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Your Directors have pleasure in presenting the Tenth Annual Report together with the audited statement of accounts of the Company for the financial year ended March 31, 2015
FINANCIAL AND OPERATIONAL HIGHLIGHTS Rating Upgrades
• In the first half of the year IBHFL was upgraded by all the four rating agencies that rate the company.
• IBHFL is rated AAA by CARE Ratings and Brickwork Ratings.
• IBHFL is rated AA+ by Crisil, a Standard & Poor's company, and ICRA, an associate of Moody's Investor Service.
• In FY 2014–15, we also got a short term rating from India Ratings, a Fitch group company, at the highest A1 + level. We are thus rated by all five rating agencies in India.
• Assets continue to grow steadily on back of long–term, low–risk mortgage loans. The total Assets under Management stood at Rs. 52,235 Crore, up 27% from Rs. 41,169 Crore.
• Outstanding securitized loan book was Rs. 6,195 Crore at the end of FY 2014–15 (previous year Rs 5,724 Crore), on which a spread of 3.4% p.a. is to be earned over the life of the loan.
• 76% of the loan assets are mortgage loans.
• Home loans, which form the majority of incremental disbursals, are disbursed at an average ticket size of Rs. 24 lacs and at average LTV of 71% at origination.
• Loans against property are disbursed at an average ticket size of Rs. 68 lacs and at an average LTV of 49% at origination.
• The loan profiles of both the home loans and loans against property are conservative. The loans are monthly amortizing, secured against mortgage on the property financed and are given out at moderate LTV levels.
• 82% of retail mortgage loans, consisting of the above home loans and loans against property are sourced in–house.
Home Loans: Streamlined Loan Fulfillment
• In FY 2015, the ISO certification (ISO 9001:2008) awarded to the Company's document management system was reaffirmed.
• The Company has a well–trained, in–house Direct Sales' Team of over 2000 people to promptly attend to prospective customers.
Improving Liability Profile
• In keeping with its stated strategy, the Company continues to maintain healthy levels of liquidity with cash and bank balances and current investments adding up to Rs. 9,631 Cr at the end of FY 14–15.
• During the FY 14–15 the company raised USD 200 mn through ECB, drawing down the complete RBI approved limit.
• Funds raised through bonds constituted 31% of the Company's incremental borrowings in FY 14–15.
• The Company has further reduced its reliance on short–term borrowings from commercial paper to 7%.
Diversified Borrowing Program
• Amongst its lenders, the Company now counts 132 strong relationships: 26 PSU banks, 17 Private and Foreign banks and 89 Mutual Funds, Provident Funds, Pension Funds, Insurance Companies and others.
Optimally Matched Balance Sheet
• The assets and liabilities have been optimally matched with no mismatch till 5 years.
• The maturity profile reflects adjustments for prepayments and renewals in accordance with the guidelines issued by National Housing Bank.
Stable Asset Quality
• Gross non–performing loans as at March 31, 2015 amounted to Rs. 442.8 Cr. This is equivalent to 0.85% of the portfolio.
• Net non–performing loans as at March 31, 2015 amounted to Rs. 185.9 Cr. This is equivalent to 0.36% of the portfolio.
• The company has a prudent approach to creating loan provisions and carries total provisions, across standard assets provision and sub–standard asset provisions of Rs. 615.5 Cr. These total provisions are Rs. 221 Cr above the regulatory requirements.
• The Company has been successful in maintaining stable, low levels of NPA as low–risk mortgage portfolio increases the asset base, while contributing very low incremental delinquencies.
• Moderate levels of LTV and emphasis on borrower cash flow stability during loan appraisal have ensured that the credit quality in loans against property portfolio also remains high.
• An experienced underwriting team and the in–house sourcing and collection teams ensure control over loan sourcing, credit appraisal and portfolio management.
As at March 31, 2015, the Company's outstanding bank loans stood at Rs. 28,138 crs (excluding the USD 200 mn of External Commercial Borrowing (ECB) availed during the financial year from various financial institutions) vis–a–vis Rs. 21,710 crs as at March 31, 2014. The Company's bank borrowings continue to enjoy a rating of AAA, signifying high degree of safety for timely servicing of debt obligations.
Non–Convertible Debentures (NCD) and Commercial Paper (CP)
As at March 31, 2015, the Company's outstanding secured NCDs stood at Rs. 13,548 crs vis–a–vis Rs. 9,460 crs as at March 31, 2014. The Company's secured NCDs have been listed on the Wholesale Debt Market segment of NSE / BSE and have been assigned 'AAA' rating from both CARE and Brickwork Ratings and 'AA+' from CRISIL.
