BOARD’S REPORT

Dear Members,

The Board of Directors of your Company take pleasure in presenting the Standalone and Consolidated Report on the operational and business performance, along with the Audited Financial Statements for the financial year ended March 31, 2016

Transfer to Reserves

During the year under review, your Company transferred Rs. 200 crore to the General Reserve and Rs. 180 crore to the Statutory Reserve under Section 36(1) (viii) of the Income Tax Act, 1961 read with Section 29C of National Housing Bank (NHB) Act, 1987 out of the amount available for appropriation and an amount of Rs. 643.68 crore is proposed to be retained in the Profit and Loss Account

National Housing Bank vide Circular No. NHB(ND)/DRS/ Policy Circular 65/2014-15 dated August 22, 2014 has clarified that deferred tax liability (contingent upon Company’s withdrawal of Section 36(1)(viii) Reserves leading to tax liability) in respect of opening balance under special reserve as at April 1, 2014 may be adjusted from free opening reserves of the Company over a period of 3 years in the ratio of 25:25:50, respectively. Accordingly, the Company has proportionately adjusted its opening reserves as at April 1, 2014 with an amount of Rs. 41.62 crore as contingent deferred tax liability and unamortised amount against the same is Rs. 83.23 crore. Deferred tax liability on current year special reserve has been appropriated to statement of profit & loss amounting to Rs. 62.97 crore.

PERFORMANCE

Standalone

Your Company was founded with a vision of providing affordable housing finance to the country’s underserved sections, primarily belonging to lower and middle-income groups. Even after 32 years of its operations, your Company continues to be driven by the same vision and aims to contribute to the country’s ‘financially inclusive’ growth.

Your Company has encouraged hundreds of thousands of people to fulfil their dreams by simplifying financial access to their dream homes. Your Company’s target customer group will be largely benefited by the government’s ‘Housing for All’ policy. Your Company also offers to its customers insurance products, both life and general, of third parties to help them de-risk themselves and their families in case of any eventualities or disasters. Being one of the few housing finance companies eligible to mobilise fixed deposits from public, your Company also provides unique fixed deposit schemes. These tailor-made schemes suit the needs of society’s different segments.

Your Company strives continually to reach out to its customers through its extensive network spread across the length and breadth of the country. The majority of its customers belong to tier II and tier III towns and outskirts of other major cities. During the financial year 2015-16, the verticalisation of home loan and non-home loan businesses introduced last year has achieved the desired objective of strengthening your Company’s reach and underwriting expertise in the respective business segments.

The small and medium enterprise (SME) business continues to achieve desired penetration in medical equipment loans, plant & machinery loans and property term loans for the SME clients.

During the financial year ended March 31, 2016 and financial year ended March 31, 2015, your Company made total loan disbursements of Rs. 24,202.22 crore and Rs. 19,821.53 crore, respectively. As at March 31, 2016 and March 31, 2015, the Gross NPAs as a percentage of the outstanding loans were 0.93% and 0.95%, respectively. The net NPAs as a percentage of the outstanding loans were 0.58% and 0.68%, respectively, which are both substantially lower than industry benchmarks.

Your Company’s strong marketing and distribution network has its presence across 349 locations throughout India as at March 31, 2016. Besides, your Company has international representative offices in London and Dubai. To broaden its customer base and to deepen its penetration into geographies, your Company has entered into tie-ups with public and private sector banks. Some significant tie-ups were with the United Bank of India for eastern India and Dhanlaxmi Bank and Yes Bank Ltd. for pan-India.

This year’s total income was Rs. 7,316.72 crore as against Rs. 5,981.64 crore during the previous financial year and total expenditure was Rs. 6,214.55 crore, compared to Rs. 5,038.60 crore during the previous financial year. Your Company’s Asset under Management (AUM) stood at Rs. 69,523.86 crore as at March 31, 2016, as against Rs. 56,884.00 crore in the previous financial year.

During the year under review, your Company maintained its good performance, in all major businesses and on all operational parameters. Its Profit Before Tax stood at Rs. 1,102.17 crore as against Rs. 943.04 crore in the previous financial year. Besides, the Profit After Tax touched Rs. 729.20 crore as against Rs. 621.29 crore in the previous financial year.

Consolidated

During the financial year, your Company’s total revenue on consolidated basis stood at Rs. 7,856.65 crore, 22.33% higher than Rs. 6,422.34 crore in the previous financial year. The overall operational expenses for the year under review was Rs. 6,735.75 crore, against Rs. 5,456.37 crore in the previous year. Operating profit before tax improved to Rs. 1,120.90 crore, compared to Rs. 965.96 crore, in the previous year. The year’s Profit after Tax attributable to the Company was Rs. 749.30 crore, higher by 17% over Rs. 642.46 crore, in the previous financial year.

Material Changes and Commitments affecting the Financial Position of the Company

There are no material changes and commitments, affecting the financial position of your Company, which have occurred between the end of the financial year of the Company, i.e. March 31, 2016 and the date of this Board’s report i.e. May 4, 2016.

DIVIDEND

Your Directors in their meeting held on October 20, 2015 had declared the first interim dividend for the financial year 2015-16 of Rs. 3 per equity share, on the 29,17,67,060 fully paid up equity shares of Rs. 10/- each of the Company. Your Directors have also on March 9, 2016 declared a second interim dividend for the financial year 2015-16 of Rs. 3 per equity share, on 29,17,97,988 fully-paid up equity shares of Rs. 10/- each of the Company. Moreover, the Board of Directors in their meeting held on May 4, 2016 has recommended a final dividend of Rs. 2 per equity share for the Financial Year ended March 31, 2016. Therefore, the total dividend for the financial year 2015-16 aggregates to Rs. 8 per equity share.

The final dividend payable shall be subject to the approval of the Members of the Company at the ensuing Annual General Meeting. The total outgo on account of dividend (including dividend distribution tax) will be Rs. 281.08 crore, for the current financial year 2015-16, as against Rs. 96.81 crore in the previous financial year.

TRANSFER OF AMOUNTS TO INVESTOR EDUCATION & PROTECTION FUND (IEPF)

Pursuant to the provisions of Section 205A (5) and Section 205C of Companies Act, 1956, (which are still applicable, as the relevant Sections under the Companies Act, 2013 are yet to be notified) the amounts pertaining to dividends/ deposits that remained unclaimed and unpaid for a period of seven years from the date it became first due for payment, have been transferred from time to time, to respective Investor Education and Protection Fund (IEPF) on the due dates, by the Company and no claims in this respect shall lie against the Company.

Your Company has been intimating the members/ depositors to lodge their claim for payments due, if any, from time to time. Such information is also being mentioned in the annual report, every year. Such claims, as and when received have been settled. Despite constant and sincere efforts to pay the unclaimed dividend / deposits and interest thereon to such members / depositors, certain amount still remains unclaimed.

Unpaid /Unclaimed Dividend

During the financial year 2015-16, your Company has transferred unclaimed final dividend of Rs. 0.03 crore pertaining to the financial year ended 2007-08 to the IEPF established by the Central Government.

Unclaimed Deposit

During the financial year 2015-16, an amount of Rs. 0.39 crore was transferred to IEPF being the amount of deposits along with interest thereon, that remained unclaimed and unpaid for a period of seven years from the date it became first due for payment.

Pursuant to the provisions of Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with Companies) Rules, 2012, your Company has uploaded the details of unpaid and unclaimed dividend / fixed deposit amounts (including interest thereon) lying with the Company as at July 23, 2015 (i.e. the date of 31st Annual General Meeting) on the Company’s website and has also filed the same with the Ministry of Corporate Affairs. Members / depositors who have not yet claimed the previous year(s) dividend / fixed deposit amount may write to the Company or to the Registrar and Share Transfer Agent.

LENDING OPERATIONS

The sanctions and disbursements of housing / other loans, during the financial year ended March 31, 2016, were Rs. 37,608.13 crore and Rs. 24,202.22 crore respectively, as against Rs. 28,497.08 crore and Rs. 19,821.53 crore, respectively, in the previous financial year. The Company’s cumulative loan disbursement since inception was Rs. 1,02,833.94 crore.

Sale/ Assignment of Loans

During the year under review, the Company has sold/ assigned a pool of housing loans aggregating to Rs. 3,066.37 crore and other non-housing loans aggregating to Rs. 534.82 crore. These constitute 90% of the actual pools sold/assigned, with the balance 10% being retained by the Company, in keeping with its Minimum Retention Requirement (MRR) commitments, as per the extant guidelines on securitization and assignment, prescribed by Reserve Bank of India.

The Company will, however, continue to collect the interest and EMI payments on these loans on behalf of the acquirer of these loans and remit the same after retaining its portion in terms of the individual agreements, with the individual acquirers.

