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Updated:19 Jul, 2019, 15:44 PM IST

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Updated:19 Jul, 2019, 15:44 PM IST

Disclosure in auditor’s report explanatory

INDEPENDENT AUDITOR’S REPORT

 

To the Members of

 

HOUSING & URBAN DEVELOPMENT CORPORATION LIMITED

 

Report on the Financial Statements:            

1.    We have audited the accompanying financial statements of Housing & Urban Development Corporation Limited (the “Company”), which comprise the Balance Sheet as at 31st March,2014, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

 

Management’s Responsibility for the Financial Statements

2.    The company’s management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the company in accordance with the Accounting Standards referred to in sub–section (3C) of section 211 of the Companies Act, 1956 (the “Act”) and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

 

Auditors’ Responsibility

3.    Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those standards require that we comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

4.    An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control relevant to the company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements.

 

5.    We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.

 

BASIS FOR QUALIFIED OPINION

6.       During the year, the company has utilized a sum of Rs. 160 Crore out of the excess provision of Rs. 380 Crore held beyond the NHB norms,  for Non Performing Assets as at the end of the previous year ending 31.03.2013. As a result, the ad–hoc provision for non performing assets beyond NHB norms stood at Rs. 220 Crore as at 31st March, 2014. Consequently, the profit for the year is higher by Rs. 160 Crore. [Refer Point 3(b) of Note 24].

 

7.       The company is accounting for application fees, front–end–fee, administrative fees and processing fees on loans on realization basis instead of accounting for on accrual basis, the effect of which has not been ascertained [Refer Significant Accounting Policy 2(b) of Note 1].

 

QUALIFIED OPINION

8.     In our opinion and to the best of our information and according to the explanations given to us, except for the matter described in the paragraphs of Basis for Qualified Opinion, the said accounts read together with theSignificant Accounting Policies and Notes to Accounts give the information required by the Companies Act, 1956, in the manner so required and 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 Company as at 31st  March, 2014;

ii)       in the case of the Statement of Profit and Loss, of the profit of the Company for  the year ended on that date, and

iii)    in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

MATTERs OF EMPHASIS

9.     We draw attention to the following:

i)     Some of the balances of loan accounts are subject to confirmation/reconciliation. [Refer Point 3(a) of Note 24]

ii)   In respect of disputes relating to Andrews Ganj Project undertaken by the company on behalf of the Ministry of Urban Development, the ministry has intimated the company that it cannot pass on the financial liability to the Government Account on account of various disputes. The company, on its part, has refused to accept any liability on account of disputes. We are unable to comment upon the financial implication, if any. [Refer Point 2(b) of Note 24].

iii)    Further, as indicated in Point 2(b) of Note 24, the company, as per the board resolution passed in the year 2009, has charged interest amounting to Rs. 22.53 Crore (Rs.20.57 Crore  for the previous year ending 31st March, 2013) for the year ended 31st March, 2014. The same has been shown under the head “Other Income – interest on construction project”.  The balance outstanding as at the end of the year is Rs. 271.27 Crore (debit) in “HUDCO AGP Account”. The same has been informed to the concerned ministry but specific confirmation from the ministry is awaited.

iv)     In view of revised guidelines issued by the Department of Public Enterprises (DPE) on Corporate Social Responsibility (CSR) and Sustainability effective from 01.04.2013, the company has formulated a CSR and Sustainability policy and accordingly has charged the CSR and Sustainability budget amount of the current financial year to Profit & Loss Account. The company, in line with the revised guidelines and policy, has also reversed the opening balance of CSR and SD reserve created by it in earlier years by debiting the same to Profit & Loss Account (through prior period) amounting to Rs. 20.29 Crore and has created a provision for the similar amount. [Refer Point No.23 (a)of Note 24].

 

10.  Our Opinion is not qualified in respect of Matters of Emphasis.

 

11.  We further report that, without considering the observations made in paragraph 7, the effect of which has not been ascertained and after considering the impact of paragraph 6, the Profit for the year would have been Rs 566.34 Crore (as against the reported figure of Rs.726.34 Crore) and Reserves & Surplus would have been Rs.4961.43 Crore (as against the reported figure of Rs.5121.43 Crore).