As at March 31, 2015, the Company's outstanding subordinated debt and perpetual debt stood at Rs. 980 and 100 Cr. The debt is subordinate to present and future senior indebtedness of the Company and has been assigned the 'AA+' and 'AAA' rating by CARE and Brickworks Ratings respectively. Based on the balance term to maturity, as at March 31, 2015, Rs. 995.62 Cr of the book value of subordinated and perpetual debt is considered as Tier II under the guidelines issued by the Reserve Bank of India (RBI) and National Housing Bank (NHB) for the purpose of capital adequacy computation.
There are no NCDs which have not been claimed by the investors or not paid by the Company after the date on which the NCD became due for redemption.
The company's outstanding commercial paper stood at Rs. 3,207 crs as at March 31,2015. The commercial paper program of the company enjoys a rating of A1+ signifying highest degree of safety for timely servicing of debt obligations.
Regulatory Guidelines / Amendments
The Company has complied with directions from the RBI and the NHB regarding Accounting Standards, Prudential norms for asset classification, income recognition, provisioning, capital adequacy and credit rating.
Risk Management Framework
The Company has a Risk Management Frame work that provides guidelines and standard practices for risk assessment and mitigation. The Risk Management Committee (RMC) of the Company comprises of members of its senior management team, who have many years of experience in the industry and have put in place preventive mechanisms to contain various risks. The RMC met multiple times during the year ending 31 March 2015 and kept an active watch on the emergent risks the Company was exposed to. The RMC put in place or enhanced the control measures to contain these risks. The Company has a robust mechanism to ensure an ongoing review of systems, policies, processes and procedures to contain and mitigate risk that arise from time to time.
Codes and Standards
The Fair Practices Code (FPC) recommended by sector regulator, the National Housing Bank (NHB) as well as the RBI seek to promote good and fair practices by setting minimum standards in dealing with customers while doing lending business. The NHB has also issued comprehensive Know Your Customer (KYC) Guidelines and Anti Money Laundering Standards in the context of recommendations made by the Financial Action Task Force on Anti Money Laundering Standards.
Marketing and Distribution
The Company has taken a number of initiatives through the financial year 2014–15 to enhance brand awareness and to reach out to a greater number of customers. The company launched a 360 degree campaign –'Celebrating the spirit of the Hardworking Indian' across mediums including television, print and digital. The campaign was well received by the potential customers and other stakeholders. Further to capitalize on the ever growing utility of digital media and social networking, the company enhanced its visibility and reach by associating with digital partners, presence on websites, social media and the use of email marketing. The company further participated in more than 40 property/consumer expos along with organizing 'Aawas' the Indiabulls budget property show.
Cross Selling and Distribution of Financial Products and Services
The financial year 2014–15, saw the Company further expanding its branch network, and widen its reach on the community. The Company now has 220 branches spread across 18 states. State of the art Customer Care set up helps speedy resolution of customer queries and promptly attends to any loan requirements. Survey calling, where feedback is taken from existing and new customers also helps in continuous process improvement and generation of new leads.
Training and Human Resource Management
The Company aims to build a team of dedicated employees who work with passion and a sense of belonging and play a defining role in accelerating the Company's growth.
Trainings for more than 4900 employees were conducted in the last financial year covering various aspects such as sales excellence, customer service, data analysis, credit risk analysis, etc. We have a state of the art facility spread over 11,000 sq.ft. at our corporate office at Parel, Mumbai, where periodic training sessions are organized by the Training Department.
In keeping with the Company's policy of rewarding its shareholders, the Board of Directors of the Company, had, for the year 2014–15, declared three interim dividends aggregating to Rs. 26/– per share on shares of face value Rs. 2/– each (Rs. 8/– for the quarter ended June 30, 2014, Rs.9/–for the quarter ended September 30, 2014 and Rs.9/– for the quarter ended December 31, 2014), with the total outflow of Rs. 1,053.01 Cr (inclusive of Corporate Dividend Tax).
The Board of Directors of the Company, had, in its meeting held on April 24, 2015, declared an interim dividend of Rs. 9/–per share of face value of Rs. 2/– each, for the Financial Year 2015–16. Further, the Board of Directors of the Company, had, in its meeting held on July 21, 2015, declared second interim dividend of Rs. 9/– per share of face value of Rs. 2/–each, for the Financial Year 2015–16.
During the year, the unclaimed dividend pertaining to the financial year ended March 31, 2008, got transferred to Investor Education and Protection Fund after giving due notice to the members.