Loan Book

As at March 31, 2016, the loan book stood at Rs. 61,775.02 crore, as against Rs. 51,039.65 crore in the previous year.

SHARE CAPITAL

(A) Authorised Share Capital

The Company’s authorised share capital stands at Rs. 828,00,00,000 (divided into 74,80,00,000 equity shares of Rs. 10/- each, 7,50,00,000 redeemable non convertible preference shares of Rs. 10/- each and 5,00,000 redeemable non convertible preference shares of Rs. 100/- each). During the year, there has been no change in the Company’s authorised share capital.

(B) Issued and Paid-up Share Capital

(1) Equity

During the year under review, pursuant to the approval of the Members of the Company, as per the provisions of the Companies Act, 2013, and in terms of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (‘SEBI ICDR Regulations’), as amended, your Company issued and allotted 14,58,56,530 Bonus Equity Shares in the ratio of 1:1 (i.e. one bonus equity share of Rs. 10/- each for every one fully paid up Equity Share of Rs. 10/- each held), to the eligible equity shareholders, by capitalising the existing permissible reserves. The Bonus Equity Shares rank pari passu with the existing equity shares in all respects including dividend.

During the year, your Company also allotted from time to time, the following Equity Shares:

(i) Prior to issue of bonus shares, 1,79,788 equity shares of Rs. 10/- each, upon exercise of stock options to the eligible employees of the Company under the Employee Stock Option Schemes –2009 (Plan II and Plan III);

(ii) Post issue of bonus shares, 84,928 equity shares of Rs. 10/- each, upon exercise of stock options to the eligible employees of the Company under the Employee Stock Option Schemes - 2008 and 2009 (Plan II and Plan III).

As at March 31, 2016, the paid up equity share capital of your Company was Rs. 291,79,79,880 divided into 29,17,97,988 equity shares of Rs. 10/- each.

(2) Preference Share Capital

During the year under review, the Company has not issued preference share capital.

(3) Issue of Warrants on Preferential Basis

During the year under review, pursuant to approval of the Company’s Members and as per the applicable provisions of the Companies Act, 2013, and Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, your Company issued and allotted 2,12,30,070 warrants (convertible into equivalent number of equity shares of Rs. 10/- each, within 18 months from the date of allotment of said warrants, in one or more tranches) at the issue price of Rs. 235.515 per warrant i.e. at a premium of 5% (amounting to Rs. 11.215 per warrant) to the Minimum Price calculated in accordance with Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 to a Promoter Group Entity i.e. Wadhawan Global Capital Private Limited.

Your Company has neither issued any shares with differential voting rights nor any Sweat Equity shares, during the year under review.

RESOURCE MOBILISATION

Your Company’s borrowing policy is under the control of the Board. The Company has vide special resolution passed by means of postal ballot on June 12, 2014, under Section 180(1)(c) of the Companies Act, 2013, authorised the Board of Directors to borrow money upon such terms and conditions as the Board may think fit in excess of aggregate of paid up share capital and free reserves of the Company up to an amount of Rs. 1,00,000 crore and the total amount so borrowed shall be within the limits as prescribed under the Housing Finance Companies (NHB) Directions, 2010.

Your Company continued to use a variety of funding sources to optimise funding costs, protect interest margins and maintain a diverse funding portfolio which further strengthened its funding stability and liquidity needs. Your Company continued to keep tight control over the cost of borrowings through negotiations with lenders and thus, raised resources at competitive rates from its lenders while ensuring proper asset liability match. The weighted average borrowing cost as at March 31, 2016 was 9.67% as against 10.28% in the previous year. As at March 31, 2016, your Company’s sources of funding were primarily from banks and financial institutions (52.65%), followed by nonconvertible debentures (23.15%), public (fixed) deposits (8.25%), commercial papers (7.61%), multilateral agencies (3.67%), refinancing from NHB (2.42%), subordinated debt (1.95%) and perpetual debt (0.30%).

Your Company continues to gradually reduce its reliance on the borrowings from banks and financial institutions and focus on capital market instruments with lower funding costs. During the year under review, your Company has continued to diversify its resources profile by accessing funds from multilateral agencies such as Rs. 721.82 crore by way of External Commercial Borrowings route.

Your Company’s total borrowings amounted to Rs. 61,103.67 crore as at March 31, 2016, as against Rs. 48,920.74 crore in the previous year. The Company’s Asset-Liability Management Committee (ALCO), setup in line with the guidelines issued by NHB, monitors asset-liability profile to ensure that there are no high mismatches or excessive concentrations between the two sides of the Balance Sheet. The ALCO lays down policies and quantitative limits based on assessment of various types of risks and shifts in assets and liabilities to manage such risks and ensures that the liquidity and interestrate risks are contained within the limits laid down by the Board. Your Company continued to tap opportunities for raising longer tenor borrowings in the financial year 2015-16. Another strategy adopted to keep a balanced ALM was to enter into strategic partnership with banks that are keen on good-quality assets and assign longtenor receivables to them at mutually beneficial terms.

Loans from Banks

As part of its liability management, your Company endeavours to diversify the sources of its resource base in order to achieve an appropriate maturity structure and minimise the weighted average cost of borrowed funds. Your Company continued to leverage on its long term relationship with banks and thus tied up fund based working capital limit amounting to Rs. 2,159 crore as at the end of financial year. Your Company also raised additional term loans from banks to the extent of Rs. 6,905 crore during the year at competitive rates available in the market.

Refinance from National Housing Bank (NHB)

During the year under review, your Company has been granted sanctions amounting to Rs. 2,000 crore under the NHB’s refinancing schemes for HFCs. During the year under review, your Company has availed Rs. 500 crore out of the refinance limit sanctioned by NHB.

Non-Convertible Debentures (NCDs)

Your Company continues to issue fully Secured Redeemable Non-Convertible Debentures on private placement basis. Pursuant to the Special resolution passed by the Members of the Company at the 31st Annual General Meeting held on July 23, 2015 and the Board approved Policy for private placement of Non- Convertible Debentures (NCDs) formulated as per the guidelines issued by National Housing Bank, your Company issued Secured Redeemable Non-Convertible Debentures (the ‘Debentures’) amounting to Rs. 6,600.50 crore to various investors, including banks, mutual funds and financial institutions by way of issue of NCDs and Zero Coupon NCDs (ZCDs), during the year under review. The outstanding balance of Debentures including accrued premium on ZCDs as on March 31, 2016 amounts to Rs. 14,144.97 crore. The proceeds of the aforesaid issue were utilised for making disbursement to meet the housing finance requirements of the borrowers of the Company, as well as for general corporate purposes. Debenture Trust Agreement(s) in favour of GDA Trusteeship Limited and IDBI Trusteeship Services Limited for the aforesaid issues were executed.

Your Company has duly paid the interest due on the aforesaid Debentures on time. The Company’s NCDs have been assigned the rating of “CARE AAA” by Credit Analysis and Research Limited (CARE) and “BWR AAA” by Brickwork Ratings India Private Limited (Brickwork).

Your Company being Housing Finance Company is exempted from the requirement of creating Debenture Redemption Reserve (DRR) in case of privately placed debentures. Sincethe Debenture issues of the Company till date are through private placement, no DRR has been created.

Subordinated Debts

Your Company did not raise money through subordinate debt during the year. As at March 31, 2016, your Company’s outstanding subordinated debts were Rs. 1,191.5 crore. The debt is subordinated to present and future senior indebtedness of your Company. Based on the balance term to maturity, as at March 31, 2016, Rs. 825.72 crore being the discounted book value of subordinated debt is considered as Tier II under the guidelines issued by the National Housing Bank (NHB) for the purpose of capital adequacy computation. The subordinated debt have been assigned ‘CARE AA+’ credit rating from CARE and a credit rating of ‘BWR AAA’ (Stable) from Brickwork.

Perpetual Debt Instrument

During the year under review, your Company did not issue any Innovative Perpetual Debt Instruments (‘IPDI’). The outstanding as at March 31, 2016, amounts to Rs. 185.70 crore.

Disclosure under Housing Finance Companies issuance of Non-Convertible Debentures on Private Placement Basis (NHB) Directions, 2014

During the year under review, the non-convertible debentures were paid / redeemed by the Company on their respective due dates and there were no such instances of any non-convertible debentures which have not been claimed by the investors or not paid by the Company after the date on which the non-convertible debentures became due for redemption.

Commercial Paper

The Commercial Paper (CP) programme of your Company have been assigned the rating of CRISIL A1+ (A One Plus) by Credit Rating and Information Services of India Limited (CRISIL) and [ICRA] A1+ by ICRA Limited. As at March 31, 2016, Commercial Papers outstanding amount stood at Rs. 4,649.00 crore.

