To The Members,

Your directors are pleased to present the Twenty Fifth Annual Report of your Company with the audited accounts for the year ended March 31, 2011.

Financial Results

( in crores)

For the year ended March 31, 2011 For the year ended March 31, 2010
Profit Before Tax 125.57 94.42
Provision for Tax (Net of deferred tax) 34.06 25.46
Profit After Tax 91.51 68.96
Add:    
Balance brought forward from last year 45.88 27.64
Amount Available for Appropriation 137.39 96.60
Appropriations:
Special Reserve 22.00 17.50
General Reserve 9.20 6.90
Proposed Dividend 38.67 22.57
Additional Tax on Proposed Dividend 6.28 3.75
Dividend pertaining to previous year paid during the year 0.09 0.00
Balance Carried to Balance Sheet 61.15 45.88
137.39 96.60

Dividend

Your directors recommend payment of dividend of 8.50 per share of face value of 10 each for the year ended March 31, 2011 and in addition, also recommended a special dividend of 2.50 per share of face value of 10 each to commemorate the Silver Jubilee of the Company. The total dividend for the year is 11 per share against a dividend of 6.50 per share of face value of 10 each for the previous year. The dividend payout ratio for the year, inclusive of additional tax on dividend will be 49%.

Disbursements

Loan disbursements during the year were 1,210.69 crores as against 780.33 crores in the previous year. GRUH continued to focus mainly on the retail segment and disbursed 1080.73 crores to 19,557 families. Cumulative disbursements as at March 31, 2011 were 5,855.87 crores.

Golden Jubilee Rural Housing Finance Scheme

GRUH disbursed 413.07 crores in respect of 8,722 dwelling units during the year under the Golden Jubilee Rural Housing Finance Scheme of the Government of India. Cumulative disbursements under the scheme were 1,974.61 crores in respect of 69,093 dwelling units.

Rural Housing Fund (RHF)

The National Housing Bank (NHB) has formulated a scheme called the Rural Housing Fund – 2008 (RHF). The scheme is aimed towards rural housing undertaken by families falling under the weaker section category as defined in the RBI guidelines on lending to the priority sector. During the year, GRUH has claimed 196.38 crores covering 4,686 families under this scheme. Cumulative disbursements under this scheme were 500.92 crores to 14,580 families.

Loan Assets

As at March 31, 2011, the loan assets increased to 3,176.85 crores with a growth of 29%. Loan assets in respect of retail segment also grew by 30% and stood at 3,080.21 crores.

Non-Performing Assets (NPAs)

As per the prudential norms of NHB, GRUH’s NPAs stood at 25.86 crores as at March 31, 2011 constituting 0.81% of the total outstanding loans of 3,176.85 crores. The NPAs at the end of the previous year were 27.14 crores, constituting 1.11% of the total outstanding loans of 2,453.70 crores.

GRUH is required to carry a provision of 6.37 crores towards NPAs and standard assets other than housing loan to individuals as at March 31, 2011 as per the norms of NHB. However, as a measure of caution, GRUH carries a provision of 27.92 crores. Net NPAs of GRUH was “NIL” on the outstanding loans of 3,176.85 crores as at March 31, 2011.

During the year, GRUH has written off 1.26 crores in respect of individual loans where the recovery was difficult in the near future. However, GRUH continued the recovery efforts in respect of written off loans of earlier years and could effect recoveries of 1.27 crores during the year in respect of such written off loans. GRUH also took possession of properties of the defaulting borrowers under the SARFAESI Act and has sold few of such acquired properties.

NHB Refinance

GRUH received refinance sanction of 800 crores from NHB during the year. GRUH availed refinance aggregating to 545.65 crores including 145.65 crores under RHF. The refinance outstanding as at March 31, 2011 was 1,157.60 crores.

Bank Term Loans

GRUH received sanctions from banks amounting to 1,400 crores of which GRUH availed loans aggregating to 1,000 crores. The outstanding bank term loans as at March 31, 2011 were 1,230 crores.

Subordinated Debt

GRUH did not issue any subordinated debt during the year. As at March 31, 2011, GRUH’s outstanding subordinated debt stood at 40 crores. The debt is subordinated to present and future senior indebtedness of the Company and has been assigned rating of “LAA+” by ICRA Limited (ICRA), indicating high safety with regard to timely payment of interest and principal. This rating carries a stable outlook. Based on the balance term to maturity, as at March 31, 2011, 8 crores of the book value of subordinated debt is considered as Tier – II capital under the guidelines issued by NHB for the purpose of computation of Capital Adequecy Ratio.

Non-Convertible Debentures (NCDs)

During the year, GRUH raised NCDs of 100 crores on private placement basis. The NCDs are rated “LAA+” by ICRA, indicating high safety with regard to timely payment of interest and principal. This rating carries a stable outlook. The outstanding NCDs as at March 31, 2011 were 100 crores.

Commercial Paper

GRUH raised 1,185 crores through issuance of commercial paper during the year. GRUH’s commercial paper is rated “P1+” by CRISIL Limited (CRISIL), indicating high safety as regards repayment. This rating carries a stable outlook. As at March 31, 2011, outstanding commercial papers were stood at 160 crores.

Deposits

GRUH mobilised deposits of 106.72 crores and experienced a renewal ratio of 42% during the year. The outstanding balance of deposits as at March 31, 2011 was 278.73 crores. The rating assigned to GRUH’s deposit programme has been maintained by the two rating agencies viz. ICRA and CRISIL. GRUH’s deposits are rated “MAA+” and “FAA+” by ICRA and CRISIL respectively and both the ratings indicate high safety as regards timely repayment of principal and interest. These ratings carry a stable outlook.

Unclaimed Deposits

As at March 31, 2011, public deposits amounting to 3.90 crores had not been claimed by 1,012 depositors. Depositors were intimated regarding the maturity of deposits with a request to either renew or claim their deposits and subsequent reminders have been sent.

As per the provisions of Section 205C of the Companies Act, 1956, deposits remaining unclaimed and unpaid for a period of seven years from the date they became due for payment are required to be credited to Investor Education and Protection Fund (IEPF) established by the Government of India. In terms of Section 205C of the Companies Act, 1956, no claim would lie against the Company or the said fund after the said transfer. Accordingly, an amount of 4.67 lacs was transferred to the IEPF during the year.

Unclaimed Dividends

As at March 31, 2011, dividend amounting to 49.78 lacs has not been claimed by shareholders. GRUH has been intimating the shareholders to lodge their claim for dividend from time to time.

As per the provisions of Section 205C of the Companies Act, 1956, dividends remaining unclaimed for a period of seven years from the date of transfer to the unpaid dividend account are required to be credited to the IEPF. Accordingly, unclaimed dividend amount of 3.43 lacs in respect of the financial year 2002-2003 was transferred to IEPF during the year. Unclaimed dividend amounting to 3.73 lacs in respect of the financial year 2003-2004 is due for transfer to IEPF in August 2011. In terms of Section 205C of the Companies Act, 1956, no claim would lie against the Company or the said fund after the said transfer.

Dematerialisation of Shares

As on March 31, 2011, 97.44% of equity shares of GRUH have been dematerialised by shareholders through National Securities Depository Limited and Central Depository Services (India) Limited.

Pursuant to an amendment to Clause 5A of the Listing Agreements, the Company affirms that there are no share certificates issued to its shareholders in physical form which are lying unclaimed.

Risk Management Framework

The Company has a Risk Management Framework, which provides the mechanism for risk assessment and mitigation. The Risk Management Committee (RMC) of the Company comprises the Managing Director, the Executive Director and some members of senior management.

During the year, the RMC reviewed the risks associated with the business of the Company, its root causes and the efficacy of the measures taken to mitigate the same. Thereafter, the Audit Committe and the Board of Directors also reviewed the key risks associated with the business of the Company, the procedures adopted to assess the risks, efficacy and mitigation measures.

Investments

GRUH continues to maintain its Statutory Liquid Ratio (SLR) as stipulated by NHB. Accordingly, GRUH carried investments in approved securities aggregating to 62.09 crores as at March 31, 2011 to meet the requirement of the SLR. GRUH has classified its investments as long-term and valued them at cost. Adequate provision, towards loss, if any, to be experienced on redemption of investments on maturity has been made.

Regulatory Guidelines

GRUH complied with the guidelines issued by NHB regarding accounting standards, prudential norms for asset classification, income recognition, provisioning, capital adequacy, concentration of credit, credit rating, ‘Know Your Customer’ – (KYC), fair practices code and real estate & capital market exposures. The details of compliances are outlined in the Management Discussion and Analysis report.

The National Housing Bank Act, 1987, empowers NHB to levy a penalty on Housing Finance Companies for contravention of the Act or any of its provisions. NHB has not levied any penalty on GRUH during the year.

The task of overseeing the implementation of the Asset Liability Management (ALM) has been entrusted to the Audit Committee which oversees and reviews the ALM position vis-à-vis risk management.

GRUH’s Capital Adequacy Ratio stood at 13.32% as against the minimum requirement of 12%. Tier – I capital was 12.98% against the minimum requirement of 6%.

Human Resource Development

At GRUH, human resource development is considered vital for effective implementation of business plans. Constant endeavours are being made to offer professional growth opportunities and recognitions, apart from imparting training to employees. During the current year, besides the in-house induction training programmes in lending operations, recoveries and accounts, employees were also nominated to training programmes conducted by NHB and other institutions.

GRUH’s staff strength as at March 31, 2011 was 449.

Employees Stock Option Scheme

The stock options granted to directors and eligible employees operate under two schemes, ESOS-2007 and ESOS-2011. The disclosures as required under Clause 12.1 of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) guidelines, 1999, as amended, have been made in the annex to this report.

Particulars regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Expenditure

GRUH does not have any foreign exchange earnings and expenditure. Particulars relating to conservation of energy and technology absorption stipulated in the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, are not applicable to GRUH.

Particulars of Employees

GRUH had 1 employee as at March 31, 2011 employed throughout the year who was in receipt of remuneration of 60 lacs or more per annum.

In accordance with the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, the name and other particulars of such employees are set out in the annex to the Directors’ Report. However, as per the provisions of Section 219(1) (b) (iv) of the Companies Act, 1956, the Directors’ Report is being sent to all shareholders of the Company excluding the annex. Any shareholder interested in obtaining a copy of the said annex may write to the company secretary at the registered office of the Company.

Directors

In accordance with Articles 134 and 135 of the Articles of Association of the Company and the provisions of the Companies Act, 1956, Mr. S. M. Palia and Mr. Rohit C. Mehta, directors of the Company, retire by rotation at the ensuing Annual General Meeting (AGM) and are eligible for reappointment. Your directors commend their reappointment.

Necessary resolutions for the re-appointment of the aforesaid directors have been included in the notice convening the ensuing AGM.

All the directors of the Company have confirmed that they are not disqualified from being appointed as directors in terms of Section 274(1)(g) of the Companies Act, 1956.

Auditors

M/s. Sorab S. Engineer & Co., Chartered Accountants, statutory auditors of the Company having registration number 110417W retire at the ensuing AGM and are eligible for re-appointment.

The Company has received a certificate from the statutory auditors to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956. The statutory auditors have also confirmed that they hold a valid certificate issued by the “Peer Review Board” of The Institute of Chartered Accountants of India.

Corporate Governance – Voluntary Guidelines

The Board of Directors have taken cognisance of the ‘Corporate Governance Voluntary Guidelines 2009’ issued by the Ministry of Corporate Affairs (MCA) in December 2009. While the guidelines are recommendatory in nature, the board recognises the importance and need to constantly assess governance practices thereby ensuring a sustainable business environment that generates long-term value to all key stakeholders. The board has adopted several provisions of the said guidelines.

Directors’ Responsibility Statement

In accordance with the provisions of Section 217(2AA) of the Companies Act, 1956 and based on the information provided by the management, your directors state that:

In the preparation of annual accounts, the applicable accounting standards have been followed;

  • Accounting policies selected were applied consistently. Reasonable and prudent judgements and estimates were made so as to give a true and fair view of the state of affairs of the Company as at March 31, 2011 and of the profit of the Company for the year ended on that date;
  • Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities;
  • The annual accounts of the Company have been prepared on a going concern basis.
Management Discussion and Analysis Report

In accordance with clause 49 of the listing agreements, the Management Discussion and Analysis Report forms a part of this report.

Acknowledgements

Your directors take this opportunity to place on record their appreciation to all employees for their hard work, spirited efforts, dedication and loyalty to GRUH. The employees have worked based on principles of honesty, integrity and fair play and this has helped GRUH in maintaining its growth. The directors also wish to place on record their appreciation to shareholders, depositors, referral associates, NHB, financial institutions and banks for their continued support.