To impart greater focus and undivided accountability at the leadership level and to rationalize operations of the diverse businesses of the Indiabulls group, so as to put the Company firmly on the growth path, the promoters, during the year under review, had mutually decided to reorganize the management control of different group companies amongst themselves. As part of the restructuring, Mr. Sameer Gehlaut, Chairman of the Company and the entities promoted by him, namely, Orthia Land Development Private Limited, Orthia Developers Private Limited, Cleta Properties Private Limited, Cleta Buildtech Private Limited, Inuus Infrastructure Private Limited and Inuus Land Development Private Limited have continued as Promoters / Promoter Group / PACs with the promoters of the Company.
Further, with effect from July 18, 2014, Mr. Rajiv Rattan and the entities promoted by him, namely, Priapus Properties Private Limited, Priapus Real Estate Private Limited, Priapus Developers Private Limited, Priapus Constructions Private Limited and Mr. Saurabh Kumar Mittal and the entities promoted by him, namely, Hespera Infrastructure Private Limited, Hespera Properties Private Limited, Hespera Real Estate Private Limited, Hespera Realty Private Limited and Hespera Realcon Private Limited, have ceased to be the Promoters / Promoter Group / PACs with the promoters of the Company.
To achieve the highest standards of Corporate Governance in its management, and to introduce a true sense of professionalism in the Board of the Company, during the financial year 2014–15, the Board of Directors of the Company (Board) was re–constituted with the appointments of Justice Bisheshwar Prasad Singh (Retd. Justice Supreme Court of India), Justice Surinder Singh Nijjar (Retd. Justice Supreme Court of India), Dr. Kamalesh Shailesh Chandra Chakrabarty (Retd Deputy Governor RBI), Brig Labh Singh Sitara (Ex–army official and Dhyanchand award winner sportsman) as Independent Directors of the Company and the appointment of Mrs. Manjari Ashok Kacker (Ex–Member CBDT), as Non–Executive Director of the Company and cessation of Mr. Rajiv Rattan and Mr. Saurabh Kumar Mittal, Non–Executive Directors and of Mr. Karan Singh Khera, Mr. Aishwarya Katoch and Mr. Joginder Singh Kataria, Independent Directors. The Board has placed on record its appreciation for the contributions made by these directors, during their respective tenures of office.
All the present Independent Directors of the Company have given declaration that they meet the criteria of independence laid down under Section 149 (6) of the Act and Clause 49 of the Listing Agreement.
In accordance with the provisions of the Companies Act, 2013 and in terms of the Memorandum and Articles of Association of the Company, Mr. Ajit Kumar Mittal (DIN: 02698115) and Mr. Ashwini Omprakash Kumar (DIN: 03341114), Directors of the Company, retire by rotation at the ensuing Annual General Meeting of the Company and being eligible offer themselves for reappointment. The Board recommends their re–appointment.
The present composition of the Board along with the brief resume of the Directors proposed to be appointed/ reappointed, nature of their expertise in specific functional areas and names of companies in which they hold directorships and memberships/chairmanships of Board Committees, are provided in the Report on Corporate Governance forming part of this Annual Report.
SHARE CAPITAL / ESOP SCHEMES
The paid up equity share capital of the Company as on March 31, 2015, was Rs. 71,11,28,932 comprising of 35,55,64,466 equity shares of Rs. 2/– each. Subsequently, from April 1, 2015 till date, the Company had allotted 67,11,254 equity shares of face value Rs. 2/– each (a) against conversion of 66,43,700 warrants (ISIN No.: INE148I13017) and (b) exercise of 67,554 stock options under various ESOP Schemes of the Company, as a result of which the paid up equity share capital of the Company stands increased to Rs. 72,45,51,440 /– comprising of 36,22,75,720 equity shares of Rs. 2/– each.
During the year under review, the Company has granted its 1,05,00,000 stock options, under Indiabulls Housing Finance Limited ESOP – 2013, to certain eligible employees, excluding the Promoter Director. The disclosures required to be made under Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, in respect of all existing ESOP Schemes of the Company are set out in the Annexure to this Report.
During the year under review, the Company has not accepted any deposits from the public, falling within the ambit of Chapter V of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014.
LISTING WITH STOCK EXCHANGES
The Equity Shares (ISIN No.: INE148I01020) of the Company, continue to remain listed at BSE Limited and National Stock Exchange of India Limited. The listing fees payable to both the exchanges for the financial year 2015–16 have been paid. The GDRs issued by the Company continue to remain listed on Luxembourg Stock Exchange.