External Commercial Borrowings (ECB)

During the year under review, your Company has availed an ECB of Rs. 721.82 crore from offshore banks including (i) from the Bank of Baroda – Kingdom of Bahrain for an aggregate principal amount of Rs. 65.62 crore, (ii) from Barclays Bank Plc., London for an aggregate principal amount of Rs. 65.62 crore, further of which Rs. 32.81 crore loan was transferred from Barclays Bank Plc., London to Chang Hwa Commercial Bank Ltd., Singapore and Rs. 32.81 crore loan was transferred from Barclays Bank Plc., London to Mega International Commercial Bank Co. Ltd. respectively, with effect from November 17, 2015 (iii) from CTBC Bank Co. Ltd., Singapore for an aggregate principal amount of Rs. 32.81 crore, (iv) from KDB Ireland Ltd. – Ireland for an aggregate principal amount of Rs. 32.81 crore, (v) from the Korea Development Bank – Korea for an aggregate principal amount of Rs. 98.43 crore,

(vi) from the State Bank of India, South Africa for an aggregate principal amount of Rs. 360.91 crore, and (vii) from Taiwan Co-operative Bank, Offshore Banking Bank, Taiwan for an aggregate principal amount of Rs. 65.62 crore, for onward lending in segment of low cost affordable housing projects pursuant to the provisions of RBI guidelines dated December 17, 2012. The subject ECB borrowing has a maturity of five years. According to the provisions of the RBI guidelines, these borrowings have been swapped into rupees for the entire maturity by way of principal only swaps. In terms of ECB Master Circular guidelines issued by RBI, the proceeds have to be utilised for financing the prospective owners of low cost affordable housing units. Low cost affordable housing units have been defined as units where the property cost is up to Rs. 30 lakh, the loan amount is capped at Rs. 25 lakh and the carpet area does not exceed 60 square metres.

During the financial year 2015-16, the principal amount for all the ECB loans availed by your Company has been fully hedged, in accordance with the guidelines prescribed by Reserve Bank of India. Additionally, LIBOR has been hedged for ECB Loans availed in financial year 2014-15.

Security Coverage for the Borrowings

The security details of the aforesaid secured borrowings made by the Company are mentioned at Note No. 6 in the Notes to accounts forming part of the audited (standalone) financial statements for the year ended March 31, 2016.

Deposits

Your Company being a deposit accepting housing finance company, registered with National Housing Bank, is governed by the provisions of the Housing Finance Companies (NHB) Directions, 2010, as amended. Retail deposits form an integral source of funding for your Company, and your Company has taken several initiatives to increase the reach and penetration to mobilse these deposits from across the country. This is eflected in the robust growth seen in the Company’s fixed deposit portfolio. The total deposits grew by 35.25% to Rs. 5,042.66 crore as on March 31, 2016. During the year, your Company added 26,326 new deposit accounts taking the total number of depositor accounts to 2,32,228, reflecting customers confidence in your Company.

During the previous financial year 2014-15, your Company launched a new deposit product ‘Wealth2Health Fixed Deposit’, which not only gives the customers all the benefits of normal fixed deposits but also provides for liquidity in case of any health emergency, along with a host of other related benefits. This product has won the coveted

‘Golden Peacock Innovative Product/Service Award – 2016’.

This is a reflection of your Company’s commitment towards providing innovative and customised solutions for all customer needs that helps it to reach out to wider set of customers and participate in the financial inclusion process. As of March 31, 2016, for 9,654 deposits, the depositors did not claim the amounts (along with interest due thereon) aggregating to Rs. 54.10 crore. Depositors have been intimated regarding the maturity of their deposits, with a request to either renew or claim their matured deposits. Fixed deposits accepted by the Company are secured appropriately to the extent of floating charge on approved securities and bank deposits created by way of Deed of Trust, as per the guidelines issued by the National Housing Bank. The security details of the aforesaid secured borrowings made by the Company are mentioned at Note No. 6 in the Notes to accounts forming part of the audited (standalone) financial statements for the financial year ended March 31, 2016.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013, apart from the loans made, guarantee given or security provided by the Company in the ordinary course of business are given in the Notes to accounts forming part of the audited (standalone) financial statements for the year ended March 31, 2016

CAPITAL ADEQUACY

As required under National Housing Bank Directions, your Company is presently required to maintain a minimum capital adequacy of 12% on a stand-alone basis. The following table sets out Company’s Capital Adequacy Ratios as at March 31, 2014, 2015 and 2016

The Capital Adequacy Ratio (CAR) of your Company was at 16.74% as on March 31, 2016, as compared to the regulatory requirement of 12%.

In addition, the National Housing Bank Directions also requires that your Company transfers minimum 20% of its annual profits to a reserve fund, which the Company has duly complied with.

NON-PERFORMING ASSETS AND PROVISIONS FOR CONTINGENCY

Your Company adhered to the prudential guidelines for Non-Performing Assets (NPAs), under the Housing Finance Companies (NHB) Directions, 2010, as amended from time to time. The Company did not recognise income on such NPAs, and further created provisions for contingencies on standard as well as non-performing housing loans and property loans, in accordance with the National Housing Bank Directions, 2010. The Company has also made additional provisions to meet unforeseen contingencies. The following table set forth Company’s gross NPAs, net NPAs, cumulative provisions and write-offs for the periods indicated:

Recovery & Collections

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) has proved to be a useful recovery tool and the Company has been able to successfully initiate recovery action under the provisions of this Act, against the defaulting borrowers. The Company has taken physical possession of the secured assets of some of the defaulters and the same are being auctioned as per the process laid down under the SARFAESI Act and the Rules framed there under.

To prevent frauds in loan cases by mortgaging the same property with multiple lenders, the Government of India has set up Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) under Section 20 of the SARFAESI Act. Your Company has been filing requisite particulars of mortgaged properties with CERSAI as per the prevailing guidelines issued by CERSAI.

INVESTMENTS

The Investment Committee constituted by the Board of Directors is responsible for approving investments in line with the policy and limits as set out by the Board. The investment policy is reviewed and revised in line with the market conditions and business requirements from time to time. During the year, the Investment policy was reviewed and revised by the Board of Directors. The decisions to buy and sell up to the approved limit delegated by the Board are taken by the Chairman & Managing Director, who is assisted by the Company’s senior executives. The investment function is carried out primarily to support the core business of housing finance to ensure adequate levels of liquidity and to maintain investment in approved securities in respect of public deposits raised as per the norms of National Housing Bank. Considering the time lag between raising of resources and its deployment, the surplus funds are generally being parked with liquid fund schemes of mutual funds and short-term deposits with banks. During the year, your Company earned Rs. 166.69 crore by way of income from mutual funds & other operations and Rs. 59.26 crore by way of interest on deposits placed with banks and bonds. At the end of the financial year, your Company maintained Rs. 677.35 crore by way of deposits with banks.

As per National Housing Bank guidelines, housing finance companies are required to maintain Statutory Liquid Ratio (SLR) in respect of public deposits raised. Currently the SLR requirement is 12.50% of the public deposits. As at March 31, 2016, your Company has invested Rs. 296.52 crore (book value - gross) in approved securities comprising of government securities, government guaranteed (State and Central) bonds, State Development Loans and by way of bank deposits for Rs. 322.85 crore. It is being maintained within the limits prescribed by National Housing Bank.

SUBSIDIARY, JOINT VENTURES AND ASSOCIATE COMPANIES

As on March 31, 2016 your Company has one whollyowned subsidiary, three Joint Venture Entities and four Associate Companies. During the year, the Board of Directors reviewed the business operations and financial performance of the said Companies.

Pursuant to the provisions of Section 129(3) of the Companies Act, 2013, your Company has prepared Consolidated Financial Statements of the Company which forms part of this Annual Report. Further, a Statement containing salient features of financial statements of the Subsidiary, joint venture entities and associate Companies in the prescribed format AOC-1, pursuant to Section 129(3) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, is annexed as “Annexure-1” to this Report. The Statement also provides details of performance and financial position of each of the Companies. In accordance with the provisions of Section 136 of the Companies Act, 2013, the Audited Financial Statements, the Consolidated Financial Statements and the related information of the Company and the Audited Accounts of the Subsidiary, Joint Venture Entities and Associate Companies, are available on our website i.e. www.dhfl.com. These documents shall also be available for inspection during the business hours, i.e. between 10.00 a.m. to 6.00 p.m. on all working days (except Saturday) at the Registered Office of the Company. During the financial year ended March 31, 2016, investments were made in the following subsidiary, joint venture entities and associate companies:

Wholly Owned Subsidiary - DHFL Advisory & Investments Private Limited (DAIPL)

During the financial year ended March 31, 2016, your Company incorporated a Wholly Owned Subsidiary i.e. DHFL Advisory & Investments Private Limited with a paidup Equity Share capital of Rs. 1 Lakh and made further investment to the tune of Rs. 75 crore, by way of subscription to 7,50,00,000 equity shares of Rs. 10/- each of DAIPL.

Avanse Financial Services Ltd. (Avanse)

During the year under review, your Company did not subscribe to Rights Issue made by its associate company, Avanse, a non-banking finance Company registered with Reserve Bank of India, which resulted in proportionate dilution of the existing shareholding percentage of the Company in Avanse. As a result, the percentage of shareholding of your Company stood at 36.78% of the total paid-up share capital of Avanse.

Investment in Asset Management Services

During the year under review, upon receipt of the requisite approvals in respect of the Joint Venture entered into during the previous financial year, your Company acquired 50% of the equity share Capital of (i) DHFL Pramerica Asset Managers Private Limited (formerly known as Pramerica Asset Managers Private Limited, hereinafter referred to as DPAMPL), the Asset Management Company of DHFL Pramerica Mutual Fund (formerly known as Pramerica Mutual Fund, hereinafter referred to as DPMF); and (ii) DHFL Pramerica Trustees Private Limited (formerly known as Pramerica Trustees Private Limited, hereinafter referred to as DPTPL), the Trustee of DPMF from PGLH of Delaware, Inc., which is a wholly-owned, indirect subsidiary of Prudential Financial Inc.

During the year under review, DPAMPL, acquired Deutsche Asset Management (India) Private Limited (‘DB AMC’), Deutsche Trustee Services (India) Private Limited the asset management company and Trustee Company of Deutsche Mutual Fund (‘DB MF’) and Deutsche India Holdings Private Limited, sponsor of DB MF. As on March 31, 2016, the direct shareholding of your Company remained at 50% in the joint venture entities DPAMPL and DPTPL.

However, the direct shareholding of the Company in the Joint Venture Entity DPAMPL is 17.12% and through its wholly-owned subsidiary i.e. DHFL Advisory and Investments Private Limited is 32.88%, as on the date of this report.

Your Company believes that this joint venture will help it to extend its philosophy of financial inclusion by increasing the product offerings to the LMI segment that your Company has profitably served over the years.

INFORMATION TECHNOLOGY

Your Company had initiated a technology transformation programme (Tech2.0) in association with IBM to support Company’s growth, improve operational efficiency and optimise costs through the use of technology. This programme is expected to establish a scalable and flexible technology landscape, improve customer centricity, enable faster decision making through automation and analytics, thereby taking the technology platform to a new level. Your Company aims to align its technology landscape to evolving business needs, which would support the Company in its growth targets.

Under Tech2.0, your Company plans to replace its legacy systems and business application platforms with proven commercial-off-the-shelf products, which would provide best fit solutions to the business functions. Your Company has further upgraded its existing information technology infrastructure by increasing network bandwidth and bringing in new servers for the core applications, thereby improving its performance.

During the year under review, your Company earmarked Rs. 100 crore for selective strategic investment in digital space.

HUMAN RESOURCES

Your Company has experienced promoters and a management team whom your Company relies upon to anticipate industry trends and to capitalise on emerging new business opportunities. Your Company believes that a combination of its reputation in the market, its working environment and competitive compensation programmes allows it to attract and retain best talent. Your Company strives to attract the best talent in the industry and ensures its employees’ development & retention and their contribution to the Company’s success.

Your Company’s vision is to become an employer of choice by providing a compelling employee value proposition. Your Company has molded its policies relating to hiring, deployment, transfers, promotion, training, including its performance-linked bonuses and employee stock options, with the clear aim of building a ‘cadre-based organisation’, whose cadre understands the company’s customers, their problems, issues and aspirations. Your Company’s human resources policies and practices are focused on recruiting and training employees who can empathise and deal with potential and existing borrowers. In the past, your Company had engaged an outside consultant that developed a behavioral competency framework for its branch and office heads. Besides, there was a technical competency framework for sales, credit appraisal, accounting, collection and recovery and technical functions. Your Company has integrated the behavioral competency and technical competency frameworks into its training, evaluation and recruiting processes.

Your Company has implemented a robust reward and recognition framework across all functions under which contributions to the business by the employees are rewarded. Your Company intends to continue investing in employee leadership, motivation, training and assistance programmes.

Your Company’s workforce strength as on March 31, 2016 was 2625. The total work force cost during the year was Rs. 227.64 crore as compared to Rs. 196.33 crore in the previous year. The increase in cost is mainly due to the increase in work force to meet the requirements of business on account of significant expansion in terms of geography as well as in business volumes and the salary revisions effected during the year.

Learning & Development

Your Company’s learning & development team, is responsible to provide learning solutions to every role within the organisation by designing comprehensive training frameworks to match the dynamic and ever evolving business trends.

Your Company creates stronger depth and focus in its skill building efforts. Your Company has been able to support professional development and empower employees to deliver improved quality of service through its training intervention and motivating them to perform with renewed vigor and enthusiasm. Teaching expertise has been nurtured in-house, in the form of dedicated trainers, facilitators, content developers as well as subject matter experts from business teams.

During the financial year 2015-16, training was imparted to 1,718 on roll employees and 1,454 off roll employees, covering a wide range of functional areas including sales skill development programmes. Employees trained under credit analytical skills and appraisal techniques were 404. The total number of employees who underwent operational excellence training programmes was 145, whereas risk and fraud management was 2210. ‘Subharambh’ the exclusive monthly Induction programme for the new recruits was conducted to give an overall view of the Company’s vision and mission. Similarly, programme based on soft skills and monitoring techniques were also conducted and 203 employees were covered. Training was also conducted to enhance product and policy knowledge and 1,976 employees were covered through this.

In keeping with its importance and in compliance with National Housing Bank norms trainings on KYC & AML policies were also imparted at all levels within the organisation. External training programmes and cross functional exposures were utilised to provide an extra edge to employees for continuous and better performance through learning and job experience.

Your Company has partnered with the best in class leadership trainers of the country for corporate breakthrough workshop for key position holders and business managers. To study the impact of training, your Company engages leading trainers from the industry to benchmark Company’s skills and for analysing the same with focus on measuring and improving employee engagement and learning quotient. Taking concrete steps based on the study findings is helping the organisation in building a stronger and more engaged workforce.

Your Company’s Human Resources initiatives and L&D systems are designed to ensure an active employee engagement process, leading to better organisational capability and vitality for maintaining a competitive edge and in pursuing its ambitious growth plans. Customer focus remains at the core of all L&D initiatives.

EMPLOYEE REMUNERATION

(A) The ratio of the remuneration of each director to the median employee’s remuneration and other details in terms of sub-section 12 of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are forming part of this report and is annexed as “Annexure - 2” to this Report.

(B) The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and Rule 5 (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, forms part of this report. In terms of Section 136 of the Companies Act, 2013 the same is open for inspection at the Company’s registered office. Copies of this statement may be obtained by the members by writing to the Company Secretary.

EMPLOYEES STOCK OPTION SCHEME (ESOS)/ EMPLOYEE STOCK APPRECIATION RIGHTS (ESARS)

Your Company has with the approval of Nomination & Remuneration Committee of the Board of Directors and pursuant to the special resolution passed by the Company’s members, at the annual general meeting held on July 23, 2007, formulated three employee stock option schemes, ESOS - 2008, ESOS - 2009 – Plan II and ESOS - 2009 – Plan III- in accordance with the provisions of Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

The ESOP 2009 Plan II lapsed on November 25, 2015. During the previous financial year 2014-15, the Members of the Company, vide a special resolution passed through postal ballot, approved the “Dewan Housing Finance Corporation Limited – Employee Stock Appreciation Rights Plan 2015” (‘DHFL ESAR 2015’) in accordance with the provisions of Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and issuance of stock appreciation rights (‘ESARs’) through DHFL ESAR 2015, exercisable into not more than 51,46,023 fully paid up equity shares in the aggregate having face value of Rs. 10/- each. Pursuant to the subject approval, the Nomination & Remuneration Committee approved the grant of 15,50,100 ESARs under DHFL ESAR 2015 to the eligible employees of the Company conferring upon them a right to receive equity shares equivalent to the appreciation in the value of the shares of the Company as per the terms of DHFL ESAR Plan 2015, first tranche of which became due for vesting, during the year under review.

The Company’s Nomination & Remuneration Committee of the Board of Directors, inter-alia, administers and monitors the Employee Stock Option Schemes/ Employee Stock Appreciation Rights Plans of the Company, in accordance with the SEBI guidelines.

The Company has received a certificate from its auditors that the Stock Options Schemes/ Employee Stock Appreciation Rights Plan have been implemented in accordance with the SEBI guidelines and is as per the respective resolutions passed by the Company’s members.

The said certificate would be placed at the ensuing annual general meeting for the inspection by Members. The applicable disclosures as stipulated under the SEBI guidelines, as applicable for the financial year 2015-16, with regard to Employee Stock Option Schemes/Employee Stock Appreciation Rights are annexed as ‘Annexure – 3’ to this Report.

DISCLOSURE UNDER SUB-SECTION (3) OF SECTION 134 OF COMPANIES ACT, 2013, READ WITH RULE 8(3) OF THE COMPANIES (ACCOUNTS) RULES, 2014

A. Conservation of Energy

Your Company is not engaged in any manufacturing activity and thus its operations are not energy intensive. However, adequate measures are always taken to ensure optimum utilisation and maximum possible saving of energy. During the year under review your Company has made capital investment of approximately Rs. 0.23 Crore at 30 branch/service locations, towards the installation of energy conservation equipments such as replacement of CFL (Compact Fluorescent Lamp) with LED (Light- Emitting Diode) lights, energy saving Air-conditioners, replacement of normal tube lights with T5 lights at the new branches and in the renovated branches.

This has resulted in power saving on a daily basis. The Company on its lending side actively associates in all programmes and schemes of the Government and NHB, in promoting energy efficient homes.

B. Technology Absorption

Your Company actively pursues a culture of technology adoption, leveraging on the advancements in technology to serve customers better, manage process efficiently and economically and strengthen control systems. The Company has maintained a technology friendly environment for its employees to work in. In keeping with the current trends in the areas of digital marketing and social media, the Company has effectively used these avenues in positioning itself in the market place and gain better Customer engagement.

The current technology transformation programme has been initiated to bring the Company’s technology platform to a new level. The programme aims to identify and implement best-fit solutions in such areas as (i) collaboration and employee communication portal to provide for internal communication, knowledge sharing and collaboration between employees; (ii) customer relationship management, in particular in marketing, sales and customer service, to achieve higher customer satisfaction and enhanced marketing and sales effectiveness;

(iii) digital channels to provide for effective interaction between the Company and its customers and business partners/agents, which will include creation of a customer portal and an agent portal; (iv) financial accounting ERP to establish unified accounting, financial management and accounting MIS at the Company; (v) imaging, workflow and DMS to facilitate the centralisation of data capture and validation of the Company’s loan, project finance and FD applications; (vi) loan origination and management (vii) collections management, project finance and property information management systems; (viii) business systems (enterprise) integration; and (ix) business intelligence and advanced analytics to build a platform and an operational data store to generate systematic, consistent and near real-time MIS reports and dashboards.

C. Foreign Exchange Earnings and Outgo

There were no foreign exchange earnings during the year.

The information on foreign exchange outgo and expenditure is furnished at Note No. 39 in the Notes forming part of the audited (standalone) financial statements for the year ended March 31, 2016.

INSURANCE

Your Company has insured its various properties and facilities against the risk of fire, theft and other perils, etc. and has also obtained Directors’ and Officers’ Liability Insurance Policy, which covers the Company’s Directors and Officers (employees in managerial or supervisory position) against the risk of financial loss including the expenses pertaining to defense cost and legal representation expenses arising in the normal course of business.

Moreover, your Company has obtained money policy to cover ‘money in safe and till counter and money in transit’ for the Company’s branches and various offices. All the vehicles owned by the Company are also duly insured. Your Company also has in place a mediclaim policy for its employees and their dependent family members, group term life and group personal accident policies, which provide uniform benefits to all the employees.

NATIONAL HOUSING BANK GUIDELINES

The Company has complied with the provisions of the Housing Finance Companies (NHB) Directions, 2010, as prescribed by NHB and has been in compliance with the various Circulars, Notifications and Guidelines issued by National Housing Bank (NHB) from time to time. The Circulars and the Notifications issued by NHB are also placed before the Audit Committee / Board of Directors at regular intervals to update the Committee/ Board members on the compliance of the same.

RISK MANAGEMENT

As a housing finance company, your Company is exposed to various risks that are inherent in the lending business. The primary risks include credit risk, market risk, liquidity risk, legal risks, interest rate risk, compliance risk and operational risk. Your Company has invested in people, processes and technology to mitigate risks posed by internal and external environment. It has in place a strong risk management team and an effective credit operations structure. Its risk management policies continue to segregate the functions of risk and credit to focus on portfolio management. The sustained efforts to strengthen the risk management framework and portfolio quality have yielded significant results over the last few years.

Your Company places emphasis on risk management measures to ensure an appropriate balance between risk and return. Your Company has taken steps to implement robust and comprehensive policies and procedures to identify, measure, monitor and manage risks. Risk management is a board-driven function with the overall responsibility of risk management assigned to the Risk Management Committee of the Board of Directors. At the operational level, risk management is assigned to the Asset Liability Management Committee (‘ALCO’). Sensitive financial risks are monitored by the Risk Management Committee and also by Audit Committee of the Board.

Your Company conducts risk profiling on a regular basis for the purpose of self-assessment. The Company has envisaged the setting up of risk containment unit (RCU) at all major business locations. The Board also on regular intervals is updated on the risk management systems, processes and minimisation procedures of the Company.

Your Company has put in place a Business Continuity Plan and adopts the practice of reviewing its risk management policies to be in step with the changing environment so as to identify and mitigate its attendant risks in a proactive manner on a continuous basis.

ASSET LIABILITY MANAGEMENT COMMITTEE (ALCO)

The Asset Liability Management Committee (ALCO) lays down policies and quantitative limits that involve assessment of various types of risks and shifts in assets and liabilities to manage such risks. ALCO ensures that the liquidity and interest-rate risks are contained within the limits laid down by the Board. The Company has duly implemented the NHB’s Asset Liability Management Guidelines.

AND POLICIES & COMPLIANCES THEREUNDER

Your Company has formulated various policies and codes in compliance with provisions of Directions and Guidelines issued by the National Housing Bank, Companies Act, 2013, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and to ensure high ethical standards in the overall functioning of the organisation. The said policies and codes are periodically reviewed by the Board of Directors. The key policies and codes as approved by the Board of Directors and the respective compliance there under are detailed herein below:

Know Your Customer & Anti Money Laundering Measures Policy

Your Company has a Board approved Know Your Customer & Anti Money Laundering Measures Policy (KYC & AML Policy) in place and adheres to the said Policy. The said Policy is in line with the National Housing Bank guidelines. Your Company has adhered to the compliance requirements in terms of the said policy including the monitoring and reporting of cash and suspicious transactions. The Company furnishes to Financial Intelligence Unit (FIU), India, in the electronic mode, information of all cash transactions of the value of more than Rs. 10 lakh or its equivalent in foreign currency and suspicious transactions whether or not made in cash, in terms of the said Policy. Your Company is also following the process as briefed out under the Guidance Note on Effective Process of STRs Detection and Reporting for Housing Finance Sector, issued by Financial Intelligence Unit - India in consultation with the Regulator viz., the National Housing Bank (NHB).

The said policy is available on website of the Company at the URL http://www.dhfl.com/investors/policies-codes-2/ kyc-aml-policy/ .

Fair Practice Code

Your Company has in place a Fair Practice Code (FPC), which includes guidelines on appropriate staff conduct when dealing with the customers and on the organisation’s policies vis-à-vis client protection. The FPC captures the spirit of the National Housing Bank guidelines on fair practices for Housing Finance Companies. Your Company and its employees duly comply with the provisions of FPC.

During the year under review, FPC was revised and updated to align the same with the improved practices in relation to the dealings of the Company with its customers, and as per the various circulars issued by the National Housing Bank. The said code is available on website of the Company at the URL http://www.dhfl.com/investors/policies-codes-2/ fair-practice-code/ .

Policy on Disclosure of Material Events and Information

During the year under review, your Company has adopted the Policy on Disclosure of Material Events and Information, in accordance with Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 to determine the events and information which are material in nature and are required to be disclosed to the Stock Exchanges.

The said policy is available on the website of the Company at the URL http://www.dhfl.com/investors/policies-codes-2/ policy-for-disclosure-of-material-events-and-information/ .

Policy on Preservation of Documents and Records

During the year under review, your Company has adopted the Policy on Preservation of Documents and Records in accordance with Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Policy ensures that the Company complies with the applicable document retention laws, preservation of various statutory documents and also lays down minimum retention period for the documents and records in respect of which no retention period has been specified by any law/ rule/ regulation. The Policy also provides for the authority under which the disposal /destruction of documents and records after their minimum retention period can be carried out.

Code of Conduct for the Board of Directors and the Senior Management Personnel

Your Company has in place Code of Conduct for the Board of Directors and the Senior Management Personnel to set forth the guiding principles on which the Company and its Board and Senior Management Personnel shall operate and conduct themselves with multitudinous stakeholders, government and regulatory agencies, media and anyone else with whom it is connected

During the year under review your Company has amended the Code of Conduct for its Board of Directors and the Senior Management Personnel to align the same with the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. A declaration by Chief Executive Officer, with regard to the compliance with the said code, forms part of this Annual Report.

The said code is available on the website of the Company at the URL http://www.dhfl.com/investors/policies-codes/ code-of-conduct-for-board-and-senior-managementpersonnel/

Code of Conduct for Prohibition of Insider Trading

Your Company has in place a Code of Conduct for Prohibition of Insider Trading, which lays down the process of trading in securities of the Company by the employees and the connected persons and to regulate, monitor and report trading by the employees and the connected persons of the Company either on his/her own behalf or on behalf of any other person, on the basis of unpublished price sensitive information.

During the year under review your Company has amended the subject Code to align the same with the requirements of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information

During the year under review, your Company has adopted Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information, with a view to lay down practices and procedures for Fair Disclosure of Unpublished Price Sensitive Information that could impact price discovery in market for its securities, in accordance with the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015.

Code of Business Ethics (COBE)

Your Company has adopted a Code of Business Ethics (COBE) which lays down the principles and standards that govern the activities of the Company and its employees to ensure and promote ethical behaviour within the legal framework of the organisation.

Whistle Blower Policy (Vigil Mechanism)

Pursuant to the provisions of Section 177 (9) & (10) of the Companies Act, 2013 read with Rule 7 of Companies (Meetings of Board and its Powers) Rules, 2014 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has in place a Whistle Blower Policy, which provides for a vigil mechanism that encourages and supports its Directors and employees to report instances of illegal activities, unethical behaviour, actual or suspected, fraud or violation of the Company’s Code of Conduct or Ethics Policy. It also provides for adequate safeguards against victimisation of persons who use this mechanism and direct access to the Chairman of the Audit Committee in exceptional cases.

The said policy is available on the website of the Company at the URL http://www.dhfl.com/investors/policiescodes- 2/whistle-blower-policy/ .

Prevention, Prohibition & Redressal of Sexual Harassment of Women at Workplace

Your Company has in place a Policy on Prevention, Prohibition & Redressal of Sexual Harassment of Women at Workplace and an Internal Complaints Committee (ICC) has been constituted thereunder. The Policy’s primary objective is to protect the women employees from sexual harassment at the place of work and also provides for punishment in case of false and malicious representations. During the financial year 2015-16, five complaints were received by the ICC under the said policy and based on the recommendations of the ICC, strict actions were taken against the employee found guilty.

Comprehensive Risk Management Policy

Your Company is committed to manage its risk in a proactive manner and has adopted a structured and disciplined approach to risk management by developing and implementing risk management framework. With a view to manage its risk effectively your Company has in place a Comprehensive Risk Management Policy which covers a formalised Risk Management Structure, along with other aspects of risk management i.e. credit risk management, operational risk management, market risk management and enterprise risk management. The Risk

Management Committee of the Board, on periodic basis oversees the risk management systems, processes and minimisation procedures of the Company.

Nomination (including Boards’ Diversity) Remuneration & Evaluation Policy (NRE Policy)

Your Company has in place a Nomination (including Boards’ Diversity), Remuneration & Evaluation Policy, which, inter-alia, lays down the criteria for identifying the persons who are qualified to be appointed as Directors and/or senior management personnel of the Company, along with the criteria for determination of remuneration of Directors, KMPs and other employees and their evaluation and includes other matters, as prescribed under the provisions of Section 178 of Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

During the year under review, your Company has amended the subject policy to align the same with the requirements of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Related Party Transaction Policy

Your Company has in place Related Party Transaction Policy, intended to ensure requisite approval, reporting and disclosure of transactions between the Company and its related parties. The said policy also defines the materiality of related party transactions and lays down the procedures of dealing with related party transactions. During the year under review, the Related Party Transaction Policy was amended to align the same with the requirements of Companies (Amendment) Act, 2015 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The said policy is available on the website of the Company at the URL http://www.dhfl.com/investors/policies-codes/ related-party-transaction-policy

Corporate Social Responsibility (CSR) Policy

Your Company has framed Corporate Social Responsibility Policy (CSR Policy), as per the provisions of the Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended, which, inter-alia, lays down the guidelines and mechanism for undertaking socially useful projects for welfare and sustainable development of the community at large. As per the provisions of Section 135 of the Companies Act, 2013, the Company has constituted a Corporate Social Responsibility Committee. The Committee assists the Board in fulfilling its duty towards the community and society at large by identifying the activities and programmes that can be undertaken by the Company, in terms of the Company’s CSR Policy. The composition of the CSR Committee and its terms of reference are given in the Corporate Governance Report forming part of this Annual Report.

The said policy is available on the website of the Company at the URL http://www.dhfl.com/about-us/corporatesocial- responsibility/csr-policy/

The Annual Report on CSR activities is annexed separately as ‘Annexure – 4’ to this Report.

Policy on Open Architecture for Retail Insurance Business

Your Company acts as a corporate agent for DHFL Pramerica Life Insurance Company Limited for distribution of life insurance products. In terms of the Insurance Regulatory and Development Authority of India (Registration of Corporate Agents) Regulations, 2015, during the year, your Company adopted a Policy on Open Architecture for Retail Insurance Business which lays down the manner of soliciting and servicing insurance products. The Policy addresses the manner of adopting the philosophy of open architecture and implementation of the same as well as the approach to be followed by the corporate agent in having single or multiple tie-ups, the partners in the tieups, the business mix, the type of products sold, grievance redressal mechanism and reporting requirement(s).

Others Policies

To strengthen the internal procedures and systems and for better governance, during the year under review, your Company had adopted the following policies:

(a) Conflict of Interest Policy: To ensure that the employees of the Company are conversant with the concept ‘Conflict of Interest’ and have every opportunity to avoid or deal with such conflicts, your Company has put in place a Conflict of Interest Policy which details out the potential areas of conflicts and provides a mechanism to disclose and report such conflicts.

(b) Information Security Policies:

During the year under review, with an objective to establish sustainable and effective information security practices within the Company, your Company adopted various information security policies based on the ISO 27001 standards.

Your Company also has in place various other policies and manuals such as Investment Policy, Policy for Private Placement of Non-Convertible Debentures (NCDs), Policy for determining Material Subsidiary, Asset Liability Management Policy, Comprehensive Outsourcing Policy and Staff Accountability Policy for ensuring the orderly and efficient conduct of Company’s business.

LISTING OF SHARES OF THE COMPANY

Your Company’s equity shares continue to remain listed on BSE Limited and the National Stock Exchange of India Limited. As per the requirements of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, which came in effect from December 1, 2015, a shortened version of the Uniform Listing Agreement was signed by the Company with both the stock exchanges. Your Company has paid the listing fees as payable to the BSE Limited and the National Stock Exchange of India Limited for the financial year 2016-17 on time.

MARKETING AND BRANDING

Your Company continued to reinforce its overarching vision of ‘transforming lives through financial inclusion’, through strategic marketing and branding initiatives led by the in-house marketing and product team.

During the year, your Company executed product innovations and marketing campaigns. These initiatives received immense customer response, which tripled the Company’s brand score. Your Company launched an integrated media campaign with its brand ambassador Shah Rukh Khan with a refreshed message ‘Say No to Bahanas’ and ‘Own Your Dream Home.’

In its spirit of financial inclusion, your Company launched a one-of-its-kind consumer education initiative. It aimed to educate consumers about various benefits of a home loan. Besides, they were also provided knowledge on how the entire process can be made more simple and convenient. This in turn enabled them to take a well informed decision while buying their dream home. The insights for the infomercials have been drawn from the expertise that your Company enjoys for over three decades of servicing the low and middle-income customers in tier II and III towns. Each infomercial is close to three minutes and is showcased across all digital media. Through this strategic move of imparting knowledge to prospective home buyers, your Company supported the government’s objective of achieving housing for all by 2022.

Your Company has focused on creating strong presence across various social media platforms including Facebook, Twitter, LinkedIn and YouTube to remain connected to customers every time. Besides, there is also a live chat service at its website.

Your Company has enhanced its consumer connect through direct marketing activities. It has emphasised on various tools including spot sanctions, transit media branding, sponsorship events, mall activations, society activations as well as hoardings and billboards. Besides, your Company has engaged through business meetings with channel partners, business associates and retail channel tie-ups. It created visibility and generated customer awareness through direct selling agents (DSAs), online sourcing platform providers, direct sourcing, channel partners, builder tie-ups and advertisements. These initiatives helped the Company to build the brand, increase sales, create relevance at points of purchase and emerge as the point-of-first-recall.

Your Company’s call centre continued to play an important role in business generation for home loans, SME loans, and mortgage loans besides deposit products on the liability side.

