Board of Directors Mr. Abhay Aima Dr. (Mrs.) Amla Samanta Mr. Ashish Rathi, Whole Time Director Mr. Bharat Shah, Chairman Mr. Dhiraj Relli, Managing Director Mr. Jagdish Capoor Auditors BSR & Co., LLP Chartered Accountants Bankers HDFC Bank Limited IndusInd Bank Limited IDBI Bank Limited Punjab National Bank Corporation Bank Company Secretary Mr. N. E. Venkitakrishnan Registered Office Office Floor 8, I think Techno Campus, