THE 44th DIRECTORS’ REPORT

 Dear Shareholders,

Housing & Urban Development Corporation Limited

Your Directors take pleasure in presenting the 44th Annual Report on the business, operations and achievements of the Company together with the audited financial statements for the financial year ended 31st March, 2014.

Your Company was incorporated in the year 1970 and during its journey of 44 years; your Company has achieved remarkable progress in all the fields. It has its presence all over the Country having 31 offices comprising of 20 Regional Offices and 11 Development Offices with a total strength of 916 employees. From Rs. 11 lakh profit in 1971-72 to over Rs. 726 crore in 2013-14, the organisation has created a niche for itself through immense contribution to the society while maintaining its profitability. 

Your Company has been upgraded from Schedule-B to Schedule-A in the year 2002 and further has been conferred the status of Mini Ratna in the year 2004. HUDCO has been affirmed “AA+” rating by M/s India Rating (Fitch group) and M/s Care Ratings, showing high degree of safety regarding timely servicing of financial obligations and has been assigned “Excellent” rating for the second consecutive year as per Memorandum of Understanding targets set by Ministry of Housing & Urban Poverty Alleviation, Govt. of India. 

During the year, HUDCO’s primary stress was on social housing, provision of basic utility infrastructure through financing of sewerage/drainage, water supply, road and transport, social infrastructure & commercial infrastructure. HUDCO is determined to support inclusive and sustainable habitats and work towards better living conditions for all, especially the marginalized sections of the society, through its sustained efforts and its innovative approaches. 1.   FINANCIALS

Your Company had completed yet another successful year of operations in the service of the Nation. Despite overall recessionary trends in the economy during the financial year 2013-14, HUDCO earned Profit before tax (PBT) and Profit after tax (PAT) of Rs. 1094.35 crore and Rs. 726.34 crore, as against Rs. 1061.70 crore and Rs.700.56 crore during the previous year

All these have been achieved due to robust project funding operations, efficient funds management and the prudent policies adopted by the management.

Resource Mobilisation/Borrowings 

During the year, your company mobilized total resources amounting to Rs.8034.61 crore, including Rs. 5,687.12 crore raised through issue of bonds. Owing to inflationary pressures and volatility in foreign exchange rates, the economy continued to witness high interest rates during the financial year 2013-14, as well.  However, despite high interest rates, HUDCO was able to mobilize resources at a weighted average incremental borrowing cost of 8.77% (i.e. 7 bps below 10 year Fixed Income Money Market and Derivatives Association of India (FIMMDA)         G-Sec, as on 31.03.2014).

During the year, your Company successfully mobilized Rs. 4987.12 crore through issue of Taxfree bonds in the nature of secured, redeemable, non-convertible debentures, having benefits under section 10(15)(iv)(h) of the Income Tax Act for 10, 15 and 20 years, out of which Rs. 4796.32 crore was mobilized though Public Issue(s), while the balance amount of Rs. 190.80 crore was mobilized through a Private placement issue.  The tax-free bonds mobilized though Public Issue(s) are listed on BSE Limited, whereas, the tax-free bonds issued on private placement basis are listed on the National Stock Exchange of India Limited.

HUDCO also availed refinance assistance of Rs. 1000 crore from National Housing Bank (NHB) under its Rural Housing Fund scheme in two tranches of        Rs. 500 crore each at fixed rate of 6.75% and 8.00%, respectively, for a tenure of  7 years.  Further, a Term Loan of Rs. 120 crore was availed from Banking Sector.

With an objective to promote efficient funds management and meet its day-to-day operational requirements, the Company also raised resources through Cash Credit/Overdraft facilities available from various banks and issue(s) of Commercial paper at competitive rates.  The Cash Credit/Overdraft facilities outstanding as on 31.03.2014 were Rs. 960.71 crore.  In addition, an amount of Rs. 266.78 crore was mobilized through HUDCO’s Public deposit scheme.

Credit Rating

HUDCO’s surveillance rating for long term instruments was reaffirmed ‘AA+’ by M/s India Ratings & Research Private Limited (Fitch group) and M/s Care Ratings. M/s India Ratings & Research Private Limited (Fitch group) and M/s CARE Ratings have further affirmed ‘A1+’ rating for HUDCO’s short term instruments, which is the highest rating on standalone basis. During the year, India Ratings & Research Private Limited also upgraded the outlook on HUDCO’s Rating from ‘Stable’ to ‘Positive’.

Your Company also enjoys long-term foreign currency rating of ‘BBB-’ with ‘Stable’ outlook from international rating agency, M/s Fitch Ratings, which is at par with the sovereign rating of India.

Dividend

Your Directors are pleased to recommend a dividend of Rs.100.01 crore for the financial year 2013-14, subject to approval of the shareholders at the ensuing Annual General Meeting. Accordingly, a provision of Rs. 17 crore has been made towards tax on dividend.

 Reserves and Surplus

During the financial year under review, your Company has transferred Rs. 628.32 crore to the reserves comprising of Bonds/Debentures Redemption Reserve Rs.378.17 crore, Special Reserve under section 36(1)(viii) of the Income Tax Act, 1961, Rs.250 crore and General Reserve of Rs.0.15 crore.

 Net Worth and Debt Equity Ratio       

The net worth of your Company as on 31st March, 2014 stood at Rs. 7056.77 crore as against Rs. 6427.11 crore as on 31st March, 2013. The borrowings from all sources stood at Rs.21304.75 crore as on 31st March, 2014 (previous year    Rs.18, 867.43 crore). The Debt Equity ratio of the Company as on 31st March, 2014 works out to 3.02:1 (previous year 2.94:1).

 Unclaimed Deposits

As mandated under the Housing Finance Companies (NHB) Directions, 2010, it is disclosed that the unclaimed deposits with respect to Debentures/Bonds/PDS (Principal and Interest amount), due and unclaimed as on 31st March, 2014 aggregated to Rs. 18.11 crore (previous year Rs. 35.25 crore). As per the procedure, HUDCO is taking all necessary actions including letters, emails, etc, for following up with its depositors. The amount remaining unclaimed for more than seven years has been transferred to the Investors Education & Protection Fund (IEPF) as required under the provisions of the Companies Act, 1956.

Stressed Assets Management

Your Company is meticulously pursuing with the defaulting agencies for effective recoveries and taking recourses available under the Negotiable Instruments Act, 1881 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 besides filing recovery applications in Debts Recovery Tribunals. The Gross NPA as on 31st March, 2014 stood at 6.76% (previous year 5.69%) and Net NPA as on 31st March, 2014 is 2.52% (Previous year 0.83%). Your Company has also created sufficient additional provision as a matter of abundant precaution. The overdues have been reduced by 12.81% as on 31st March, 2014.

Risk Management

HUDCO has in place a Risk Management Policy and Operating Manual for management of the various risks to which HUDCO is exposed viz. credit risk, market risk, interest rate risk, liquidity risk and operational risk. The Policy aims at establishing the company's risk management strategy in line with the goals of the organization and the internal and external environment.

The Company has a prudent and efficient risk management framework. There is a Risk Management Committee of the Board (RMCB) to review various reports and actions taken by Sub-Committees, such as Assets & Liabilities Management Committee (ALCO), Credit Risk Management Committee (CRMC) and Operational Risk Management Committee (ORMC). The recommendations of the RMCB are submitted to the Board of Directors. During the year 2013-14, four meetings of RMCB were held. HUDCO has in place an effective Asset Liability Management System and has constituted an Asset Liability Management Committee (ALCO). The liquidity risk and interest rate risk are being monitored with the help of liquidity gap analysis and interest rate sensitivity analysis. During the year 2013-14, four meetings of ALCO were held.

HUDCO also has in place a Currency Risk Management policy to manage risks associated with foreign currency borrowings. Forex Consultant appointed by HUDCO reviews and opines on the matters regarding scenario of international markets, foreign currency costs, hedging, and options of further borrowings/ repayments etc., which are also deliberated in RMCB meetings.

Foreign Currency Risk Management

Your Company has in place a Currency Risk Management (CRM) Policy to manage risks associated with foreign currency borrowings. The Company enters into hedging transactions to cover exchange rate and interest rate risk through various instruments like currency forward, options, principal only swap, interest rate swap and full Currency swaps. As on March 31, 2014, the total foreign currency liabilities are USD 81.763 million and JPY 3831.012 million. On an overall basis, as on 31st March, 2014, the currency exchange rate risk is covered to the extent of 74.40% through hedging instruments.

Cost Reduction Measures

During the year, costly loans were identified and foreclosed or prepayment option was exercised in respect of outstanding loans amounting to Rs. 133.33 crore. It would be imperative to highlight that by virtue of term loan agreement executed with the respective lender(s), no prepayment penalty in respect of loans foreclosed have been paid.

2.   OPERATIONS

During the year under review, HUDCO has recorded excellent results on the operational front and has surpassed majority of targets set as per Memorandum of Understanding signed by the Company with Ministry of Housing & Urban Poverty Alleviation, Government of India both in terms of sanctions, releases and other related parameters. HUDCO has recorded an overall sanction of Rs. 17,491 crore against MoU target of Rs. 15,000 crore registering an increase of 16.61%. Further, on the release front, it has released sum of Rs. 7438 crore against the MoU target of Rs. 6602 crore with an increase of 12.66%  

Memorandum of Understanding

Based on the provisional data/information available, performance of your Company, in terms of Memorandum of Understanding (MoU) signed with the Ministry of Housing & Urban Poverty Alleviation, Government of India, is expected to be rated as ‘excellent’ for the year 2013-14. 

Further, HUDCO and the Ministry of Housing & Urban Poverty Alleviation have entered into a MoU for the year 2014-15, in regard to various operational performance parameters like disbursement, sanctions, gross operating margin, cost of borrowing, gross NPA, etc. and also for various non-financial parameters like Human Resource Development (HRD), Corporate Social Responsibility (CSR), capacity building programmes, financing EWS & LIG housing, etc. The MoU for 2014-15 envisages a significant growth in the operations of HUDCO in the housing and urban development sectors with proposed sanctions of Rs.16100 crore and disbursements of Rs. 7300 crore during the year, with exclusive focus on social housing and core infrastructure.

As per the MoU, MoHUPA would facilitate HUDCO to achieve its projected growth by supporting the Corporation to increase its creditworthiness and enable it to achieve its social objectives by providing the necessary policy support. The Ministry would also support HUDCO in mobilizing resources at lower costs.

Housing for all – “Affordable Abode”

Food, Clothing and Housing are the three basic needs of human being, and among three, housing being the costliest and has become beyond the reach of a common man. HUDCO endeavors to make this costly component of human life as an ‘affordable abode’ to all. HUDCO is committed to fulfill its mandate of supporting the development of housing sector in the Country.

During the year 2013-14, housing sanctions were Rs.9643 crore (55% of total sanctions) and housing releases were Rs.2841 crore (38% of total releases). During the year 2013-14, 64% (Rs.6267 crore) of housing sanctions and 74%        (Rs. 2110 crore) of housing releases were made for affordable housing including, EWS & LIG.

During the year, HUDCO financed 14,34,102 housing units, out of which 14,11,962 units belong to Economically weaker and Low Income Group category i.e. 98.46 % of the total sanctioned housing units, which is in sync with HUDCO’s motto of “Profitability with Social Justice”.

HUDCO also sanctioned 3.125 lacs dwelling units (DUs) of EWS category in the State of Andhra Pradesh, 1.6 lacs rural units in Haryana State under Priyadarshni Awas Yojana, 5000 DUs for Schedule Tribes and 1.228 lac DUs under Indira Awas Yojna (IAY) in the State of Kerala and Tamil Nadu respectively and 2.71 lac dwelling units each in SC/ST & general category in State of Karnataka under the Basava Grameena Vasathi. In addition to the above, HUDCO has also supported construction of police housing in various States viz. Madhya Pradesh, Karnataka, Tamil Nadu and Uttar Pradesh.

Urban Infrastructures – “Foundation for stronger India”

Towards fulfilling its strong commitment to provide an adequate and effective core infrastructure in the Country, in line with its motto of – “Foundation for stronger India”, HUDCO continued extending its financial support to various urban infrastructure projects.

During the financial year 2013-14, HUDCO has sanctioned a total of 72 schemes with its financial assistance of Rs.7,848 crore to various sectors like Water Supply, Sewerage, Drainage, Social Infrastructure, Commercial Infrastructure, Power and Road & Transport. An amount of Rs. 4,596 crore loan was disbursed for urban Infrastructure projects.

HUDCO is one of the few financial institutions in the market to cater to the needs of Core urban infrastructure sectors (water supply, drainage, sanitation, solid waste management, transport including metro, buses, roads, social infrastructure like schools, hospitals etc.). These sectors form the foundation of city level infrastructure and play a significant role in enhancing the quality of life in cities. During the year 2013-14, HUDCO sanctioned Rs 5322 crore (68 % of total UI sanctions) and released Rs. 3,494 crore (76% of UI releases) for Core Urban Infrastructure.

 Social Infrastructure

The major thrust of HUDCO has been on providing housing and social infrastructure to the poor, as an integral part of the urban growth and harmonious development. During 2013-14, HUDCO has funded 20 schemes under this category for a total loan assistance of Rs. 153.98 crore to the States of Jharkhand, Nagaland, Odisha and Puducherry. These schemes include construction of Workshops, Govt. buildings, etc.