AWARDS AND RECOGNITIONS

Your Company has added yet another feather in its cap and kept up its record of displaying commendable performance in the housing finance service sector. It is reflected by the awards won by the Company as recognition at various award forums

The most creative Ad on TV in the Banking, Financial Services and Insurance Sector by INDY’s presented by 94.3 My FM and Start Group endorsed by CMO Asia, for DHFL’s ‘Bahana Campaign’ The 6th CMO Asia Award for excellence in Branding and Marketing Gold in the Asian Customer Engagement Awards for the Ghar Jaisa Loan Campaign The Best Housing Finance Company by BFSI awards presented by ABP News and World HRD Congress and endorsed by Star Group The ‘Top 50 Dream Companies To Work For’ by Times Ascent & World HRD Congress The Best Corporate Brand Award 2015 by Economic Times India’s Most Trusted Brand Award 2015 in the housing finance category The Brand Trust Report India Study 2015 ranked DHFL as India’s Most Trusted Housing Finance Brand in a study covering 19,000 brands across 16 cities India’s 50 Biggest Financial Companies by Business World DHFL ranked 194th in the ET 500 Listing Golden Peacock Innovative Product/Service Award – 2016.

BRANCH NETWORK

To support the Company’s growth initiatives, your Company has established an integrated branch network that has helped it to optimise operational coverage and improve Company’s ability to deliver products and services to its customers effectively. Your Company has a presence at 349 locations throughout India including 182 branches, 146 service centres, 18 circle/cluster offices, 2 disbursement hubs, 1 collection center as at March 31, 2016.

Your Company’s network is grouped into circles and clusters located pan-India. The Company’s distribution network in India is primarily spread over Tier II and Tier III cities and towns. Additionally, your Company has international representative offices located in London and Dubai.

Your Company has also entered into tie-ups with a number of Indian public and private sector banks to provide their customers access to Company’s home loan solutions. Such tie-ups allow the Company to access the banks’ customers and branch networks while providing them with the option to participate in Company’s loan syndication programmes. The Company’s partners include United Bank of India for eastern India, and Dhanlaxmi Bank and Yes Bank Limited for pan-India. The alliance arrangements benefit your Company financially, and the additional points of sales through the ally banks’ networks provide the Company with an increased footprint at minimal cost.

Your Company will be able to explore latent opportunities in the LMI segment to its advantage. Your Company operates primarily in the LMI segment. It targets private salaried persons, public servants, entrepreneurs, traders and other professionals, which are underserved by conventional financial institutions and where significant opportunities for growth are expected. These customers are not targeted by most banks and HFCs due to smaller average loan sizes. Your Company works on evolving techniques to improve credit assessment for this segment, as well as run a pilot funding programme to evaluate behavioral trends and credit performance in such segments, in order to discover latent opportunities within its target segment. Moreover, considering the widespread geographical reach, your Company plans to dig deeper into the target customer base of the geographies and increase its market share in each of these locations.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

On the basis of the recommendation of Nomination & Remuneration Committee, the Board of Directors appointed Dr. Rajiv Kumar [DIN-02385076], as an Additional Director, in the category of Independent Director of the Company, with effect from August 7, 2015, Dr. Rajiv Kumar holds office up to the date of the ensuing annual general meeting. The Company has received a notice from a Member under Section 160 of the Companies Act, 2013, along with a requisite deposit, proposing his candidature for the office of Independent Director, to be appointed as such, at the ensuing annual general meeting. Necessary resolution is being proposed in the notice of the ensuing Annual General Meeting in respect of appointment of Dr. Rajiv Kumar as an Independent Director of the Company, for the approval of the Members of the Company pursuant to Section 149 of the Companies Act, 2013 for a term of 5 consecutive years w.e.f. August 7, 2015.

The term of Mr. Kapil Wadhawan as the Chairman & Managing Director (designated as the ‘Key Managerial Personnel’), which was for a period of 5 years w.e.f. October 4, 2010 expired on October 3, 2015. Pursuant to the approval by the Members of the Company at the 31st Annual General Meeting held on July, 23, 2015, Mr. Kapil Wadhawan, was re-appointed as the Managing Director (designated as Chairman & Managing Director) of the Company and as Key Managerial Personnel, and his office was made liable to retirement by rotation, for a further period of five years w.e.f. October 4, 2015, pursuant to the provisions of the Companies Act, 2013 and rules made there under.

In accordance with the provisions of Section 152 of the Companies Act, 2013 and Articles of Association, Mr. Dheeraj Wadhawan, Non- Executive Director of your Company being the longest in office among Directors who are liable to retire by rotation, retires by rotation and being eligible; offers himself for reappointment at the ensuing Annual General Meeting.

All Independent Directors have given declarations that they meet the criteria of independence, as laid down under Section 149(6) of the Companies Act, 2013 and the provisions of Regulation 16(1)(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

None of the Directors of your Company are related to each other, except for Mr. Dheeraj Wadhawan, Non Executive Director who is the brother of Mr. Kapil Wadhawan, Chairman & Managing Director of the Company. Brief resumes of Directors, proposed to be appointed/ re-appointed, nature of their expertise in specific functional areas and names of other listed companies in which they hold Directorship along with their Membership/ Chairmanship of Committees of the Board as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, are provided in the annexure to the Notice of the Thirty Second Annual General Meeting being sent to the Members along with the Annual Report.

Based on the confirmations received, none of the Directors are disqualified for being appointed/re-appointed as directors in terms of Section 164 the Companies Act, 2013. During the year under review, no stock options were issued to the Directors of the Company.

PERFORMANCE EVALUATION

The provisions of the Companies Act, 2013 mandates formal annual evaluation of the Board of Directors, its committees and individual Directors. Schedule IV of the Companies Act, 2013 also requires the performance evaluation of Chairman & Managing Director and Non Executive Directors and Board as a whole to be carried out at a separate meeting by the Company’s Independent Directors. It also states that performance evaluation of Independent Directors shall be done by the entire Board excluding the Director being evaluated. The provisions of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, also require that the Board shall monitor and review the Board Evaluation Framework. The annual performance evaluation of the Board as a whole, all Directors as well as the evaluation of the Board Committees including Audit Committee, Nomination & Remuneration Committee, Risk Management Committee, Stakeholders’ Relationship Committee, Corporate Social Responsibility Committee and Finance Committee of the Board of Directors of the Company, was carried out. The details of evaluation process as carried out and the evaluation criteria and framework have been explained in the Corporate Governance Report, forming part of this Annual Report.

BOARD MEETINGS

Your Company holds at least four Board meetings in a year, one in each quarter, inter-alia, to review the financial results of the Company. The Company also holds additional Board Meetings to address its specific requirements, as and when required. All the decisions and urgent matters approved by way of circular resolutions are placed and numbered and noted at the subsequent Board meeting. Annual calendar of meetings of the Board are finalised well before the beginning of the financial year after seeking concurrence of all the Directors. During the financial year 2015-16, six (6) Board Meetings were convened and held. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 and the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015. The details of the Board composition, its meetings held during the year along with the attendance of the respective Directors thereat are set out in the Corporate Governance Report forming part of this Annual Report.

Board Committees

Your Company has a duly constituted Audit Committee as per the provisions of Section 177 of Companies Act, 2013 and provisions of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Board of Directors has constituted five other committees namely – Nomination and Remuneration Committee, Stakeholders’ Relationship Committee, Risk Management Committee, Finance Committee and Corporate Social Responsibility Committee which enables the Board to deal with specific areas / activities that need a closer review and to have an appropriate structure to assist in the discharge of their responsibilities.

The Board of Directors also constituted two committees with specific objectives, namely - Sub-Committee for Investment in Mutual Fund Sector (which was dissolved by the Board on May 4, 2016) and Allotment Committee (comprising of Independent Directors) for Allotment of Warrants convertible into equivalent number of Equity Shares of Rs. 10/- each, to the Promoter Group Entity. The details of the composition of the Audit Committee along with that of the other Board committees and their respective terms of reference are included in the Corporate Governance Report forming part of this Annual Report.

The Audit Committee and other Board Committees meet at regular intervals and ensure to perform the duties and functions as entrusted upon them by the Board. The details of the Audit Committee and other Board Committees are also set out in the Corporate Governance Report forming part of this Annual Report.

RELATED PARTY TRANSACTIONS

There were no materially significant related party transactions i.e. transactions of material nature, with its promoters, directors or senior management or their relatives etc., that may have potential conflict with the interest of company at large. Transactions entered with related parties, as defined under the Companies Act, 2013 and provisions of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 during the financial year 2015-16 were mainly in the ordinary course of business and on an arm’s length basis.

Prior approval of the Audit Committee is obtained by the Company before entering into any related party transaction as per the applicable provisions of Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. As per the provisions of Section 188 of the Companies Act, 2013, approval of the Board of Directors is also obtained for entering into related party transactions by the Company. A quarterly update is also given to the Audit committee and the Board of Directors on the Related Party Transactions undertaken by the Company for their review and consideration.