 

Report on Other Legal and Regulatory Requirements

 

12.  As required by the Companies (Auditor’s Report) Order, 2003, as amended by ‘the Companies (Auditor’s Report) (Amendment) Order 2004’, issued by the Central Government of India in terms of sub–section (4A) of section 227 of the Act (hereinafter referred to as the “Order”), and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us , we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

 

13.  As required by Section 227(3) of the Act, We report that:

 

i)         We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

ii)       In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

iii)      The Balance Sheet, Statement of Profit & Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account;

iv)     In our opinion, the Balance Sheet, Statement of Profit & Loss and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub–section (3C) of Section 211 of the Companies Act, 1956, except Accounting Standard (AS) 9 “Revenue Recognition” regarding accounting of application fees, front–end–fees, administration fees and processing fees on loans on realisation basis instead of accrual basis. [Refer Significant Accounting Policy 2 (b) of Note 1].

v)       The company being a Government company, clause (g) of sub–section (1) of section 274 of the Companies Act, 1956 regarding obtaining written representation from the directors of the company is not applicable to the company, in terms of notification no. GSR–829(E) dated 21.10.2003.

 

 

NHB DIRECTIVES

 

14.  The Company is complying with National Housing Bank’s credit concentration norms in respect of loans to Private Sector Agencies. However, in case of loans to State Governments / State Governments agencies, the said norms have been relaxed to HUDCO by NHB vide letter no. NHB/ND/HFC/DRS/3792/2011 dated April 5th 2011; the same is complied with except in case of the investment in equity share of HFC i.e. Indbank Housing Limited more than 15% of the equity capital of the investee company as prescribed limit, which was invested in the financial year 1990–91. [Refer Point 7(iv) of Note 24]

                                                                             

For DHAWAN & CO

Chartered Accountants

Firm Regn. No. 002864N

       Sd/–                                 

 Prakash N. Mathur

(Partner)

M. No. 086292

 

Place of Signature: New Delhi                                                                           Date: July 30, 2014

Disclosure in auditors report relating to fixed assets

i)            (a)  The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b)                    As per information and explanations given to us, all the fixed assets were physically verified by the Company during the year. No material discrepancies were noticed on such verification.

(c)                    According to the information and explanations given to us, the Company has not disposed off a substantial part of its fixed assets during the year.

Disclosure relating to quantitative details of fixed assets

i)            (a)  The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

Disclosure relating to physical verification and material discrepancies of fixed assets

(b)        As per information and explanations given to us, all the fixed assets were physically verified by the Company during the year. No material discrepancies were noticed on such verification.

Disclosure relating to fixed assets disposed off

(b)                    According to the information and explanations given to us, the Company has not disposed off a substantial part of its fixed assets during the year.

Disclosure in auditors report relating to inventories

i)            The Company does not have any inventory. Therefore, the provisions of clause 4 (ii) (a), (b) & (c) of the Order, are not applicable.

Disclosure of physical verification of inventories at fixed intervals

i)            The Company does not have any inventory. Therefore, the provisions of clause 4 (ii) (a), (b) & (c) of the Order, are not applicable.

Disclosure of procedure followed for physical verification of inventories

i)            The Company does not have any inventory. Therefore, the provisions of clause 4 (ii) (a), (b) & (c) of the Order, are not applicable.

Disclosure about maintenance of inventory records and material discrepancies

i)            The Company does not have any inventory. Therefore, the provisions of clause 4 (ii) (a), (b) & (c) of the Order, are not applicable.

Disclosure in auditors report relating to loans

i)            a)      According to the information and explanation given to us, the company has granted a loan to its director (year end balance Rs. 0.03 Crore) (Maximum Outstanding during the year Rs. 0.04 Crore), covered in the register maintained under section 301 of the Companies Act, 1956. Other than the above, the Company has not granted any loans, secured or unsecured to companies, firms or parties covered in the register maintained under section 301 of the Act.

 

b)      In our opinion, the rate of interest and other terms and conditions of loans granted by the company to parties listed in the register maintained under section 301 of the Companies Act, 1956, secured or unsecured, are prima facie not prejudicial to the interest of the company.

 

c)       In the case of the loans granted to director listed in the register maintained under section 301 of the Act, the borrower has been regular in the payment of the interest as stipulated.

 

d)      There are no overdue amounts of more than rupees one lakh in respect of the loan granted to a body corporate or parties listed in the register maintained under section 301 of the Act.

 

e)       The company has not taken any secured or unsecured loans from the companies, firms or parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii)(e) to 4(iii)(g) of the Order are not applicable.

Disclosure about loans granted or taken by parties covered under section 301 of companies act

i)            a)      According to the information and explanation given to us, the company has granted a loan to its director (year end balance Rs. 0.03 Crore) (Maximum Outstanding during the year Rs. 0.04 Crore), covered in the register maintained under section 301 of the Companies Act, 1956. Other than the above, the Company has not granted any loans, secured or unsecured to companies, firms or parties covered in the register maintained under section 301 of the Act.

Disclosure regarding terms and conditions of loans granted or taken

b)      In our opinion, the rate of interest and other terms and conditions of loans granted by the company to parties listed in the register maintained under section 301 of the Companies Act, 1956, secured or unsecured, are prima facie not prejudicial to the interest of the company.

Disclosure regarding terms of payment of loans granted or taken

c)       In the case of the loans granted to director listed in the register maintained under section 301 of the Act, the borrower has been regular in the payment of the interest as stipulated.

 

d)      There are no overdue amounts of more than rupees one lakh in respect of the loan granted to a body corporate or parties listed in the register maintained under section 301 of the Act.

Disclosure regarding terms of recovery of loans granted or taken

e)       The company has not taken any secured or unsecured loans from the companies, firms or parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii)(e) to 4(iii)(g) of the Order are not applicable.

Disclosure in auditors report relating to internal control system

i)            In our opinion and according to the information and explanations given to us, there are generally adequate internal control procedures commensurate with the size of the Company and nature of its business with regard to purchase of fixed assets. The Company’s operations do not involve purchase of inventory and sale of goods. In our opinion, monitoring mechanism in regional offices regarding loan schedule implementation, site inspection, reviewing of financial/ technical appraisal of the schemes and non–receipt of utilization certificates in respect of various grants and subsidies needs to be further strengthened.

Disclosure in auditors report relating to contracts and arrangements under section 301 of companies act

i)            According to the information and explanations given to us, we are of the opinion that there are no transactions that need to be entered in the register required to be maintained under section 301 of the Companies Act, 1956.

Disclosure relating to presence of register for necessary transactions

i)            According to the information and explanations given to us, we are of the opinion that there are no transactions that need to be entered in the register required to be maintained under section 301 of the Companies Act, 1956.

Disclosure relating to reasonability of transactions

i)            According to the information and explanations given to us, we are of the opinion that there are no transactions that need to be entered in the register required to be maintained under section 301 of the Companies Act, 1956.

Disclosure in auditors report relating to deposits accepted from public

i)            In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Section 58A and 58AA and other relevant provisions of the Companies Act, 1956, the Companies (Acceptance of Deposits) Rules, 1975 and Housing Finance Companies (NHB) Directions with regard to deposits accepted from the public.  No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or NHB or any Court or any other Tribunal on the Company in respect of the aforesaid deposits.

Disclosure in auditors report relating to companies internal audit system

i)           According to the information and explanations given to us, the company has an internal audit system; however, to make it commensurate with size and nature of its business, it requires to be further strengthened.In our opinion, the coverage of internal audit should be enlarged.

Disclosure in auditors report relating to maintenance of cost records

i)            According to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records under Section 209(1) (d) of the Companies Act, 1956.

 

Disclosure in auditors report relating to statutory dues

i)            (a) According to the information and explanations given to us and according to the records produced before us for verification, the Company is generally regular in depositing, with appropriate authorities, the undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Income Tax, Wealth Tax, Service Tax and any other material statutory dues applicable to it.

 

Further, since no rules relating to the amount of cess for rehabilitation or revival or protection of assets of sick industrial companies, payable by a company under section 441A of the Act have been notified by the Central Government. Thus, it would not be possible for us to comment on the regularity or otherwise about the cess till the time relevant rules or regulations are issued.

 

(b)                   According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Service Tax and any other statutory dues were in arrears as at 31st March 2014 for a period of more than six months from the date they became payable.

 

(c)                   According to the information and explanations given to us, there are no dues of income tax, wealth tax and Service Tax which have not been deposited on account of any dispute except the following:

 

Name of

the statue

Nature  Of

Dues

Financial Year to which the matter  pertains

Forum where

Matter is pending

Amount

(Rs. in Crores)

Income Tax Act, 1961

Income Tax, Interest & Penalty

1996–1997,

1999–2000,

2000–2001,

2001–2002,

2004–2005,

2006–2007,

2007–2008,

2008–2009,

2009–2010,

2010–2011

Deputy Commissioner of Income Tax, CIT(A),ITAT

298.84

Finance Act, 1994

Service Tax, Interest & Penalty

2004–2005,

2005–2006,

2006–2007,

2007–2008,

2008–2009,

2009–2010,

2010–2011

Commissioner of Service Tax

2.95

 

Disclosure relating to regularity in payment of undisputed statutory dues

(b)                   According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Service Tax and any other statutory dues were in arrears as at 31st March 2014 for a period of more than six months from the date they became payable.