Sewerage and Drainage & Solid Waste Management

Rapid urbanization and growth of a large number of cities requires laying of sewerage and drainage systems. To meet the growing demand, HUDCO during 2013-14 has funded 11 schemes with a total loan assistance of Rs. 1764.27 crore to the States of Gujarat, Karnataka, Maharashtra, Madhya Pradesh, Odisha and Puducherry. These projects would enable provision of comprehensive sewerage system with treatment facilities, which would benefit a large number of people in these areas.

Water Supply

Potable water shortage is becoming one of the major problems in the country. Rapid growth of towns/cities in India put more demands for water supply to the inhabitants. Keeping in view the growing demand of potable water, HUDCO during 2013-14, has sanctioned financial assistance to 5 schemes under this category for a total loan assistance of Rs. 1812.19 crore to the States of Gujarat, Maharashtra, Odisha and Tamil Nadu.

Road and Transport

Road and Transport Infrastructures are necessary for any economy to function properly. India’s growing economy has witnessed a rise in demand for transport infrastructure and services. HUDCO during the year 2013-14, has sanctioned 20 projects under this category for a total loan assistance of Rs. 2120.72 crore in the States of Bihar, Gujarat, Himachal Pradesh, Kerala, Karnataka, Maharashtra, Madhya Pradesh, Nagaland, Punjab and Uttar Pradesh. During the year, an amount of Rs. 1159.74 crore has been disbursed under this category.

Power Sector

Power has multiple knock-on effects on development of the country. Without it, development stalls. Nothing can be moved without power. Development in the country will be very hard to thrive unless there are reliable source of power. During the year 2013-14, in development of this sector, HUDCO has sanctioned 5 schemes in the States Maharashtra, Rajasthan, Uttar Pradesh, Uttarakhand & Assam, for a total HUDCO loan of Rs. 1145.50 crore.  During the year, an amount of Rs. 615.34 crore has been disbursed under this category.

HUDCO’s Projects in the North Eastern Region

HUDCO continued its special thrust towards developments of the Seven Sister States in North Eastern Region. During the year, HUDCO has sanctioned 7 housing schemes with a loan amount assistance of Rs. 26 crore to the North-Eastern Region. This would support taking up of 140 housing units in the State of Mizoram and Nagaland. Beside this, HUDCO has also sanctioned 14 infrastructure projects with a loan assistance of Rs. 24.92 crore in the State of Nagaland and Assam. These projects include construction of government institutional buildings, commercial buildings, etc.

Building Material Industries

HUDCO has extended financial support through equity and term loan to the building material industries for manufacturing building materials products and components, which are innovative and alternates to the conventional options. These alternate building materials utilize agricultural and industrial wastes and thus are energy efficient and environmentally appropriate options. A major thrust is to support fly-ash based building material industries and also alternates to timber in different parts of the country. Till date, 30 building material industrial units have been supported with HUDCO assistance of Rs.29.48 crore.

Committee for the Rejuvenation and strengthening of Building Centres

HUDCO has taken the initiative to set up a Committee under the Chairmanship of architect Shri Kirtee Shah with representation from NGOs, private sector, R & D bodies as well as HUDCO and BMTPC with a mandate to suggest a plan of action for the revival of the Building Centres as an important tool for the development and propagation of green technologies and as an effective response to the contemporary needs of the sector. 

Model Villages and Model Bastis

HUDCO has extended support for development of model village and model bastis throughout the country, out of interest accrued from HUDCO-KfW IV & V grant. 

The selected villages/slums, which predominantly cover low-income population, have been provided with grant assistance up to Rs 70 lacs each for a village/basti. Matching contribution has been waived off in the natural calamity hit areas, whereas for other areas, it is kept as 80:20 ratio (80% HUDCO-KfW: 20% agency/state Govt. share). 20% contribution may be met by the State Governments/Union Territories/Implementing agencies by dovetailing other resources of Central/ State Government schemes with a convergence approach, to provide community buildings and public utilities infrastructure facilities.

In the financial year 2013-14, HUDCO has sanctioned 10 model villages and model bastis in the natural calamity hit areas of Uttarakhand under HUDCO-KfW grant–in-assistance of Rs 70 lac each i.e. Rs. 7 crore and 5 model village and model bastis in the cyclone hit areas of Odisha State of Rs. 70 lac each i.e.          Rs. 3.50 crore. Thus, HUDCO has sanctioned a total grant–in-aid-assistance of Rs. 10.50 crore for the natural calamity hit areas in the year 2013-14. The proposals are at various stages of implementation.

3.     HUDCO NIWAS – INDIVIDUAL HOUSING LOAN SCHEME  

HUDCO Niwas is working through a network of 20 Regional Offices throughout the Country and offers individual Housing Loans for construction/ purchase of a house/flat/extending or improvement of the existing house/ flat and re-financing of existing housing loans. HUDCO Niwas also offers bulk loan to State Government/Para Statals of the State Government/Profit making PSUs and other Housing Finance Companies.

During the year, an amount of Rs. 65.58 crore has been sanctioned and Rs.297.88 crore has been released, which include release of Rs. 284 crore to PNBHFL, a Housing Finance Company promoted by Punjab National Bank. Further, cumulatively, till March, 2014, an amount of Rs. 4923.26 crore has been sanctioned and Rs. 4348 crore has been released under HUDCO Niwas portfolio.

4. EMERGING SECTOR, INCLUDING INDUSTRIAL INFRASTRUCTURE  

Towards Industrial and economic growth of the country, HUDCO plays vital role by financing Industrial Infrastructure Projects, Industrial Estates and Special Economic Zones (SEZs) for land acquisition and Land Development, Water Supply, Access/Circulation Roads, Residential Townships, Street Lighting, Jetties, Bus Terminals/Stops and Community Centres etc. During the year 2013-14, HUDCO has funded 10 such schemes with a total loan assistance of Rs. 832.19 crore; namely City Gas distribution project in Gujarat, Establishment of new Industrial Growth Centre at Vidisha, Dewas and Sagar and Up-gradation of Industrial Growth Centre at Bhopal, Indore, Jabalpur and Mandla, in Madhya Pradesh. During the year an amount of Rs. 485.17 crore has been disbursed under this category.

5.   NEW INITIATIVES 

Extending HUDCO’s reach to the new clients

During the year under review, HUDCO has entered into Memorandum of Understanding with various organisations like:

·         National Commission for Women (NCW) under CSR for improving the living conditions of widows at Vrindavan, Mathura.

·         National Building Construction Corporation Limited (NBCC) for joint development of projects.

·         School of Planning & Architecture (SPA) for research relating activities.

·         National Culture Fund (NCF) for conservation of heritage sites/ buildings.

·         Construction Industry Development Council (CIDC) for creation of skills required in the building construction industry.

Laying stress on acquiring business from Government agencies, HUDCO extended funding to 135 new Urban Local Bodies, who have borrowed from HUDCO for the first time during the current year. This initiative will provide vast opportunities in future for funding a large number of small and medium towns/cities in the country, which need to develop quality infrastructure for the growing population.

HUDCO Nav Nagar Yojana (HuNNY)

HUDCO, as a pioneering techno-financial institution in the housing and urban development sector, proposes to facilitate Urban Local Bodies (ULBs)and other Government agencies in developing integrated townships/layouts/ colonies, to meet the increasing requirement of planned housing for its citizens. It offers a comprehensive solution to the growing cities/towns from 'Planning to Financing' the sustainable habitats. HUDCO will provide technical and financial support for developing potential sites as planned urban extensions to meet the requirements of the ever growing population. The programme operates at three stages:

·      advisory service on conceptualization and feasibility of the proposed development;

·      consultancy assistance on fee basis, for architectural and engineering designs;

·      providing funds required for development of sites and services as well as housing, including land acquisition.

HUDCO would provide technical assistance for integrated development of such identified sites covering housing, infrastructure as well as commercial areas. The assistance would enable location specific optimal development, covering all categories of households with commensurate infrastructure facilities. Comprehensive planning would be undertaken in consultation with the ULB as well as other stake holders.

The HuNNY programme is open to all the willing ULBs, Urban Development Authorities, Housing Boards or any other Government Corporation or Agency that may like to foster collaboration with HUDCO towards planned growth and expansion of the city/town. This will help the ULB in meeting the emerging requirements with special reference to affordable housing segment. Private Developers for projects approved by the Central/State Governments for subsidy under the Affordable Housing in Partnership scheme of the Ministry of Housing and Urban Poverty Alleviation are also eligible.

HUDCO has sanctioned Inderlok Housing Scheme for construction of 822 dwelling units (DUs) consisting of LIG & HIG houses to Haridwar Development Authority for a financial assistance of Rs. 125 crore. The project envisages planned development in the industrial area of State Infrastructure and Industrial Development Corporation of Uttarakhand Ltd.  

Rent–to–Own Scheme

HUDCO has been striving to make “Housing for All' a reality. One of the sections of the society, which finds it very difficult to own a house in the career span is the salaried public/government sector employees, especially at the lower rung. Towards improving access to housing for this section of the society, HUDCO has conceived the “Rent-to-Own” Scheme. Broadly, this scheme facilitates an agency to initially avail loan from HUDCO on behalf of its employee. The agency would allot the houses to its employees initially on rental basis. The employee would become the 'owner' of the house as and when the full cost of the house is paid to the agency. This would help the agency to improve the satisfaction level of employees.

6.            CONSULTANCY INITIATIVES

HUDCO’s contribution as the premier techno-financial institution in the country is not limited to housing finance alone but includes various other initiatives to contribute to the cause of sustainable urban development. Utilising its inherent strength of technical personnel, long experience and expertise in the fields of Architecture and Planning, a distinct thrust has been extended to the fee based consultancy. During the financial year, HUDCO has been involved in showcasing various facets of consultancy services, thereby contributing to the overall image building of HUDCO.

During the year, HUDCO has signed an agreement with Srinagar Development Authority for preparation of a detailed project report for housing colony at Bemina, Srinagar. HUDCO is also undertaking the preparation of Draft Master Plans of two towns in Madhya Pradesh namely, Khargone and Jhabua for the State Institute of Town Planning. The Final report for the Slum Free City Plan of Gangtok, has also been submitted. Further, HUDCO is also in the process of signing consultancy agreements with Andhra Pradesh State Housing Corporation Limited for providing consultancy services for preparation of Comprehensive Development Plan and with Siliguri Jalpaiguri Development Authority for providing consultancy services for preparation of a Detailed Project Report for Affordable Housing in Siliguri Jalpaiguri Planning Area. Apart from this, HUDCO is likely to sign an agreement with the Planning and Development Authority, Manipur, for providing consultancy services for preparation of DPRs for Market-cum-Office Complexes at various locations in Manipur.

7.     HUDCO DESIGN AWARDS

HUDCO has always been associated in improving the habitat conditions, use of effective technologies and designs, especially of the urban poor. In keeping with this tradition, HUDCO instituted ‘HUDCO Design Awards’ to give recognition and felicitate innovative ideas and initiatives that contribute to make our cites inclusive, live able and environmentally sustainable. The Award has five different categories and is expected to encourage professionals in the field of Architecture, Planning and Engineering and sensitize decision makers regarding utility and applicability of innovative design solutions. HUDCO Design Awards 2013 were conferred to the awardees by Hon’ble Minister of Housing & Urban Poverty Alleviation, Govt. of India on 17th February, 2014 at New Delhi. HUDCO also published a book titled “HUDCO Design Awards 2013” which is a compilation of all the award winning entries for dissemination of information regarding these innovative and inspiring projects.

8.     CUSTOMER SATISFACTION

HUDCO is an organization, committed to develop products and provide services that meet the requirements of its customers i.e. its borrowing agencies, investors, etc. to ensure that they have attained full satisfaction in transacting with HUDCO. Systems have been created to ensure that customer requirements are determined and services and products are developed taking into consideration features/ requirements specific to the sector and fulfilled at each applicable function and level with the aim of continually enhancing their satisfaction. It is a culture of HUDCO to treat its customers aspirations as a priority and support them by facilitating them for example, assistance through the entire life cycle of the loan or assistance to the investors to get their interest payments at the right time. 

During the year 2013-14, Regional Offices of HUDCO organized 15 customer feedback meets with the borrowing agencies to gauge their satisfaction level. Another key measure to enhance customer satisfaction is the redressal of complaints in a time-bound manner. All complaints received during the year were redressed well in time i.e. within 25 days.

The time taken to process the loan releases is a good indicator of efficient and effective delivery of services and this goes a long way in enhancing the customer’s satisfaction level. In 2013-14, the process time for releases in government and private sector schemes is 6.39 days and 2.2 days respectively.

 9.   HUDCO – AN ISO 9001:2008 CERTIFIED COMPANY

HUDCO has recertified an ISO 9001:2008 Company for Quality Management for the full range of its activities covering providing project and retail financing services, resource mobilization for funding consultancy and joint ventures and training, research and networking in Human Settlement Planning & Management, from Indian Register Quality Scheme (IRQS) on 30th September, 2012. The certificate is valid till 29th September, 2015. The Surveillance Audit for continuance of the ISO certificate was carried out by IRQS in August 2013 at the Regional Offices at Kolkata, Chennai, Dehradun, HSMI and HUDCO Head Office and gave their recommendation for continuation of certificate.

10.   HUDCO BUILD-TECH 2013HUDCO organized HUDCO Build-tech 2013 – an exposition on cost effective and environmentally friendly building materials and technologies as a part of India International Trade Fair held from 14th to 27th November, 2013 at Pragati Maidan. A large scale display was put up for visitors in around 2126 Sqm area, showcasing various HUDCO activities and areas of operation. The event, which also included a grand display of cost-effective and environmentally friendly building materials and technologies, by way of construction of a dwelling unit, received much appreciation from the general public.

11. JAWAHARLAL NEHRU NATIONAL URBAN RENEWAL MISSION    (JNNURM) AND RAJIV AWAS YOJANA (RAY)

HUDCO has been mandated to play a significant role in the successful implementation of the Government of India’s flagship programme of Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and Rajiv Awas Yojana (RAY). The Government of India launched the 7 years JNNURM programme on 3rd December, 2005 for provision of basic amenities to the urban poor, which was extended upto March 2015, for implementation of the programme. Ministry of Housing & Urban Poverty Alleviation has appointed HUDCO as an appraisal agency for appraisal of Basic Service for the poor (BSUP) and Integrated Housing & Slum Development Programme (IHSDP) projects and as one of the Central Monitoring Agency for monitoring of BSUP/IHSDP projects and review of Third Party Inspection & Monitoring Agencies (TPIMA) Reports. As on 31st March, 2014, HUDCO has appraised 1239 projects with Project Cost of Rs 24,434 crore and central assistance of Rs 13,745 crore for the construction/upgradation of 9.81 lac dwelling units across 870 cities/towns in the Country. HUDCO supported 15 ‘viability gap funding’ schemes under JNNURM to projects under BSUP, IHSDP, gap-funding for Sewerage network, water supply, solid waste management and purchase of buses etc.

Rajiv Awas Yojana (RAY) was announced in June, 2009 for creating ‘Slum Free India’. Preparatory phase of RAY concluded on 2ndJune, 2013. During the preparatory phase, the States were required to draw up Slum-free Plans of Action (SFCP) for proceeding towards the goal of Slum-free Cities/States. In the preparatory phase, the State Governments prepared pilot projects with an aim of evolving, demonstrating and establishing models for scalability and replicability.  Implementation phase of RAY was launched on 3rd September 2013. HUDCO with its social mandate of providing housing to economically weaker sections, has appraised 83 RAY projects as on 31st March 2014, with Project Cost of Rs. 3160 crore and central assistance of Rs. 1570 crore for the construction/ upgradation of 62,202 dwelling units. In addition, 3 Affordable Housing in Partnership (AHP) projects with project cost of Rs. 56 crore covering 992 dwelling units for the State of Karnataka were also appraised by HUDCO.

Against the MoU targets for ‘Fee based income from Action Plan Scheme’ for the year 2013-14 of Rs. 2.50 crore, HUDCO has raised fee based income of Rs. 3.01 crore against appraisal of JNNURM & RAY projects, monitoring and analysis of TPIMA reports.

12.   HUMAN RESOURCES 

HUDCO is an treasure trove of expertize with its multi-disciplinary strength of professionals. During the year, HUDCO Board has approved HUDCO Employees Superannuation Pension Scheme as per DPE Guidelines, for which approval of the Government of India has been received. As a next step Trust has been constituted and further action is being taken. The guidelines for the utilisation of Employees’ Welfare Reserve have been approved by the Board. An Employee Welfare Committee has been constituted for overall management of Welfare Fund and to implement the welfare measures. The benefits under the Social Security Scheme have been broadened for larger coverage of facilities. With a view to hone the skills of employees, capability development was taken up in various strategic, functional and behavioural areas for the employees. 370 employees have been nominated for 133 different training programmes out of which 10 were International Training Programmes.

As per the MoU Targets for the Company for the Financial Year 2013-14, HRMA Wing was given targets with a weightage of 5 points. The parameters were: (i) for restructuring of supervisory level of executives, Board approval was obtained on 20th November,2013 and restructuring has already been done; (ii) a  Voluntary Retirement scheme (VRS) for the Company employees was approved by the Board on 23rd April, 2013, (iii) implementation of Bell Curve has been adhered        to (iv) as infusion of fresh talent and ideas is a must for the growth of the company, a plan of recruitment at entry level was approved by the Board on                           12th September,  2013.

Human Settlement Management Institute (HSMI)

Human Settlement Management Institute (HSMI) is the Research & Training Wing of HUDCO and its activities are supported by a multi-disciplinary group of professionals. The Institute continued its capacity building efforts for the professionals engaged in the housing and urban development sector including HUDCO’s borrowing agencies and HUDCO’s own functionaries.

During the year, 51 training programs were conducted, covering 1869 Indian professionals from different sectors. Besides, HSMI also organised two International training programmes: one supported by Ministry of External Affairs on the theme of “Planning of Equitable and Prosperous Cities”; and one International Refresher Course jointly organised with Institute for Housing & Urban Development Studies (I.H.S.), Rotterdam on the theme of “A Right Based Approach to Resettlement (Inter-National) Standards and Local Practice” for the Alumni located in South-East Asian Countries.  Further, as Anchor Institution, HSMI organised a Joint Working Group meeting of IBSA-HS (India, Brazil, South Africa on Human Settlements) in May, 2013.

Keeping in view HUDCO’s emphasis on strengthening and working through local bodies and supporting these agencies for taking up projects funded by HUDCO, the Institute organised 15 Capacity Building Programmes for Urban Local Bodies (ULBs). HSMI also organized 17 In-house programmes for HUDCO officers, in the disciplines of Law, Finance, and Projects, achieving training 1261 man-days during the year. 

Further, to create a culture of Innovation in HUDCO to achieve ‘Mission Five Ones’ goals, HSMI organised Orientation and Synergy Building Workshop for “Innovation Officers of HUDCO” during the month of July, 2013. 

HUDCO Chair activities supporting 18 reputed institutions to undertake research and training activities in the habitat sector have been operationalized.

HUDCO/HSMI also sanctioned research grants for 14 research proposals during the financial year 2013-2014 under the five areas i.e. (i) Affordable Housing and Financing Options; (ii) Urbanisation and Urban Poverty – A Geo-Demographic Approach; (iii) Project Development and Management for PPP Project; (iv) Environmental Improvement Planning in Cities;  (v) Governance and use of IT for Urban Development.  Out of these 14 proposals, 11 proposals were awarded before 31st December, 2013 to reputed institutions. The total R&D expenditure incurred in financial year 2013-2014 amounts to Rs.353.48 lakh.  Nine Best Practices Awards have also been given to agencies, which have undertaken unique/novel projects/schemes after recognising their potential for replication and adaptation by other agencies in the country.

HSMI is one of the National Nodal Resource Centres of the Ministry of Housing & Urban Poverty Alleviation, Govt. of India, for undertaking training and documentation activities in support of implementing Action Plan Programmes of the Ministry. The activities are supported through funds earmarked for IEC (Information, Education & Communication) component of the programmes, which include National Urban Livelihood Mission (NULM) and Rajiv Awas Yojana (RAY). HSMI also organised nine training programmes as support to Action Plan Programmes of the GoI & MoHUPA including six training programmes on RAY as well as one ToT programme on RAY.

HSMI is also the nodal agency for implementing the ‘Challenge Fund’ concept instituted by the Ministry of Housing & Urban Poverty Alleviation with the assistance of international agencies. Four projects have been approved for grant funding under this project.

CITYNET – National Chapter India

HUDCO is an Associate Member of ClTYNET since 1993. The purpose of ClTYNET is to promote exchange of information, experience and skills through various research and training activities among members of CITYNET. HUDCO has established an India chapter of CITYNET, so that more Indian cities could benefit from HUDCO's vast experience in the area of common interest. HUDCO/ HSMI also organised the CITYNET – National Chapter India – First Meeting of the Expert Group was held on 16th December, 2013.

13.  CORPORATE SOCIAL RESPONSIBILITY (CSR) AND SUSTAINABLE DEVELOPMENT (SD) ACTIVITIES

In line with the revised guidelines issued by Department of Public Enterprises (DPE) on CSR and Sustainable Development effective from 01.04.2013, HUDCO Board of Directors has approved the revised CSR and Sustainability Policy and has also provided a budget of Rs. 10.51 crore (1.5% of profit after tax for the year 2012-13) for the CSR and SD activities. In line with the annual plan approved by the Board in its meeting held in July, 2013 and thrust areas identified in the HUDCO CSR and Sustainability Policy, HUDCO has sanctioned financial assistance of Rs.15.33 crore for 39 proposals and disbursed an amount of Rs. 12.49 crore (including proposals sanctioned in the previous years) for implementation of various proposals. 

During the year, HUDCO has supported Construction/Renovation and Extension of 6 Nos. Night Shelters/Community Toilets – (2 nos each at Ahmedabad and Haridwar and 1 no. each at Alwar and Mussoorie) and 4 number of the proposals of Renewable Sources of Energy - Solar Lighting at BSUP School Site, Vijayawada, Ukhimath, Uttarkashi in Uttarakhand, Deshpriyo Park in Kolkata, West Bengal and for setting up of Wind Mill for generation of Power at Naya Raipur. The first instalment equivalent to 25% of Project Cost/CSR assistance has been also disbursed to the implementing agencies for implementation of the proposals.

HUDCO has also extended support for Conservation of Sunderwala Mahal (protected monument) Sunder Nursery, Delhi through National Culture Fund (Project cost/CSR assistance of Rs. 38.51 lacs) and Construction of Community/Pay & Use Toilets at 3 locations In Kapasan Town, Chittorgarh District, Rajasthan, a Backward district identified by the Planning Commission under BRGF scheme (Project cost/ CSR assistance of Rs 41.76 lacs) and first instalment of 25% of Project cost/CSR assistance has been already disbursed to the agencies before end of December’ 2013 for implementation of proposal.

Employment Oriented Skill Training Programme in construction trades to more than 115 beneficiaries in the States of Orissa and Rajasthan has been also completed and KUDUMBASHREE has also completed training in construction trade for 70 slum women in Kerala.  

HUDCO has also contributed an amount of Rs. 25 lacs and Rs. 15 lacs to the Chief Minister’s Relief Fund, Uttarakhand and Himachal Pradesh respectively for flood and land slide victims. In addition, HUDCO has also made a contribution of Rs. 12.55 lacs to the Chief Minister’s Relief Fund, Orissa for Cyclone “Phalin” affected area.

Besides, HUDCO has also extended support for Construction of toilets in the various schools of Unakoti Distt. in Tripura, Completion of Kala Bhawan at Chikkaballapur in Karnataka, Construction of Skill Training Centre in Cuttack in Orissa and Tezpur in Assam, Purchase of 4 Ambulances in the state of Goa and Cesspool cleaners in state of Nagaland and also taken up/completed the Rain Water harvesting in its Regional office Building at Jhalana Dongri, Jaipur through CPWD at a cost of Rs 4.50 lacs.

HUDCO’S Role in Disaster Mitigation

HUDCO has always been on the forefront of disaster mitigation efforts in Indiaand always extended its helping hand in times of crisis due to natural calamities like earthquakes, landslides, cyclone, flooding, sea erosion and tsunami etc in various parts of the country. Consequent these natural calamities, substantial damage to property and assets take place, rendering large number of families homeless. HUDCOhas played an active role in the rehabilitation/reconstruction of housing and other amenities for natural calamity affected areas. Recently HUDCO has supported natural calamity hit areas of Uttarakhand, Himachal Pradesh and OdishaState through CSR and HUDCO’s KfW grant assistance.

14.    OFFICIAL LANGUAGE

HUDCO continued its efforts to implement the official language policy of Govt. of India in all its offices and motivating the employees at all levels to achieve the targets set in the annual official language programme issued by Govt. of India. In order to promote use of Hindi in HUDCO, ‘Rajbhasha Month’ was celebrated in September 2013 and various competitions were organized both at Corporate Office, as well as in Regional Offices and during the month. Officials from Official Language Department of Corporate Office participated in Regional Offices meetings and programmes and a special Hindi workshop was also organized in Thiruvananthapuram for Hindi Nodal Officers and Nodal Assistants. Further, officials of HUDCO were sent for Hindi Training Programme organized by various Officials Language Institutes.

During the year, Committee of Parliament on Official Language inspected HUDCO’s Guwahati and Patna Regional Offices and the official Language implementation in these Regional Offices was appreciated by the Parliamentary Committee. Official language inspection was also conducted by Hindi Department, Corporate Office at Mumbai, Guwahati, Jaipur, Hyderabad, Thiruvananthapuram, Jammu, Bhopal, Lucknow and NCR Regional Offices and the Corporate Office departments viz. Human Settlement Management Institute, Public Relations, Audit, Company Secretary, Administration, Human Relations and General Accounts.

In recognition of HUDCO’s efforts towards progressive use of Hindi, “NARAKAS” awarded special appreciation award – “Rajbhasa Shield” to HUDCO and also appreciated HUDCO for organizing “Doha Path Pratiyogita” for the employees of PSUs, Delhi under NARAKAS. Two of our officials were also awarded for participating in Hindi competitions by NARAKAS, Delhi. Our Thiruvananthapuram Regional Office and one of the officials of our Jammu Regional Office were also awarded appreciation award for Official Language implementation.

15.     VIGILANCE

The Corporate Vigilance Department (CVD) continued to strive for improving the systems and procedures in the working of the company, in line with CVC’s directions issued from time to time. Several steps were initiated as part of preventive vigilance by putting in place the modes of creating general awareness amongst all officials, particularly towards vigilance related issues, with special emphasis on implementation of e-governance by the concerned wings of the Company and Regional Offices.

The steps taken/being taken towards preventive vigilance and the efforts made to deal with the third party in a transparent manner include online applications, tenders accessible to the general public/vendors, information on payments made to them from time to time. In compliance of CVC’s instructions, all the Regional Offices of HUDCO have been advised to ensure the maintenance of quality standards in construction activities by the borrowing agencies in the projects financed by HUDCO. Another initiative taken by HUDCO towards reducing the volume of physical documents at Head Office includes digitization of records which has been taken up on a pilot basis.

Further, inspection of Regional Offices at Hyderabad and Ahmedabad were carried out during the year and officials were detailed about preventive aspects of vigilance. The points emerged out of inspections have been apprised to the concerned ROs for follow-up action. Vigilance Awareness Week was observed by the Corporation from 28th October to 2nd November, 2013 at the Head Office as well as at all the Regional Offices with focus on ‘Promoting Good Governance–Positive Contribution of Vigilance’. Shri PRK Naidu, IPS (Jharkhand 1987) has joined HUDCO as Chief Vigilance Officer with effect from 6th March, 2014.

16.   MANAGEMENT DISCUSSION & ANALYSIS REPORT

Management Discussion & Analysis Report covering the requisite information as required by the DPE guidelines is annexed with the Directors Report.

17. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO Conservation of Energy

HUDCO is not a manufacturing Company and does not own any manufacturing unit; hence the disclosure of particulars regarding Conservation of Energy is not applicable. However, efforts are made for conservation of energy in the office(s) of HUDCO by use of energy efficient machines/ equipments/ lights while replacing the existing ones. Rain water harvesting methods are also adopted, wherever possible.

 Technological Absorption

HUDCO has taken various measures in the field of technology absorption by extending financial assistance to the building material industries manufacturing building materials and other components, through the latest technology, which are innovative, cost effective and alternates to the conventional mode of manufacturing. Foreign Exchange Earnings and Outgo

During the year, inflow on account of foreign exchange transaction was amounted to Rs.1.73 crore (previous year Rs. 2.28 crore) while out go was amounted to     Rs 6.89 crore (previous year Rs. 8.92 crore).           

18.  DIRECTORS’ RESPONSIBILITY STATEMENT

As required under Section 217 (2AA) of the Companies (Amendment) Act, 2000, the Directors of your Company confirm:   

 

(i)	that in the preparation of the annual accounts, the applicable accounting standards have been followed, alongwith proper explanation relating to material departures, if any;
(ii)	that the directors have 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 at the end of the financial year and of the profit and loss of the company for the financial year 2013-2014;
(iii)	that the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and
(iv)	that the directors have prepared the annual accounts on a going concern basis.

19.     DIRECTORS

Shri KBS Sidhu, IAS, Joint Secretary (Housing), Ministry of Housing & Urban Poverty Alleviation, Government of India was appointed as Government Nominee Director on the Board of HUDCO with effect from 30th August, 2013 in place of Shri Susheel Kumar.

Further, Dr. M. Ravi Kanth, IAS(r), has been appointed as Chairman & Managing Director of HUDCO with effect from 11th April, 2014 in place of Shri VP Baligar, IAS, who ceased to be Chairman & Managing Director with effect from 10th April, 2014 on completion of his term.

Smt. Jhanja Tripathy, IRAS, Joint Secretary & Financial Advisor, Ministry of Housing & Urban Poverty Alleviation, Government of India was appointed as Government Nominee Director on the Board of HUDCO with effect from 3rd May, 2014 in place of Shri Naresh Salecha.

Your Directors extend a warm welcome to Shri KBS Sidhu, Dr. M. Ravi Kanth and Smt. Jhanja Tripathy for being part of HUDCO. Your Directors also place on record its appreciation for the valuable contribution made by Shri Susheel Kumar, Shri VP Baligar and Shri Naresh Salecha, during their tenure on the Board of HUDCO.

20.    PARTICULARS OF EMPLOYEES

There is no employee, in receipt of remuneration in excess of limit prescribed under section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended.

 21.     AUDIT COMMITTEE

Your Company has an Audit Committee in compliance to the provisions of Section 292A of the Companies Act, 1956 and the guidelines issued by Department of Public Enterprises (DPE) applicable to Central Public Sector Enterprises. The complete detail with respect to the Audit Committee as required to be given under the Companies Act, 1956 and DPE guidelines is given in the ‘Corporate Governance Report’.

22.    AUDITORS & AUDITORS’ REPORT

M/s Dhawan & Co., Chartered Accountants, the Statutory Auditors, who were appointed by the Comptroller & Auditor General of India (C&AG) for the financial year 2013-2014, had conducted the statutory audit of your Company. The review of Annual accounts of your Company for the year ended 31st March, 2014 by the C&AG under section 143(6) of the Companies Act, 2013 forms part of this report and the same is annexed hereto. 23.     BUY-BACK OF SHARES

There was no buy back of shares as per provisions of section 77A of the Companies Act, 1956.

 24.     EMPLOYEE STOCK OPTION SCHEME (ESOS)

During the year, no Employee Stock Option Scheme has been offered to the employees by the Company.

25.     LISTING OF SECURITIES

The entire equity share of the Company is held by Government of India; hence the same is not listed on the Stock Exchanges. However, the bonds issued by the Company are listed at the following stock exchanges as on 31st March, 2014:

1.    National Stock Exchange of India Ltd. (NSE)

2.    Bombay Stock Exchange (BSE)

3.    Delhi Stock Exchange (DSE)

26.   APPRECIATION  AND GRATITUDE

Your Directors acknowledge with gratitude the valuable guidance, support and co-operation extended by various Ministries of the Government of India including the Ministries of Housing & Urban Poverty Alleviation, Urban Development, Rural Development, Finance, External Affairs, Planning Commission, Reserve Bank of India, National Housing Bank, Bankers, Financial Institutions, Credit Rating agencies, Comptroller & Auditor General of India, Statutory Auditors and other Governments’ Agencies/Departments. Your directors also appreciate the continued support provided by the International Finance Institutions, such as Kreditanstalt fur Wideraufbau (KfW), Japan Bank of International Cooperation (JBIC), Asian Development Bank (ADB), USAID, etc.

Your Directors also acknowledge their gratitude to various State Governments, Housing Boards, Development Authorities, Municipal/Local Bodies and other Institutions for their continued support and confidence reposed in your Company and for their valuable suggestions.

Your Directors also place on record its appreciation to the debenture/bond holders, depositors and other investors/ stakeholders for their unstinted support and confidence reposed in the organization and their continued support has been a source of inspiration and strength to the Company.

Your Directors also take this opportunity to place on record its appreciation to the hard work, dedication, commitment and unstinted efforts put in by all the members of HUDCO family. 

 

	For and on behalf of the Board of Directors
Place: New Delhi Dated:30.07.2014	Sd/- Dr. M.  Ravi Kanth Chairman & Managing Director DIN:- 01612905 Flat No. 235 & 236, Asian Games Village Complex (AGVC), Asiad Village, New Delhi, 110049

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

1.    INDUSTRY STRUCTURE AND DEVELOPMENTS

The overall economic activity of the Indian economy remained subdued in  2013-14, which was reflected in the GDP growth figures. The quarterly GDP during Q1, Q2 and Q3 of 2013-14 registered growth rates of 4.4%, 4.8% and 4.7% respectively- all below 5%. The overall GDP growth for the year 2013-14 is estimated at 4.9%.During the course of 2013-14, monetary policy had to face challenges of financial turbulence arising from the US Fed contemplating tapering its large scale asset purchase programme. This sparked off turning of the global interest rate cycle with volatile movements for cross-border capital flows and asset prices. As a result, like most emerging markets and developing economies, India faced capital outflows and intense exchange rate pressures. In response to these developments, monetary policy had to depart from its charted course of calibrated monetary easing that had started in April 2012. The event resulted in a rapid deterioration of financial conditions across emerging markets, including India. Stabilisation of the economy by restoring exchange rate stability became the overriding task. Short-term interest rates were raised by hiking the Marginal Standing Facility (MSF) rate by 200 bps and siphoning off excess liquidity with a view to defending the Rupee Exchange rate.

Several other measures were introduced, either to restrain the current account deficit or to improve its financing. Following a host of such measures stability returned to the external front by a good measure. The monetary policy stance of the Reserve Bank of India has been driven by the imperatives of keeping inflation in check and supporting growth revival while managing a complex external economic situation. The inflation trend, especially the retail inflation remained elevated during most part of the year, barring the last quarter of the financial year. The interest rates had hardened marginally during the year.

With the general economic slowdown persisting and uncertainties looming large on the economic front, its ripple effects have been experienced by the housing, real estate and infrastructure sectors. As per the advanced estimate of GDP released by CSO, the construction sector’s growth is estimated at only 1.7% in FY14 compared to 1.1% in FY13.

However, the CSO data on third quarter GDP shows that construction sector grew only by 0.6% in Q3 of FY14 compared to 4.3% in the previous quarter. As per RBI’s data on sectoral deployment of bank credit, housing loans recorded a higher growth in FY14 at 18.4% compared to 15% in FY13 but the overall sentiment remained subdued. Similarly data on banking sector’s credit flow to infrastructure shows that it has recorded marginally lower growth at 15.1% in FY14 compared to 15.8% in FY13. As per Reserve Bank House Price Index (Base year = 2010-11), house price pressures, that abated in Q1 of 2013-14 had shown some signs of increase in Q2. The y-o-y increase in the RBI House Price Index at the all-India level was 15.0 per cent in Q2 of 2013-14 as compared to 13.8 per cent in the preceding quarter.

On the policy front, key developments in 2013-14 were: (1) National Urban Livelihood Mission was launched by the MoHUPA to reduce poverty and vulnerability of the urban poor households. The Mission has six areas of operation for which guidelines were issued: Employment through Skills Training & Placement, Social Mobilisation and Institution Development, Urban Street Vendors,Scheme of Shelters for Urban Homeless, Self Employment Programme,Capacity Building and Training;(2)A Model State Affordable Housing Policy was prepared by MoHUPA in September,2013; (3) The Task Force on Rental Housing, MoHUPA brought out its Report on Policy and Interventions to Spur Growth of Rental Housing in India recommending rental housing as the more workable solution especially for the poor.

2.    STRENGHTS AND WEAKNESSES

HUDCO is a leading techno-financial institution with strong corporate image in housing and urban development sectors it has an All-India presence and has a long -standing association with State Governments, State level agencies like Development Authorities, Housing Boards, Urban Local Bodies, Utilities etc. Having a vast and rich experience in project appraisal of housing and urban infrastructure projects, the Company is financially sound and consistently profit-earning organisation. It has a multidisciplinary human resource base of professionals and it provides capacity-building support to the housing and urban development sectors.

Some of the constraints that the company faces include a mismatch between assets and liabilities, with long gestation period of projects (short-term borrowing but long-term lending). The financial status of its main borrowers in the urban space, i.e. urban local bodies, is weak. HUDCO has an aging human resource with average age is 47 plus and no young blood has been infused into the Company as there has not been any fresh recruitment for the last 15 years. However, the process for fresh recruitment is underway.

3.   OPPORTUNITIES, THREATS, RISKS AND CONCERNS

India’s urban population is expected to go up from 377 million in 2011(Census,2011) to about 600 million for the year 2031 which implies an increase of over 200 million in just 20 years. There is a concentration of urban population in large cities and existing urban population in large cities and existing urban agglomeration. The census of 2011 notes that the number of towns in India increased from 5161 in 2001 to as many as 7935 in 2011. An addition of 2774 towns implies an increase in the market for HUDCO.

As per the estimates of the Technical Group on Urban Housing Shortage (2012-17), the housing shortage in urban areas is 18.78 million units, out of which 17.96 million units (95.62%) are for the EWS/LIG segment. This shows the housing finance potential for HUDCO.

The Government of India recognizes that its future growth trajectory would depend on the quality of infrastructure created. As per the Interim Report of the High Level Committee on Financing Infrastructure (August 2012), the government has set a massive target for doubling investment in infrastructure from Rs. 27 lakh crore in Eleventh Plan to Rs 51 lakh crore during the Twelfth Plan period, i.e. 2012–2017 which is an estimate for 10 major infrastructure sectors in the economy (electricity, roads & bridges, water supply & sanitation, telecom, railways, irrigation, ports, airports, storage, oil & gas pipelines). It is expected that private sector would contribute an increasing proportion to the required investment.

As far as the core-city-level infrastructure (water supply, sanitation, sewerage, solid waste management etc.) is concerned, the inherent nature of such projects makes it unattractive to the private sector and financial institutions like HUDCO have been lending to them. The total capital investment in this sector is estimated to be about Rs.39 lakh crore over the period 2010-30 (The High Powered Expert Committee (HPEC) for estimating the Investment Requirements for Urban Infrastructure Services, 2011). HUDCO is in fact one of the few players in the market lending for core-city-level infrastructure and also building the capacities of the service providers i.e. the urban local bodies and parastatal agencies.

The large gap between demand and supply in housing and urban infrastructure sectors provides a huge scope for HUDCO’S lending operations, there are around 8000 Urban Local Bodies (ULBs) in the country and HUDCO has to tap as many as possible because it is one of the few institutions which has the appetite to lend to urban local bodies by virtue of its experience over the years. There is untapped potential in the area of consultancy and other fee-based activities; there is scope to assist and support Micro-Housing Finance Institutions; Scope for development of government properties (construction business) through JV routes and scope for expansion/diversification in key commercially viable sectors (Real Estate, Power, Delhi Mumbai–Industrial Corridor and Amritsar–Kolkata Industrial Corridor).

HUDCO’s operational performance in 2013-14 was exceptional considering the macroeconomic scenario in which it had to operate. Despite slow GDP growth, high levels of inflation, high interest rates, HUDCO maintained its stability by following a policy mix of cautious lending, careful appraisal, prudent resource mobilization etc. The company strengthened its ties with the traditional borrowers and maintained its core competence and closed the year with a satisfactory performance especially against its MoU targets. Other challenges that HUDCO faces in conducting its business are: competition from Banks and Financial Institutions – HDFC, PNBHFL, LICHFL; poor health of borrowers especially Urban Local Bodies (ULBs), NPA build-up, reaching exposure limit in case of borrowing States.

4.   SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

This has already been discussed in Housing and Urban Infrastructure section of the Directors' Report.

5.   FUTURE OUTLOOK

Govt. of India has envisaged various Industrial / Economic corridors such as Delhi Mumbai Industrial Corridor (DMIC), Amritsar-Kolkata Industrial Corridor Development Corporation Ltd. (AKICDC), Mumbai-Bangalore Economic Corridor (MBEC), and Chennai-Bangalore Industrial Corridor (CBIC). These projects will see major expansion of Infrastructure and Industry – including industrial clusters and rail, road, port, air connectivity – in the states along the route of the Corridors.

HUDCO has subscribed to 19.90% (Rs.19.90 crore) of the equity capital of Delhi Mumbai Industrial Corridor Development Corporation Ltd. (DMICDC). By utilizing the high capacity western dedicated railway freight corridor as the backbone, DMICDC has a vision to develop seven Industrial cities (in Phase-I) along Delhi Mumbai corridor, which can compete with the best manufacturing and investment destinations in the World. Through this endeavour, HUDCO has not only been able to secure participation in the prestigious flagship infrastructure project of the country, but could also avail business opportunities from the State Governments along the Delhi-Mumbai Infrastructure Corridor in financing of land acquisition, new township development and related infrastructure projects.

HUDCO has accorded an in-principle approval to AKICDC for equity investment of Rs. 16 to Rs. 26 crore. HUDCO is also very keen in financing of land acquisition, new township development and related infrastructure projects in AKICDC, CBIC and MBEC industrial / Economic Corridors.

HUDCO has also funded the projects of Piped Natural Gas (PNG), Compressed Natural Gas (CNG) Station in the State of Gujarat. There is a vast scope in Oil, Gas & Energy Sectors.

6.   INTERNAL CONTROL SYSTEM AND ITS ADEQUACY

Internal Control System entails the overall control environment established by the management of an organization for effective and efficient monitoring and control of its operations. It endeavours to ensure adherence to the management policies, safeguarding of assets of the enterprise and proper accounting and recording of the business transactions.

HUDCO has well laid down internal control system with adequate checks and balances in various operational areas. It is regulated and controlled by Master Circulars, Operational Circulars, Guidelines, Checklists, Manuals etc., which ensures the proper functioning of the internal control system. There is also a detailed system of authorization of transaction through delegation of authority and responsibility. The norms for concurrence of the proposals are prescribed for technical, legal and financial areas and their adherence is ensured. The financial transactions of Hudco are recorded in the customized software package with inbuilt control mechanism. These are constantly reviewed and updated keeping in view the latest developments on the economic scenario and experience learnt during the courses of operations.

7. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

This portion has already been discussed in the Directors’ Report under the heading ‘Operational achievements’.

8.   MATERIAL DEVELOPMENTS IN HUMAN RESOURCES, INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

During the year, the total employee strength of your Company stood at 916 comprising of 684 executives and 232 non-executives as on 31st March, 2014.  Out of the total strength, there were 168 SCs, 56 STs, 78 OBCs, 17 Physically Handicapped and 21 Ex-servicemen employees.The total number of women employees was 262, including 50 employees in SC/ST category. HUDCO continues to follow the Government policies on reservation for SC / ST/ OBCs etc.

9. ENVIRONMENTAL PROTECTION AND CONSERVATION, TECHNOLOGICAL CONSERVATION, RENEWABLE ENERGY  DEVELOPMENTS,   FOREIGN EXCHANGE CONSERVATION

This portion has already been discussed in the Directors’ Report. Further, Renewable Energy Development, due to its distinctive nature, is beyond the scope of operations of HUDCO.

10.  CORPORATE SOCIAL RESPONSIBILITY

This portion has already been discussed in the Directors’ Report under the heading ‘Corporate Social Responsibility’ and Sustainable Development Activities’.

11.    CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis Report with regard to projections, estimates and expectations have been made in good faith. Many unforeseen factors may come into play and affect the actual results, which could be different from what the Management envisages in terms of performance and outlook. The Management of the Company reserves the right to re-visit any of the predictive statements to decide the best course of action for meeting social and human obligations. 

***

CORPORATE GOVERNANCE REPORT

HUDCO has established a system of Corporate Governance with emphasis on compliance of law(s), rules & regulations in its true letter and spirit and safeguarding the interest of all its stakeholders & maximizing their wealth

HUDCO has been complying with the requirements of Corporate Governance as stipulatedin the guidelines on Corporate Governance issued by the Department of Public Enterprises (DPE), Government of India applicable to Central Public Sector Enterprises (CPSE), from time to time. A report on Corporate Governance is given below along with Statutory Auditor’s Certificate regarding compliance of the conditions of Corporate Governance. 

1.   CORPORATE GOVERNANCE POLICY IN THE COMPANY

HUDCO, Board of Directors is managing its business in an ethical, fair and transparent manner with emphasis on commitment to quality of governance, transparency, timely disclosure of all material information, maximization of stakeholders’ wealth and Corporate Social Responsibility.

At HUDCO, your Management is taking all possible steps in a time bound manner to ensure compliance of not only the prevalent statutory provisions relating to Corporate Governance but also believes in adopting the best practices that are being followed in the field of Corporate Governance across the country as per the global trends. 

Your Company continues its efforts towards upgrading its systems and procedures on regular basis being a continuous process for raising the standards of Corporate Governance and bring transparency in its business and operations.

2.   BOARD OF DIRECTORS

HUDCOis a Government Company within the meaning of section 2(45) of the Companies Act, 2013, as President of India presently holds 100 % of its paid up equity share capital.

As per Articles of Association of the Company, the power to appoint Directors vests in the President of India. Further as per Articles, the number of Directors at any time shall not be less than three and more than ten. The directors are not required to hold any qualification shares.   

2.1 Composition of Board and Category of Directors.

As on 31st March, 2014, HUDCO Board comprises of 8 Directors, comprising of three Functional Directors including Chairman & Managing Director, two Government nominee Directors and three Independent Directors, hence, have a optimum combination of Executive & Non-executive Directors.

HUDCO Board’s composition as on 31st March, 2014 is as follows:

Sl. No.	Name	Position	Qualification
Whole Time Directors (Executive Directors)
1	Shri V  P  Baligar  (DIN 00850615)	Chairman & Managing Director	B. Tech, MBA
2	Shri Nand Lal Manjoka (DIN 06560566)	Director (Corporate Planning)	AMIE (Civil Eng.), MBA in International Business from IIFT, New Delhi. Executive Master in International Business from IIFT, New Delhi.
3	Shri Anil Kumar Kaushik (DIN 06600755)	Director (Finance)	M.Com, LL.B., ACMA, ACS
Government Nominee Directors (Non-Executive Directors)
4	Shri K B S Sidhu (DIN 03128133)	Director (Government Nominee)	BE (Electronics & Electrical Comm), Masters of Arts (Economics) (Development Administration and Management. Leaders in Development, Certificate Course from Harvard University, USA.
5	Shri Naresh Salecha (DIN 00843812)	Director (Government Nominee)	M.B.A., LL.B.
Independent Directors   ( Non-Executive Directors)
6	Prof. Dinesh Mehta (DIN 01957927)	Independent  Director	Civil Engineering, PGD Planning, Masters in Regional Planning, M.A. and Ph.D.
7	Shri Virender Ganda (DIN 01013057)	Independent  Director	B.SC, LL.B., F.C.S., F.I.C.W.A.
8	Prof. Sukhadeo Thorat (DIN 06414412)	Independent  Director	MA (Eco.), M.Phil./Ph.D.(Economics),  Diploma in Economic Planning & Honorary D.Litt.

No Director is related to any other Directors in any manner. As per DPE guidelines, the Independent Directors shall be at least 50% of Board’s strength, therefore number of Independent Directors are short of two than the required strength. The Company has already taken up the matter with the Ministry of Housing & Urban Poverty Alleviation, Government of India.

Further, after the close of financial year 2013-14, Shri V P Baligar and Shri Naresh Salecha ceased to be Chairman & Managing Director and Director on the Board of the Company with effect from 10th April, 2014 and 3rd May, 2014 respectively on completion of their term(s).

The vacancy caused on completion of term of Shri V P Baligar and Shri Naresh Salecha as Chairman & Managing Director and Director respectively was filled with the appointment of Dr. M.Ravi Kanth, IAS(r), as Chairman & Managing Director and Smt. Jhanja Tripathy, Joint Secretary & Financial Advisor, Ministry of Housing & Urban Poverty Alleviation, Government of India as Government Nominee Director effective from 11th April, 2014 and 3rd May, 2014 respectively, the brief of whom is as under:

 

Sl. No.	Name	Position	Qualification
Whole Time Director (Executive Director)
1	Dr. M. Ravi Kanth w.e.f. 11/04/2014. (DIN no. 01612905)	Chairman & Managing Director	MA (Economics), Ph.D. (Agri-Exports), LL.B and  MBA (Finance)
Government Nominee Director  (Non-Executive Director)
2.	Smt. Jhanja Tripathy w.e.f. 03/05/2014 (DIN no. 06859312)	Director (Government Nominee)	Masters in Psychology and Post Graduate Diploma in Industrial Relations & Personnel Management.

Dr. M. Ravi Kanth

Dr. M. Ravi Kanth is 1986 batch ex-IAS officer of Kerala Cadre. He took over as Chairman & Managing Director of HUDCO on 11th April, 2014.

Prior to joining HUDCO, he was Chairman & Managing Director of Project & Development India Ltd., (PDIL). He held important positions such as Principal Secretary to the Government of Kerala and Joint Secretary, Ministry of Power, Government of India, New Delhi and had served at various other important positions in Government of India and Government of Kerala as well as Govt. of Delhi.

Dr. M. Ravi Kanth is Masters in Economics, Doctorate in Agri–Exports from AndhraUniversity, LL.B. from DelhiUniversity and MBA in finance from Melbourne, Australia.

He holds directorship in Delhi Mumbai Industrial Corridor Development Corporation Limited and does not hold membership of committees of the Board in other Companies.

Smt. Jhanja Tripathy

Smt. Jhanja Tripathy, Joint Secretary & Financial Adviser, Ministry of Housing & Urban Poverty Alleviation (MoHUPA), is a 1986 batch of Indian Railways & Accounts Services (IRAS). She has been appointed as Government Nominee Director (Non-executive) with HUDCO on 3rd May, 2014.

Smt. Tripathy has wide experience in finance and administration field and held many senior positions during her service with Railways/Government of India. Before joining, MoHUPA, as Joint Secretary & Financial Advisor, she was Executive Director (Finance) at Sports Authority of India. She held the position of Secretary of the Railways Sports Promotion Board.

Smt. Tripathy is Masters in Psychology and Post Graduate Diploma in Industrial Relations & Personnel Management.

She holds directorship in Hindustan Prefab Limited and Kolkata Metro Rail Corporation and does not hold membership of committees of the Board in other companies.

2.2    Details of the Board Meeting(s) held, dates on which held during the financial year 2013-14

During the year, the Board of Directors met 14 times to transact the business of the Company, the details of which are as follows:

Sr. No.	Date of Meeting(s)	Place	Board Strength	No. of Director(s) Present
1.	23.04.2013	New Delhi	8	5
2.	07.06.2013	New Delhi	9	6
3.	28.06.2013	New Delhi	9	6
4.	31.07.2013	New Delhi	9	6
5.	23.08.2013	New Delhi	8	5
6.	12.09.2013	New Delhi	8	7
7.	10.10.2013	New Delhi	8	7
8.	28.10.2013	New Delhi	8	6
9.	20.11.2013	New Delhi	8	6
10.	19.12.2013	New Delhi	8	5
11.	15.01.2014	New Delhi	8	8
12.	29.01.2014	New Delhi	8	5
13.	19.02.2014	New Delhi	8	6
14.	26.03.2014	New Delhi	8	5

2.3    Attendance Record and Directorship/Committee Position held during the   financial year 2013-14.

S. No	Name of the Director(s)	No. of Board Meeting(s)	Last AGM Attended (A.G.M. held on 28th June, 2013)	Number of other directorship/committee membership held on 31.03.2014
Held during their tenure in 2013-14	Attended	Director- ship	Committee Member-ship
1.	Shri VP Baligar	14	13	Yes	2	0
2.	Shri N L Manjoka (from 11/04/2013)	14	14	Yes	0	0
3.	Shri Anil Kumar Kaushik (from 30/05/2013)	13	13	Yes	0	0
4.	Shri KBS Sidhu (From 30/08/2013)	9	8	No.	1	0
5.	Shri Naresh Salecha	14	6	Yes (also as a shareholder)	3	2
6.	Prof. Dinesh Mehta	14	9	Yes	0	0
7.	Shri Virender Ganda	14	14	Yes (also as Chairman of the Audit Committee)	0	1
8.	Prof Sukhadeo Thorat	14	5	No	0	0
9.	Shri Susheel Kumar (upto 30/08/2013)	5	1	No	2	0
10.	Shri Nasser Munjee (upto 04/08/2013)	4	0	No	14	9

None of the Directors on the Board of HUDCO was a member of more than 10 Committees, and Chairman of more than 5 Committees, across all the Companies (Public Limited) in which, he/she/they is/are the Director(s). For computation of limit of chairmanship/ membership of the Committees, only, chairmanship/ membership of Audit Committee and Shareholders’ Grievance Committee are considered as per DPE guidelines.

2.5       Declaration of the Code of Conduct

The Board of Directors of your company has laid down HUDCO’s Code of Conduct and Ethics for all Board Members and Senior Management Personnel of the Company as per the DPE guidelines and the same has been placed on the website. All the Board Members and Senior Management Personnel have affirmed compliance with the Code.

Declaration

It is hereby declared that the Company has obtained from the Board and Senior Management Personnel of the Company, affirmation that they have complied with the HUDCO’s Code of Conduct and Ethics. The said affirmation is subject to:

1.    The condition of not less than the fifty percent of Board members being non-executive and independent is not complied with. Matter has already been taken up with the Ministry of Housing & Urban Poverty Alleviation, for filling up the vacancies of Independent Directors.

2.    The Company has complied with all applicable Accounting Standards issued by the Institute of Chartered Accountants of India, except Accounting Standard AS-9 “Revenue Recognition” regarding accounting of application fees, front-end-fees, administrative fees and processing fees on loans on realisation basis instead of accrual basis;

3.    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 one case the investment in equity share of HFC i.e. Indbank Housing Ltd is beyond the ceiling of 15% as prescribed, which was invested around twenty years back.

4.    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 31st March, 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.

                                                                   Sd/-

Place: New Delhi                                            Dr. M. Ravi Kanth

Date:  30.07.2014                         Chairman & Managing Director

                                                                                         DIN:- 01612905

Flat No. 235 & 236, AsianGamesVillage Complex (AGVC),

                                                                        Asiad Village,  New Delhi, 110049

3.   AUDIT COMMITTEE   

3.1    Composition of the Audit Committee

The Composition of the Audit Committee is in accordance with the provisions of Section 292-A of the Companies Act, 1956 and as per DPE guidelines.

As on 31st March, 2014, the Committee consists of five members, out of which three are Independent Directors (Non-Executive) and two are Government Nominee Directors (Non-Executive).

The Audit Committee comprised of the following members during the year.

 

Sl. No.	Name	Position	Tenure as Audit Committee Member	Status of Member
1.	Shri Virender Ganda	Chairman	(From 19.03.2012)	Independent – Non Executive
2.	Prof. Dinesh Mehta	Member	(From 30.07.2012)	Independent – Non Executive
3.	Shri Naresh Salecha	Member	(From 21.12.2012)	Government Nominee–Non Executive
4.	Shri KBS Sidhu	Member	(From 15.01.2014)	Government Nominee–Non Executive
5.	Prof. Sukhadeo Thorat	Member	(From 15.01.2014)	Independent– Non Executive
6.	Shri Nasser Munjee	Member	(From 05.01.2011 to 04.08.2013)	Independent – Non Executive

As on date, the Audit Committee consists of Shri Virender Ganda, as Chairman, Prof. Dinesh Mehta, Prof. Sukhadeo Thorat and Mrs. Jhanja Tripathy (w.e.f. 03.05.2014) as members. Shri KBS Sidhu and Shri Naresh Salecha ceased to be members of the Committee w.e.f. 30th April, 2014 and 3rd May, 2014 respectively.

Secretary to the Audit Committee:

 

Shri H Verma, (Upto 6.11.2013)	Company Secretary, HUDCO
Shri Harish Kumar Sharma, (From 6.11.2013)	Company Secretary, HUDCO

3.2 Terms of reference of the Audit Committee

The terms of reference of Audit Committee are to comply with the provisions of the Companies Act, 1956 relating to Audit Committee and to comply with the guidelines relating to Audit Committee as contained under Corporate Governance guidelines for Central Public Sector Enterprises (CPSEs) issued by the Department of Public Enterprises and such other functions as has been assigned by the Board from time to time. The meetings of the Audit Committee are regularly held to review various tasks as per terms of reference of the Committee.

The Company Secretary acts as the Secretary to the Audit Committee. The Head of the Finance Department, Statutory Auditors and Internal Auditors of the Company are also invited for the meeting of the Audit Committee as per requirement. The recommendations of the Audit Committee were considered/ accepted and implemented by the Board.

3.3   Audit Committee Meetings and Attendance for the year 2013-14.

During the year, six meetings of the Audit Committee were held, as per following details:

Detail of the meetings

 

Sl. No.	Date of Meeting(s)	Place	Total Strength	No. of Member(s) Present
1.	23.04.2013	New Delhi	4	2
2.	07.06.2013	New Delhi	4	2
3.	31.07.2013	New Delhi	4	3
4.	19.08.2013	New Delhi	3	2
5.	28.10.2013	New Delhi	3	2
6.	29.01.2014	New Delhi	5	2

Attendance of members at the meetings

 

Sl. No	Name of Member	No. of Audit Committee Meeting(s)
Held during their tenure in 2013-14	Attended
1.	Shri Virender Ganda	6	6
2.	Prof. Dinesh Mehta	6	4
3.	Shri Naresh Salecha	6	2
4	Shri KBS Sidhu	1	0
5.	Prof. Sukhadeo Thorat	1	1
6.	Shri Nasser Munjee	3	0

Shri Anil Kumar Kaushik, Director (Finance) attended the Audit Committee meeting(s) as a Special Invitee.

4.         REMUNERATION COMMITTEE

4.1HUDCO, being a Central Public Sector Undertaking, the appointment, terms & conditions of appointment and remuneration payable to its Chairman & Managing Director and Whole-Time Directors (Executive) are approved by the President of India through the Administrative Ministry i.e. ‘Ministry of Housing & Urban Poverty Alleviation’. 

As per DPE guidelines on Corporate Governance, “Remuneration Committee” was constituted by the Board to decide the annual bonus/variable pay pool and policy for its distribution across the executives and non-unionised supervisors’ within the prescribed limits.

4.2. Composition of Committees

As on 31st March, 2014, the committee consists of three members, out of which two are Independent Directors (Non-executive) and one is Government Nominee Director (Non-executive). The Committee is headed by Shri. Virender Ganda, as Chairman, an Independent Director (Non - executive) and other members of the Committee are Prof. Dinesh Mehta (Independent Director) and Shri Naresh Salecha (Govt. nominee Director).

4.3. Detail of the meetings and record of attendance

During the year four meetings of the Remuneration Committee were held, detail of the meetings and record of attendance there at is as under:

Detail of the Meetings

Sl. No.	Date of Meeting(s)	Place	Total Strength	No. of Member(s) Present
1.	23.04.2013	New Delhi	3	2
2.	30.10.2013	New Delhi	3	2
3.	15.01.2014	New Delhi	3	2
4.	19.02.2014	New Delhi	3	2

Attendance of members at the meetings

 

Sl. No.	Name of Member	No. of Meeting(s)
held during their tenure in 2013-14	attended
1.	Shri Virender Ganda	4	4
2.	Prof. Dinesh Mehta	4	3
3.	Shri Nasser Munjee	1	0
4	Shri Naresh Salecha	3	1

4.4 Independent Directors (Non-Executives) are paid sitting fees for attending each meeting of the Board/ Audit Committee and other Committee of Directors.

4.5    Details of Remuneration of Whole Time Directors

The Whole Time Director(s) including Chairman & Managing Director were paid remuneration as per terms and conditions of their appointments approved by Government of India. Details of the remuneration paid to the whole time directors during the financial year 2013-14 are given below:

 

Sl. No.	Name of Director	Salary/ Allowances	Benefits*	Performance Linked Incentives	Gross Amount
1.	Shri VP Baligar Chairman & Managing Director	18,19,200	4,90,345	-	23,09,545
2.	Shri N L Manjoka ** Director (Corporate Planning)	18,11,470	8,23,531	-	26,35,001
3.	Shri A K Kaushik*** Director (Finance)	16,25,057	4,11,337	5,78,172	26,14,966

*     Benefits include medical reimbursement, leave encashment, perquisites, lease rent, EPF etc.

**   For the period from:  11th April, 2013 to 31st March, 2014

***   For the period from:  30th May, 2013 to 31st March, 2014

4.6       Details of Remuneration of Independent Directors and      Government Nominee Directors

Independent Directors (Non-Executive Directors) are paid sitting fee at the rate of Rs. 10,000/- for each meeting of the Board and at the rate of Rs. 8000/- for each meeting of the Committee(s) attended by them. Details of sitting fee paid to Independent Directors during the year 2013-14 are as given below: -

 

SI. No.	Name of the Independent Director	Sitting Fee	Total (Rs.)
Board Meeting (Rs.)	Committee Meeting (Rs.)
1.	Shri Nasser Munjee	0	0	0
2.	Prof. Dinesh Mehta	90,000	1,36,000	2,26,000
3.	Shri Virender Ganda	1,40,000	2,00,000	3,40,000
4.	Prof. Sukhadeo Thorat	50,000	64,000	1,14,000

Government Nominee Directors (Non-Executive), are not paid any remuneration or sitting fee by the Company.

5.   SHAREHOLDERS/ INVESTORS GRIEVANCE COMMITTEE

HUDCO, being a Government Company, its entire Share Capital is held by the President of India and its nominee(s), hence, no Shareholders/Investors Grievance Committee is required to be constituted.

6.   DETAILS OF GENERAL MEETING(s)

6.1 Date, location and time of the last three AGM of the company   

 

Financial Year	Location	Date	Time	Special Resolution Passed
2012-13	Registered Office, New Delhi	28.06.2013	12.30 p.m.	-
2011-12	Registered Office, New Delhi	09.07.2012	12.00 p.m.	-
2010-11	Registered Office, New Delhi	29.06.2011	5:00 p.m.	-

6.2       Extra-ordinary General Meeting.

During the year, one Extra-ordinary General Meeting was held on 7th May, 2013 for seeking approval of the shareholders by way of special resolution for alteration by way of insertion of new clause under the Object Clause.

6.3       Resolution through Postal Ballot

No resolution has been passed through Postal Ballot during the financial             year 2013 -14.

7.   DISCLOSURES

a)    The condition no. 3.1.4 on Corporate Governance applicable to Central Public Sector Enterprises (CPSE) issued by the Department of Public Enterprises, (DPE) regarding the number of Independent Directors has not been complied with.  The Company as on 31st March, 2014 is short of two Independent Directors and the matter has been taken up with the Ministry. All other compliances as prescribed as per DPE guidelines have been complied with. Matter has already been taken up with the Ministry of Housing & Urban Poverty Alleviation, for filling up the vacancies of independent Directors.

b)    There were no material transactions with related parties that may have potential conflict with the interest of the Company at large. 

c)    There are no penalties, strictures imposed on the Company by any statutory body, in any manner relating to the guidelines issued by the Government and non-compliance, during the last three years.

d)    The Company has a Whistle Blower Policy, empowering employees to report to the management concerns about any unethical or improper activity/practice, actual or suspected fraud, or violation of the Company’s general guidelines on Conduct & Ethics Policy. They are also empowered to have access/report to the Audit Committee of the Company and further confirm that no personnel has denied access to the Audit Committee.

e)    An amount of Rs.25,41,978/- (on account of perquisite tax paid by the Company, amounting to Rs.24,91,846/- and HUDCO recreation club expenditure of Rs.50131/-) has been adjusted in the books of accounts which are not for the purpose of business.

f)     No expenses, personal in any nature have been incurred for the Board of Directors and top management.

g)    An amount of Rs.57.88 crore has been incurred towards Administrative and Office expenses constituting 2.84 per cent of total expenses vice-versa 3.4 percent of financial expenses.

h)   The Company’s Board comprises of optimum combination of executive and non-executive Director(s) with varied range of skills, experience and expertise in different fields. For the professional development and knowledge of HUDCO’s operating environment, the Management encouraged them to keep up to date on relevant issues and provided/nominated them for various programmes from time to time.

i)      The Audit Report for the year 2013-14 has been considered by the Audit Committee & Board of Directors and the observations, pointed by the Auditors’, have been suitably replied in the Directors’ Report.

8.    CEO/CFO CERTIFICATION AS REQUIRED UNDER DPE GUIDELINES

 To the Board of Directors

Housing & Urban Development Corporation Ltd.

We hereby certify to the Board that:

 

a)	We have reviewed the financial statements and the cash flow statement of the Company for the year ended March 31, 2014 and to the best of our knowledge and belief:
	i)	These statements do not contain any materially untrue statement or omit any material fact or contain statement that might be misleading.
	ii)	These statements together present a true and fair view of the Company’s affairs and are in compliance with existing accounting standards, applicable laws and regulations.­­­
b)	There are, to the best of our knowledge and belief, no transactions entered into by the Company during the year which are fraudulent, illegal or violative of the Company’s code of conduct.
c)	We accept responsibility for establishing and maintaining internal controls for financial reporting and that we have evaluated the effectiveness of the internal control systems of the Company pertaining to financial reporting and we have disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which we are aware and the steps we have taken or propose to take to rectify these deficiencies.
d)	We have indicated to the auditors and the Audit Committee:
	i)	Significant changes in internal control over financial reporting during the year;
	ii)	Significant changes in accounting policies during the year and that the same have been disclosed in the notes to the financial statements; and
	iii)	Instances of significant fraud of which we have become aware and the involvement therein, if any, of the management or an employee having a significant role in the Company’s internal control system over financial reporting.

                         for Housing & Urban Development Corporation Ltd.

 

Date:	13th June, 2014	Sd/- Anil Kumar Kaushik	Sd/- Dr. M. Ravi Kanth
Place:	New Delhi	Director (Finance)	Chairman & Managing Director
		DIN: 06600755 P-290, Sector -12, Pratap Vihar, Ghaziabad-201009, Uttar Pradesh.	DIN:- 01612905 Flat No. 235 & 236, Asian Games Village Complex (AGVC), Asiad Village,  New Delhi-110049

9.  PRESIDENTIAL DIRECTIVES

During the financial year ending March 31, 2014, no Presidential Directive has been received.

10.  MEANS OF COMMUNICATIONS:               

a)     Half yearly (Unaudited) results as reviewed by the Statutory Auditors and Annual audited financial results of the Company as recommended by the Audit Committee and approved by the Board of Directors are submitted to Stock Exchanges and published in the newspapers.

b)     Quarterly results though not mandatory as per listing requirements, yet, the same are placed before the Audit Committee and as recommended by the Audit Committee, the same are approved by the Board.

 

Half yearly result	:	Press advertisements, information to Stock Exchanges etc.
Annual/half yearly/Quarterly results	:	Normally advertised in Economic Times, Financial Express etc.
Website where annual/half yearly/ quarterly results are displayed	:	www.hudco.org
Whether it also displays official news releases and presentations made to institutional investors/analysts	:	Yes

11.  GENERAL SHAREHOLDER INFORMATION

11.1 44th Annual General Meeting:

 

Date and Time	:	To be held in the month of September, 2014
Venue	:	HUDCO Bhawan, India Habitat Centre, Lodhi Road, New Delhi-110003.

11.2   Calendar for the financial year 2014-15 (Tentative)

 

Accounting Period	:	1st April, 2014 to 31st March, 2015
Unaudited financial results (half yearly)	:	Within a period of 45 days from end of each half year.
Unaudited financial results (Quarterly)	:	Within a period of 45 days from end of each quarter.
Audited financial results for the last half year/ quarter	:	Within a period of 60 days from end of last half year/ quarter
Annual General Meeting (for next year)	:	September, 2015 (tentative)

11.3     Dividend Payment Date

The Board of Directors has recommended a final dividend of Rs.100.01crore for the financial year ending on 31st March, 2014 and the same shall be paid within statutory time period, after its declaration/approval by shareholders in the Annual General Meeting of the Company.

11.4   Listing of Securities on Stock Exchanges

As on 31st March, 2014, HUDCO Bonds were listed only on - 

(i)         National Stock Exchange of India Limited (NSE),

(ii)        Bombay Stock Exchange (BSE) and

(iii)       Delhi Stock Exchange (DSE).

11.5     Dematerialization

The different bonds series of the Company have been admitted as an eligible security for trading in dematerialization form by National Securities Depository Ltd. (NSDL) and Central Depository Services (India) Ltd (CDSL).

11.6   Address & name of Registrars and Transfer Agents

 

1.	Alankit Assignment Limited Alankit House, 2E/21, Jhandewalan Extn., New Delhi-110055   Telephone No.011-42541234/23541234, Fax No.011-23552001 Email – info@alankit.com
2.	Link Intime India Private Limited, 44, 2nd Floor, Community Centre, Naraina Industrial Area, Phase-I, Near PVR, Naraina, New Delhi-110028 Telephone No.011-41410592-94/25896893/25897309 Fax No. 011-41410591, Email – delhi@linkintime.co.in
3.	Beetal Financial & Computer Services (P) Limited, Beetal House, 3rd floor, 99, Madangir, Behind Local Shopping Centre, New Delhi-110062 Telephone No 011-29961281-83, Fax No 011-29961284 Email - beetalrta@gmail.com
4.	Karvy Computer Share Pvt. Ltd. Plot No. 17 to 24, Vithal Rao Nagar, Madhapur, Hyderabad – 500081. Telephone No. 040-44655000, Fax No.04023431551 Email -  e.inward.ris@karvy.com

11.7    Names and address of Trustees.

1.   PNB Investment Services Ltd.

      10  RakeshDeepBuilding,

      Yusuf Sarai Commercial Complex,

      Gulmohar Enclave, New Delhi - 110049                                   

      Phone No: 011-41032929

      Fax no: 011-41035057

      Email- coo@pnbisl.com

2.  SBICAP Trustee Company Limited

      Apeejay House,  6th Floor,

     3 Dinshaw Wachha Road, Church Gate,

            Mumbai – 400 020.

Telephone no.  022-43025555

Fax no: 022-43025500

E-mail- corporate@sbicaptrustee.com  

3.    IL&FS Trust Company Ltd.

      IL&FS Financial Centre,

      Plot No.C-22, G Block, Bandra Kurla Complex,

      Bandra (E), Mumbai -400051.

      Phone No.022-26593560

     Fax No. 022-26533149

     Email: itcl@ilfsindia.com, itcldata@gmail.com

4.   Axis Trustee Services Ltd.

2nd Floor, Axis House C-2, Wadia International Centre,

      Bombay Dyeing Mills,

      Pandurang Budhkar Marg,

      Worli, Mumbai – 400 025.

      Phone No. 022-24252525/43252525

      Email: debenturetrustee@axistrustee.com

5.   IDBI Trusteeship Services Ltd.

     AsianBuilding, Ground Floor,

     17, R. Kamani Marg, Ballard Estate,

     Mumbai-400001.

            Ph. No. 02240807000, Fax No. 022-66311776

Email: itsl@idbitrustee.com                                                          

11.8   Shareholder’s Profile

                                  

Category	As on 31.3.2012	As on 31.3.2013	As on 31.3.2014
No. of Shares of (Rs. 1,000 each)	%   of Shares	No. of Shares of (Rs. 1,000 each)	% of Shares	No. of Shares of (Rs. 1,000 each)	% of Shares
President of India	2,00,18,993	99.999965	2,00,18,993	99.999965	2,00,18,993	99.999965
Others*	7	0.000035	7	0.000035	7	0.000035
Total	2,00,19,000	100.000000	2,00,19,000	100.000000	2,00,19,000	100.000000

*Nominees from the Ministry on behalf of the President of India.

11.9   Address for Communication

The Company Secretary

Housing and Urban Development Corporation Limited

HUDCO, HUDCO Bhawan, Core – 7A,

India Habitat Centre, Lodhi Road, New Delhi – 110003.

CIN No. :  U74899DLL970GOI005276     

Telephone No.: 011-24648420/24649610

Fax No.                        :  011-24625301, 24615534

E-mail                          :  hudco1970@gmail.com     

11.10   Web Site

Shareholders related information like Annual Report/Quarterly/half yearly financial results etc. is available on Company’s website www.hudco.org

Certificate by Statutory Auditors on Corporate Governance

As required under the DPE guidelines on Corporate Governance, the certificate from the Statutory Auditors pertaining to the Compliance of conditions of Corporate Governance is being annexed with the Directors’ Report.

AUDITORS' CERTIFICATE REGARDING COMPLIANCE WITH THE CONDITIONS OF CORPORATE GOVERNANCE UNDER CLAUSE 8.2 OF THE DPE GUIDELINES.
To the members of Housing and Urban Development Corporation Limited
We have examined the Compliance of conditions of Corporate Governance by the Housing and Urban Development Corporation Limited for the year ended 31st March, 2014 as stipulated in clause 8.2 of the DPE Guidelines.   The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of conditions of Corporate Governance as stipulated in the aforesaid clauses. It is neither an audit nor an expression of opinion on the financial statements of the Company.   In our opinion and to the best of our information and according to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above-mentioned clause of the listing agreement and of the DPE Guidelines, subject to the following:
1.	The condition of not less than the fifty percent of Board members being non-executive and independent is not complied with. Matter has already been taken up with the Ministry of Housing & Urban Poverty Alleviation, for filling up the vacancies of independent Directors.
2.	The Company has complied with all applicable Accounting Standards issued by the Institute of Chartered Accountants of India, except Accounting Standard AS-9 “Revenue Recognition” regarding accounting of application fees, front-end-fees, administration fees and processing fees on loans on realization basis instead of accrual basis;
3.	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 one case the investment in equity share of HFC i.e. Indbank Housing Ltd. is beyond the ceiling of 15% as prescribed, which was invested around twenty years back.
4.	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 31st March, 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.
We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.
	For M/s Dhawan & Co.                                                                     Chartered Accountants,Registration No.002864N                                                                                                                 Sd/-
Place: New Delhi Dated:30.07.2014	(Prakash N. Mathur ( Partner) (Membership no. 086292)

ADDENDUM – I                  

Annexure to the Directors’ Report

Management reply on the observations made by Statutory Auditors’ on the Corporate Governance report for the financial year ended 31st March 2014.

 

Sl. No.	Auditors observations on Corporate Governance	Management reply
1.	The condition of not less than the fifty percent of Board members being non-executive and independent is not complied with. Matter has already been taken up with the Ministry of Housing & Urban Poverty Alleviation, for filling up the vacancies of independent Directors.	HUDCO does not have the power to appoint Directors on its Board. The power to appoint the Director(s) vests with the Administrative Ministry. The said non-compliance was brought to the knowledge of the Administrative Ministry and was pursued for the appointment of independent Directors. HUDCO has made all best possible efforts within its control for compliance of the required provisions.
2.	The Company has complied with all applicable Accounting Standards issued by the Institute of Chartered Accountants of India, except Accounting Standard AS-9 “Revenue Recognition” regarding accounting of application fees, front-end-fees, administration fees and processing fees on loans on realization basis instead of accrual basis;	The Company has the accounting policy of recognising   application fees, front-end-fees, administration fees and processing fees on loans on realization basis, which has also been disclosed in the Accounting Policy No. 2 (b) of Note no.1: Significant Accounting Policies, part of Annual Accounts for the year 2013-14.
3.	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 one case the investment in equity share of HFC i.e. Indbank Housing Ltd. is beyond the ceiling of 15% as prescribed, which was invested around twenty years back.	HUDCO’s Board has already granted in-principle approval of merger of Ind Bank Housing Limited into Indian Bank. The swap ratio of the respective shares is to be finalised and then merger would be effected after approval of the Boards of HUDCO and Indian Bank, consequent upon which there would not be non-compliance of prudential norms regarding equity investment in Ind Bank Housing Limited.
4.	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 31st March, 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.	The additional provision is considered prudent keeping in view the unforeseen events & happenings such as change in policy of Government & procedural delays in repayment from Government agencies etc,.   The position has been disclosed in point no 3(b) in Note 24, Explanatory Notes of Annual Accounts for the year 2013-14.

 

	For and on behalf of the Board of Directors
Place: New Delhi Dated:12.0.2014	Sd/- Dr. M.  Ravi Kanth Chairman & Managing Director DIN:- 01612905 Flat No. 235 & 236, Asian Games Village Complex (AGVC), Asiad Village,, New Delhi, 110049

Reserves and Surplus

During the financial year under review, your Company has transferred Rs. 628.32 crore to the reserves comprising of Bonds/Debentures Redemption Reserve Rs.378.17 crore, Special Reserve under section 36(1)(viii) of the Income Tax Act, 1961, Rs.250 crore and General Reserve of Rs.0.15 crore.

Dividend

Your Directors are pleased to recommend a dividend of Rs.100.01 crore for the financial year 2013-14, subject to approval of the shareholders at the ensuing Annual General Meeting. Accordingly, a provision of Rs. 17 crore has been made towards tax on dividend.

Conservation of Energy

HUDCO is not a manufacturing Company and does not own any manufacturing unit; hence the disclosure of particulars regarding Conservation of Energy is not applicable. However, efforts are made for conservation of energy in the office(s) of HUDCO by use of energy efficient machines/ equipments/ lights while replacing the existing ones. Rain water harvesting methods are also adopted, wherever possible.

Technological Absorption

HUDCO has taken various measures in the field of technology absorption by extending financial assistance to the building material industries manufacturing building materials and other components, through the latest technology, which are innovative, cost effective and alternates to the conventional mode of manufacturing.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

1.    INDUSTRY STRUCTURE AND DEVELOPMENTS

The overall economic activity of the Indian economy remained subdued in  2013-14, which was reflected in the GDP growth figures. The quarterly GDP during Q1, Q2 and Q3 of 2013-14 registered growth rates of 4.4%, 4.8% and 4.7% respectively- all below 5%. The overall GDP growth for the year 2013-14 is estimated at 4.9%.During the course of 2013-14, monetary policy had to face challenges of financial turbulence arising from the US Fed contemplating tapering its large scale asset purchase programme. This sparked off turning of the global interest rate cycle with volatile movements for cross-border capital flows and asset prices. As a result, like most emerging markets and developing economies, India faced capital outflows and intense exchange rate pressures. In response to these developments, monetary policy had to depart from its charted course of calibrated monetary easing that had started in April 2012. The event resulted in a rapid deterioration of financial conditions across emerging markets, including India. Stabilisation of the economy by restoring exchange rate stability became the overriding task. Short-term interest rates were raised by hiking the Marginal Standing Facility (MSF) rate by 200 bps and siphoning off excess liquidity with a view to defending the Rupee Exchange rate.

Several other measures were introduced, either to restrain the current account deficit or to improve its financing. Following a host of such measures stability returned to the external front by a good measure. The monetary policy stance of the Reserve Bank of India has been driven by the imperatives of keeping inflation in check and supporting growth revival while managing a complex external economic situation. The inflation trend, especially the retail inflation remained elevated during most part of the year, barring the last quarter of the financial year. The interest rates had hardened marginally during the year.

With the general economic slowdown persisting and uncertainties looming large on the economic front, its ripple effects have been experienced by the housing, real estate and infrastructure sectors. As per the advanced estimate of GDP released by CSO, the construction sector’s growth is estimated at only 1.7% in FY14 compared to 1.1% in FY13.

However, the CSO data on third quarter GDP shows that construction sector grew only by 0.6% in Q3 of FY14 compared to 4.3% in the previous quarter. As per RBI’s data on sectoral deployment of bank credit, housing loans recorded a higher growth in FY14 at 18.4% compared to 15% in FY13 but the overall sentiment remained subdued. Similarly data on banking sector’s credit flow to infrastructure shows that it has recorded marginally lower growth at 15.1% in FY14 compared to 15.8% in FY13. As per Reserve Bank House Price Index (Base year = 2010-11), house price pressures, that abated in Q1 of 2013-14 had shown some signs of increase in Q2. The y-o-y increase in the RBI House Price Index at the all-India level was 15.0 per cent in Q2 of 2013-14 as compared to 13.8 per cent in the preceding quarter.

On the policy front, key developments in 2013-14 were: (1) National Urban Livelihood Mission was launched by the MoHUPA to reduce poverty and vulnerability of the urban poor households. The Mission has six areas of operation for which guidelines were issued: Employment through Skills Training & Placement, Social Mobilisation and Institution Development, Urban Street Vendors,Scheme of Shelters for Urban Homeless, Self Employment Programme,Capacity Building and Training;(2)A Model State Affordable Housing Policy was prepared by MoHUPA in September,2013; (3) The Task Force on Rental Housing, MoHUPA brought out its Report on Policy and Interventions to Spur Growth of Rental Housing in India recommending rental housing as the more workable solution especially for the poor.

2.    STRENGHTS AND WEAKNESSES

HUDCO is a leading techno-financial institution with strong corporate image in housing and urban development sectors it has an All-India presence and has a long -standing association with State Governments, State level agencies like Development Authorities, Housing Boards, Urban Local Bodies, Utilities etc. Having a vast and rich experience in project appraisal of housing and urban infrastructure projects, the Company is financially sound and consistently profit-earning organisation. It has a multidisciplinary human resource base of professionals and it provides capacity-building support to the housing and urban development sectors.

Some of the constraints that the company faces include a mismatch between assets and liabilities, with long gestation period of projects (short-term borrowing but long-term lending). The financial status of its main borrowers in the urban space, i.e. urban local bodies, is weak. HUDCO has an aging human resource with average age is 47 plus and no young blood has been infused into the Company as there has not been any fresh recruitment for the last 15 years. However, the process for fresh recruitment is underway.

3.   OPPORTUNITIES, THREATS, RISKS AND CONCERNS

India’s urban population is expected to go up from 377 million in 2011(Census,2011) to about 600 million for the year 2031 which implies an increase of over 200 million in just 20 years. There is a concentration of urban population in large cities and existing urban population in large cities and existing urban agglomeration. The census of 2011 notes that the number of towns in India increased from 5161 in 2001 to as many as 7935 in 2011. An addition of 2774 towns implies an increase in the market for HUDCO.

As per the estimates of the Technical Group on Urban Housing Shortage (2012-17), the housing shortage in urban areas is 18.78 million units, out of which 17.96 million units (95.62%) are for the EWS/LIG segment. This shows the housing finance potential for HUDCO.

The Government of India recognizes that its future growth trajectory would depend on the quality of infrastructure created. As per the Interim Report of the High Level Committee on Financing Infrastructure (August 2012), the government has set a massive target for doubling investment in infrastructure from Rs. 27 lakh crore in Eleventh Plan to Rs 51 lakh crore during the Twelfth Plan period, i.e. 2012–2017 which is an estimate for 10 major infrastructure sectors in the economy (electricity, roads & bridges, water supply & sanitation, telecom, railways, irrigation, ports, airports, storage, oil & gas pipelines). It is expected that private sector would contribute an increasing proportion to the required investment.

As far as the core-city-level infrastructure (water supply, sanitation, sewerage, solid waste management etc.) is concerned, the inherent nature of such projects makes it unattractive to the private sector and financial institutions like HUDCO have been lending to them. The total capital investment in this sector is estimated to be about Rs.39 lakh crore over the period 2010-30 (The High Powered Expert Committee (HPEC) for estimating the Investment Requirements for Urban Infrastructure Services, 2011). HUDCO is in fact one of the few players in the market lending for core-city-level infrastructure and also building the capacities of the service providers i.e. the urban local bodies and parastatal agencies.

The large gap between demand and supply in housing and urban infrastructure sectors provides a huge scope for HUDCO’S lending operations, there are around 8000 Urban Local Bodies (ULBs) in the country and HUDCO has to tap as many as possible because it is one of the few institutions which has the appetite to lend to urban local bodies by virtue of its experience over the years. There is untapped potential in the area of consultancy and other fee-based activities; there is scope to assist and support Micro-Housing Finance Institutions; Scope for development of government properties (construction business) through JV routes and scope for expansion/diversification in key commercially viable sectors (Real Estate, Power, Delhi Mumbai–Industrial Corridor and Amritsar–Kolkata Industrial Corridor).

HUDCO’s operational performance in 2013-14 was exceptional considering the macroeconomic scenario in which it had to operate. Despite slow GDP growth, high levels of inflation, high interest rates, HUDCO maintained its stability by following a policy mix of cautious lending, careful appraisal, prudent resource mobilization etc. The company strengthened its ties with the traditional borrowers and maintained its core competence and closed the year with a satisfactory performance especially against its MoU targets. Other challenges that HUDCO faces in conducting its business are: competition from Banks and Financial Institutions – HDFC, PNBHFL, LICHFL; poor health of borrowers especially Urban Local Bodies (ULBs), NPA build-up, reaching exposure limit in case of borrowing States.

4.   SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

This has already been discussed in Housing and Urban Infrastructure section of the Directors' Report.

5.   FUTURE OUTLOOK

Govt. of India has envisaged various Industrial / Economic corridors such as Delhi Mumbai Industrial Corridor (DMIC), Amritsar-Kolkata Industrial Corridor Development Corporation Ltd. (AKICDC), Mumbai-Bangalore Economic Corridor (MBEC), and Chennai-Bangalore Industrial Corridor (CBIC). These projects will see major expansion of Infrastructure and Industry – including industrial clusters and rail, road, port, air connectivity – in the states along the route of the Corridors.

HUDCO has subscribed to 19.90% (Rs.19.90 crore) of the equity capital of Delhi Mumbai Industrial Corridor Development Corporation Ltd. (DMICDC). By utilizing the high capacity western dedicated railway freight corridor as the backbone, DMICDC has a vision to develop seven Industrial cities (in Phase-I) along Delhi Mumbai corridor, which can compete with the best manufacturing and investment destinations in the World. Through this endeavour, HUDCO has not only been able to secure participation in the prestigious flagship infrastructure project of the country, but could also avail business opportunities from the State Governments along the Delhi-Mumbai Infrastructure Corridor in financing of land acquisition, new township development and related infrastructure projects.

HUDCO has accorded an in-principle approval to AKICDC for equity investment of Rs. 16 to Rs. 26 crore. HUDCO is also very keen in financing of land acquisition, new township development and related infrastructure projects in AKICDC, CBIC and MBEC industrial / Economic Corridors.

HUDCO has also funded the projects of Piped Natural Gas (PNG), Compressed Natural Gas (CNG) Station in the State of Gujarat. There is a vast scope in Oil, Gas & Energy Sectors.

6.   INTERNAL CONTROL SYSTEM AND ITS ADEQUACY

Internal Control System entails the overall control environment established by the management of an organization for effective and efficient monitoring and control of its operations. It endeavours to ensure adherence to the management policies, safeguarding of assets of the enterprise and proper accounting and recording of the business transactions.

HUDCO has well laid down internal control system with adequate checks and balances in various operational areas. It is regulated and controlled by Master Circulars, Operational Circulars, Guidelines, Checklists, Manuals etc., which ensures the proper functioning of the internal control system. There is also a detailed system of authorization of transaction through delegation of authority and responsibility. The norms for concurrence of the proposals are prescribed for technical, legal and financial areas and their adherence is ensured. The financial transactions of Hudco are recorded in the customized software package with inbuilt control mechanism. These are constantly reviewed and updated keeping in view the latest developments on the economic scenario and experience learnt during the courses of operations.

7. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

This portion has already been discussed in the Directors’ Report under the heading ‘Operational achievements’.

8.   MATERIAL DEVELOPMENTS IN HUMAN RESOURCES, INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

During the year, the total employee strength of your Company stood at 916 comprising of 684 executives and 232 non-executives as on 31st March, 2014.  Out of the total strength, there were 168 SCs, 56 STs, 78 OBCs, 17 Physically Handicapped and 21 Ex-servicemen employees.The total number of women employees was 262, including 50 employees in SC/ST category. HUDCO continues to follow the Government policies on reservation for SC / ST/ OBCs etc.

9. ENVIRONMENTAL PROTECTION AND CONSERVATION, TECHNOLOGICAL CONSERVATION, RENEWABLE ENERGY  DEVELOPMENTS,   FOREIGN EXCHANGE CONSERVATION

This portion has already been discussed in the Directors’ Report. Further, Renewable Energy Development, due to its distinctive nature, is beyond the scope of operations of HUDCO.

10.  CORPORATE SOCIAL RESPONSIBILITY

This portion has already been discussed in the Directors’ Report under the heading ‘Corporate Social Responsibility’ and Sustainable Development Activities’.

11.    CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis Report with regard to projections, estimates and expectations have been made in good faith. Many unforeseen factors may come into play and affect the actual results, which could be different from what the Management envisages in terms of performance and outlook. The Management of the Company reserves the right to re-visit any of the predictive statements to decide the best course of action for meeting social and human obligations. 

***

Foreign Exchange Earnings and Outgo

During the year, inflow on account of foreign exchange transaction was amounted to Rs.1.73 crore (previous year Rs. 2.28 crore) while out go was amounted to     Rs 6.89 crore (previous year Rs. 8.92 crore).           

20.    PARTICULARS OF EMPLOYEES

There is no employee, in receipt of remuneration in excess of limit prescribed under section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended.

18.  DIRECTORS’ RESPONSIBILITY STATEMENT

As required under Section 217 (2AA) of the Companies (Amendment) Act, 2000, the Directors of your Company confirm:   

 

(i)	that in the preparation of the annual accounts, the applicable accounting standards have been followed, alongwith proper explanation relating to material departures, if any;
(ii)	that the directors have 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 at the end of the financial year and of the profit and loss of the company for the financial year 2013-2014;
(iii)	that the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and
(iv)	that the directors have prepared the annual accounts on a going concern basis.

ADDENDUM – I                  

Annexure to the Directors’ Report

Management reply on the observations made by Statutory Auditors’ on the Corporate Governance report for the financial year ended 31st March 2014.

 

Sl. No.	Auditors observations on Corporate Governance	Management reply
1.	The condition of not less than the fifty percent of Board members being non-executive and independent is not complied with. Matter has already been taken up with the Ministry of Housing & Urban Poverty Alleviation, for filling up the vacancies of independent Directors.	HUDCO does not have the power to appoint Directors on its Board. The power to appoint the Director(s) vests with the Administrative Ministry. The said non-compliance was brought to the knowledge of the Administrative Ministry and was pursued for the appointment of independent Directors. HUDCO has made all best possible efforts within its control for compliance of the required provisions.
2.	The Company has complied with all applicable Accounting Standards issued by the Institute of Chartered Accountants of India, except Accounting Standard AS-9 “Revenue Recognition” regarding accounting of application fees, front-end-fees, administration fees and processing fees on loans on realization basis instead of accrual basis;	The Company has the accounting policy of recognising   application fees, front-end-fees, administration fees and processing fees on loans on realization basis, which has also been disclosed in the Accounting Policy No. 2 (b) of Note no.1: Significant Accounting Policies, part of Annual Accounts for the year 2013-14.
3.	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 one case the investment in equity share of HFC i.e. Indbank Housing Ltd. is beyond the ceiling of 15% as prescribed, which was invested around twenty years back.	HUDCO’s Board has already granted in-principle approval of merger of Ind Bank Housing Limited into Indian Bank. The swap ratio of the respective shares is to be finalised and then merger would be effected after approval of the Boards of HUDCO and Indian Bank, consequent upon which there would not be non-compliance of prudential norms regarding equity investment in Ind Bank Housing Limited.
4.	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 31st March, 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.	The additional provision is considered prudent keeping in view the unforeseen events & happenings such as change in policy of Government & procedural delays in repayment from Government agencies etc,.   The position has been disclosed in point no 3(b) in Note 24, Explanatory Notes of Annual Accounts for the year 2013-14.

 

	For and on behalf of the Board of Directors
Place: New Delhi Dated:12.0.2014	Sd/- Dr. M.  Ravi Kanth Chairman & Managing Director DIN:- 01612905 Flat No. 235 & 236, Asian Games Village Complex (AGVC), Asiad Village,, New Delhi, 110049