During the year, your Company has not entered into any material contract, arrangement or transaction with related parties, as defined under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Related Party Transaction Policy of the Company. The details with respect to the related party transactions are mentioned in the notes to the audited (standalone) financial statements.

The Policy on Related Party Transactions as approved by the Board is uploaded on the Company’s website. None of the Directors have any pecuniary relationships or transactions vis-à-vis the Company.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATOR OR COURT OR TRIBUNALS

There were no significant and material orders passed by any Regulator or Court or Tribunal, which would impact the going concern status of the Company and its future operations

INTERNAL AUDIT & INTERNAL FINANCIAL CONTROL AND ITS ADEQUACY

Your Company has an Internal Audit Department, headed by a senior management personnel, who reports to the Audit Committee of the Board of Directors of the Company, conducts comprehensive audit of functional areas and operations of the Company to examine the adequacy of and compliance with policies, procedures, statutory and regulatory requirements. Significant audit observations and follow up actions thereon are reported to the Audit Committee. The Audit Committee reviews adequacy and effectiveness of the Company’s internal control environment and monitors the implementation of audit recommendations.

The audit function maintains its independence and objectivity while carrying out assignments. It evaluates on a continuous basis, the adequacy and effectiveness of internal control mechanism. The function also proactively recommends improvement in policies and processes, suggests streamlining of controls against various risks

Your Company has also engaged practicing chartered accountant firms to conduct concurrent audit in branches covering more than 80% of the business during the financial year. Concurrent audit assesses and evaluates the operational effectiveness of checks and balances on a continuous basis with focus on regulatory guidelines and adherence to internal policies, procedures and guidelines issued by management from time to time.

Your Company has laid down set of standards, processes and structure, which enables it to implement internal financial control across the Company and ensure that the same are adequate and operating effectively.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company had appointed Mrs. Jayshree S. Joshi Proprietress of M/s Jayshree Dagli & Associates, Practicing Company Secretaries, Mumbai, to undertake the Secretarial Audit of the Company for the financial year 2015-16. The Secretarial Audit Report for the financial year ended March 31, 2016, is annexed as ‘Annexure – 5’ to this report. The said report does not contain any qualification, reservation or adverse remark.

STATUTORY AUDITORS

M/s. T. R. Chadha & Co. LLP (FRN 06711N/N500028) Chartered Accountants and M/s Rajendra Neeti & Associates (FRN 06543C), Chartered Accountants, the Joint Statutory Auditors have not offered themselves to continue as Joint Statutory Auditors of the Company in view of their pre-occupation with other work. The Board places on record its appreciation for the services rendered by them during their tenure with the Company.

Based on the recommendation of the Audit Committee, the Board of Directors, at their meeting held on May 4, 2016, have appointed M/s. Chaturvedi & Shah (FRN 101720W), as the Statutory Auditors of the Company, subject to the approval by the Members of the Company in the Company’s ensuing annual general meeting. M/s. Chaturvedi & Shah shall hold office for the first term of five years, from the conclusion of the 32nd Annual General Meeting until the conclusion of the 37th Annual General Meeting of the Company (subject to ratification of their appointment by the Members at every subsequent Annual General Meeting). The proposal for their appointment as Statutory Auditors of the Company is included in the Notice of the ensuing annual general meeting for approval of the Members of the Company. M/s. Chaturvedi & Shah has furnished written consent and a confirmation to the effect that they are not disqualified to be appointed as the Statutory Auditors of the Company in terms of the provisions of Companies Act, 2013 and Rules framed thereunder. In terms of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, they have confirmed that they hold a valid certificate issued by the Peer Review Board of the ICAI.

Notes to Accounts and Auditor’s Report

The notes to the accounts referred to in Auditor’s Report are self-explanatory and do not call for any further comments. The Joint Statutory Auditor’s Report on the financial statements for the financial year 2015-16 does not contain any qualification, reservation or adverse remark.

DIRECTORS’ RESPONSIBILITY STATEMENT

Your Directors would like to inform that the audited financial statements for the year ended March 31, 2016 are in conformity with the requirements of the Companies Act, 2013 and they believe that the financial statements reflect fairly the form and substance of transactions carried out during the year and reasonably present the Company’s financial condition and results of operations.

These Financial Statements are audited by M/s. T. R. Chadha & Co.LLP, Chartered Accountants together with M/s. Rajendra Neeti & Associates, Chartered Accountants, the Joint Statutory Auditors of the Company. Pursuant to the provisions of Section 134(5) of the Companies Act, 2013, it is hereby confirmed that :

(a) in the preparation of the annual accounts for the year ended March 31, 2016, the applicable Accounting Standards had been followed along with proper explanation relating to material departures,

(b) the Directors had selected such Accounting Policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at March 31, 2016 and of the profit of the Company for that period;

(c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the Directors had prepared the annual financial statements on a going concern basis;

(e) the Directors had laid down Internal Financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

(f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.  

REPORT ON CORPORATE GOVERNANCE & MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, a separate section titled ‘Report on Corporate Governance’ and ‘Management Discussion and Analysis’  forms part of this Annual Report.

The Report on Corporate Governance also includes certain disclosures that are required, as per Companies Act, 2013. The certificate by the Joint Statutory Auditors confirming compliance with the conditions of Corporate Governance as stipulated in Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed as ‘Annexure 6’ to this report. The said certificate for financial year 2015-16 does not contain any qualification, reservation or adverse remark.

EXTRACT OF ANNUAL RETURN

Pursuant to Section 134(3)(a) and Section 92(3) of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014, the extract of the Annual Return as at March 31, 2016, in the prescribed form MGT 9, forms part of this report and is annexed as ‘Annexure – 7’.

OUTLOOK

During the year, Indian economy continued to consolidate the gains achieved through macroeconomic stability. The country remained on a stable growth path on the back of sharp reduction in crude oil prices and resilient domestic consumption. Besides, inflation remained under control and fiscal and current account deficits continued to be moderate. The policy initiatives taken by the government in recent times have yielded positive results. India’s gross domestic product (GDP) at factor cost is INR 113.5 trillion, as against INR 105.5 trillion in 2014-15, registering a growth rate of 7.6%. This significant growth has made India one of the fastest growing major economies in the world. The y-o-y inflation for the WPI Index was at -0.9% in March 2016. CPI inflation is projected to moderate in 2016-17 to around 5%.

The Reserve Bank of India (RBI) reduced interest rates two times this year as inflation eased sharply. This has improved sentiments and has paved the way for further investments, supporting the country’s economic progress. Amid global uncertainties, IMF has projected Indian economy to grow at 7-7.75% during FY 2016-17. The Economic Survey 2015-16 has also forecasted that the Indian economy will grow by more than 7% for the third successive year 2016-17 and can start growing at 8% or more in next two years.

The real estate sector is directly linked to the economic performance. Therefore, it is expected to get the benefits of India’s strong economic growth. Factors like urbanisation, rising income level; young population and growing number of nuclear families will drive this growth. Moreover, strong expected growth in the manufacturing and service sector will also contribute to this. The government agenda of Housing for All by 2022 and 100 smart cities is expected to give a big boost to the real estate sector and consequently, to the housing finance. The size of real estate market is expected to increase fivefold to reach USD 676 billion by 2025. The share of real estate sector in national GDP is projected to touch 13% by 2028. The ‘Make in India’ Vision of Government of India is expected to further spur the credit growth.

The government policies on affordable housing and affordable housing finance, coupled with favorable macroeconomic indicators are expected to be positive indicators for the Company. The policies would primarily benefit the lower and middle-income (LMI) segment groups coupled with the growth of smaller towns and cities. Your Company believes that its rich experience in working with the LMI segment will provide it with a significant competitive advantage. Hence, your Company expects another year of healthy growth in 2016-17.

ACKNOWLEDGEMENTS

Your Directors wish to place on record their gratitude to the National Housing Bank, Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India, Ministry of Corporate Affairs, Registrar of Companies, Financial Intelligence Unit (India), the Company’s Customers, Bankers and other Lenders, Members, Debenture holders, Trustees, Depositors and others for their continued support and faith reposed in the Company. The Board also places on record its deep appreciation for the dedication and commitment of the employees at all levels as their hard work, co-operation and support had enabled the Company to maintain its consistent growth. The Directors would also like to thank the BSE Limited, the National Stock Exchange of India Limited, National Securities Depository Limited, Central Depository Services (India) Limited and the Credit Rating Agencies for their continued co-operation.

For and on behalf of the Board

Kapil Wadhawan

Chairman & Managing Director

(DIN-00028528)

Place : Mumbai

Date : May 4, 2016