 

Disclosure relating to disputed statutory dues

(b)                   According to the information and explanations given to us, there are no dues of income tax, wealth tax and Service Tax which have not been deposited on account of any dispute except the following:

 

Name of

the statue

Nature  Of

Dues

Financial Year to which the matter  pertains

Forum where

Matter is pending

Amount

(Rs. in Crores)

Income Tax Act, 1961

Income Tax, Interest & Penalty

1996–1997,

1999–2000,

2000–2001,

2001–2002,

2004–2005,

2006–2007,

2007–2008,

2008–2009,

2009–2010,

2010–2011

Deputy Commissioner of Income Tax, CIT(A),ITAT

298.84

Finance Act, 1994

Service Tax, Interest & Penalty

2004–2005,

2005–2006,

2006–2007,

2007–2008,

2008–2009,

2009–2010,

2010–2011

Commissioner of Service Tax

2.95

 

Disclosure in auditors report relating to accumulated losses

i)      The Company has no accumulated losses as at 31st March, 2014 and it has not incurred any cash losses during the financial year covered by our audit or in the immediately preceding financial year. 

Disclosure in auditors report relating to default in repayment of financial dues

i)      In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

 

Disclosure in auditors report relating to loans and advances granted by way of pledge of shares debentures and other securities

i)      According to the information and explanations given to us, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.  Therefore, the provisions of clause 4(xii) of the Order are not applicable.  

Disclosure in auditors report relating to provisions under special statute

i)      In our opinion, the Company is not a Chit Fund or Nidhi /Mutual Benefit Fund/Society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable.

Disclosure relating to net owned fund to deposit liability ratio

i)      In our opinion, the Company is not a Chit Fund or Nidhi /Mutual Benefit Fund/Society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable.

Disclosure relating to income recognition and provisioning against assets

i)      In our opinion, the Company is not a Chit Fund or Nidhi /Mutual Benefit Fund/Society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable.

Disclosure relating to credit appraisal procedure

i)      In our opinion, the Company is not a Chit Fund or Nidhi /Mutual Benefit Fund/Society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable.

Disclosure relating to repayment schedule and procedure of recovery

i)      In our opinion, the Company is not a Chit Fund or Nidhi /Mutual Benefit Fund/Society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable.

Disclosure in auditors report relating to adequacy of records maintained by share trading companies

i)      In our opinion the Company is not dealing or trading in shares, securities, debentures or other investments. Therefore, the provisions of clause 4 (xiv) of the Order are not applicable.

 

Disclosure in auditors report relating to guarantee given

i)      The Company has not given any guarantees for loans taken by others from banks or financial institutions. Therefore, the provisions of clause 4(xv) of the Order are not applicable.

 

Disclosure in auditors report relating to term loans used for purpose other than for purpose they were raised

i)         According to the information and explanations given to us, the term loans have been applied for the purpose for which they were raised.

 

Disclosure in auditors report relating to nature and amount of fund raised for short–term has been used for long–term or vice versa

i)         According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that, prima facie, no funds raised on short–term basis have been used for long– term investment.

 

Disclosure in auditors report relating to preferential allotment of shares

i)         According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

 

Disclosure in auditors report relating to securities created against debentures issued

i)         According to the information and explanations given to us, the Company has not issued any debentures, during the year. Therefore, the provisions of clause 4(xix) of the Order are not applicable.  

 

Disclosure in auditors report relating to any material fraud reported during period

i)         To the best of our knowledge and belief and according to the information and explanations given to us, no material fraud on or by the Company was noticed or reported during the year, although there have been eleven instances of loans becoming doubtful of recovery consequent upon fraudulent misrepresentation by borrowers amounting to Rs. 29.54 Crores. The legal proceedings are under progress. However the amounts are not material in the context of the size of the Company and the nature of its business and which have been provided for to the extent of Rs. 27.28 Crores.

 

For DHAWAN & CO

Chartered Accountants

F.R.N. 002864N

        Sd/–                                                                                                                                               

(Prakash N Mathur)

Partner

M. No. 086292

 

Place of Signature: New Delhi                                                                                           Date: July 30, 2014

Disclosure in auditors report relating to purpose and end use of money raised through public issues

i)         The Company has raised funds of Rs.4796.32 Crore through Public Issue of tax free bonds, which are to be utilized towards lending purposes, augmenting the resource base of the Company and other operational requirements. The position of utilization, as on 31.03.14, of issue proceeds transferred to Company’s current account on 31.03.2014 is as under:

(Rs. in crore)

(A)

Total Issue proceeds – Secured Tax–free Bonds

Tranche–I

Tranche–II

Tranche III

 

2370.000

2153.393

272.93

 

Grand Total

4796.325

(B)

Utilized towards lending purposes, augmenting the resource base of the Company and other operational requirements during the period.

4737.695

(C)

Utilized towards Debt Servicing, statutory payments, establishment and administrative expenses and other working capital requirements of our company.

58.639

 

Grand Total (B)+(C)

4796.324

 

 

 

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