(a) Statutory Auditors
M/s Deloitte Haskins & Sells LLP (Firm Regn. No. 117366W / W–100018), the statutory auditors of the Company were appointed by the members in their ninth Annual General Meeting, held on 11th August 2014, for a period of three years i.e. until the conclusion of the twelfth Annual General Meeting of the Company. The Company has received a certificate from the Auditors to the effect that their continuation as such from the conclusion of this Annual General Meeting until the conclusion of eleventh annual general meeting is in accordance with the provisions of the Section 141(3)(g) of the Companies Act, 2013. The Board recommends the ratification of the appointment of M/s Deloitte Haskins & Sells LLP, as statutory auditors of the Company till the conclusion of eleventh annual general meeting of the Company.
The Notes to the Accounts referred to in the Auditors' Report are self – explanatory and therefore do not call for any further explanation.
(b) Secretarial Auditors & Secretarial Audit Report
Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with the rules made thereunder, the Company has appointed M/s Jatin Gupta & Associates, a firm of Company Secretaries in practice as its Secretarial Auditors, to conduct the secretarial audit of the Company, for the Financial Year 2014–15. The Company has provided all assistance, facilities, documents, records and clarifications etc. to the Secretarial Auditors for conducting their audit. The Report of Secretarial Auditors for the Financial Year 2014–15, is annexed as "Annexure 1" and forming part of this Report. The Report is self – explanatory and therefore do not call for any further explanation.
CORPORATE SOCIAL RESPONSIBILITY
As part of its initiatives under "Corporate Social Responsibility (CSR)", the Company has undertaken projects in the areas of Health, Education, Sanitation, Nutrition and Rural Development, as per its CSR Policy (available on your Company's website <http://www.indiabullshomeloans.com/>) and the details are contained in the Annual Report on CSR Activities given in "Annexure 2", forming part of this Report. These projects are in accordance with Schedule VII of the Companies Act, 2013 read with the relevant rules.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Management's Discussion and Analysis Report, for the year under review, is presented in a separate section forming part of this Annual Report.
CORPORATE GOVERNANCE REPORT
Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a separate section on Corporate Governance Practices followed by the Company, together with a certificate from a practicing Company Secretary confirming compliance, is presented in a separate section forming part of this Annual Report.
DIRECTORS' RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 134 of the Companies Act, 2013:
a) that in the preparation of the annual financial statements for the year ended March 31, 2015, the applicable accounting standards had been followed along with proper explanation relating to material departures, if any;
b) that such accounting policies as mentioned in the Notes to the Financial Statements have been selected and applied consistently and judgments and estimates have been made 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, 2015 and the profit and loss of the company for the year ended on that date;
c) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
d) that the annual financial statements have been prepared on a going concern basis; and
e) that proper internal financial controls were in place and that such financial controls were adequate and were operating effectively.
f) that systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.
INFORMATION PURSUANT TO SECTION 134 AND SECTION 197 OF THE COMPANIES ACT, 2013 READ WITH THE RELEVANT RULES AND LISTING AGREEMENT
The information required to be disclosed pursuant to Section 134 and Section 197 of the Companies Act, 2013 read with the relevant rules (to the extent applicable) and Listing Agreement, not elsewhere mentioned in this Report, are given in "Annexure A" forming part of this Report.
Electronic copies of the Annual Report 2015 and Notice of the 10th AGM are sent to all the members whose email addresses are registered with the Company / Depository Participant(s). For members who have not registered their email addresses, physical copies of the Annual Report 2015 and Notice of the 10th AGM are sent in the permitted mode.
The Company is providing e–voting facility to all members to enable them to cast their votes electronically on all resolutions set forth in the Notice of the 10th AGM. This is pursuant to section 108 of the Companies Act, 2013 and Rule 20 of the Companies (Management and Administration) Rules, 2014 as substituted by Companies (Management and Administration) Amendment Rules, 2015 and Clause 35B of the Listing Agreement. The instructions for e–voting are provided in the Notice.
Your Company has been able to operate efficiently because of the culture of professionalism, creativity, integrity and continuous improvement in all functional areas and the efficient utilization of all its resources for sustainable and profitable growth. Your Directors wish to place on record their appreciation of the contributions made and committed services rendered by the employees of the Company at various levels. Your Directors also wish to express their gratitude for the continuous assistance and support received from the investors, clients, bankers, regulatory and government authorities, during the year.
For and on behalf of the Board of Directors
Date: 5th August, 2015