 INVESTMENTS                                  5                                  19,892.68          15,443.34
 DEFERRED TAX ASSET [Note 15]                                                       225.06             156.51
 CURRENT ASSETS, LOANS AND                    6                7,992.56                              5,951.40
 ADVANCES
 Less : CURRENT LIABILITIES                   7                5,971.15                              4,393.37
 AND PROVISIONS

 NET CURRENT ASSETS                                                               2,021.41           1,558.03
 FIXED ASSETS                                 8
 Gross Block                                                   1,082.71                               991.15
 Less : Depreciation                                             575.71                               499.81

 Net Block                                                                          507.00            491.34
 GOODWILL ON                                                                        170.23            159.90
 CONSOLIDATION
 MISCELLANEOUS
 EXPENDITURE
 (to the extent not written off or
 adjusted)
 Preliminary Expenditure                                                              0.18               0.36

                                                                                110,109.13          92,583.01
 Notes forming part of the Accounts           14

 Significant Accounting Policies              15

Schedules 1 to 15 annexed hereto form part of the Balance Sheet and the Profit and Loss Account

As per our report attached.

For Deloitte Haskins & Sells                       Deepak S. Parekh                   Keki M. Mistry
Chartered Accountants                              Chairman                           Vice Chairman &
                                                                                      Managing Director



                                                      240
P. R. Ramesh
Partner                      Renu Sud Karnad
                             Jt. Managing Director

MUMBAI, May 4, 2009.




                       241
Housing Development Finance Corporation Limited

Consolidated Profit and Loss Account for the year ended March 31, 2009

                                                  Schedule                              Previous
                                                                                          Year
                  INCOME                                      Rupees in   Rupees in     Rupees in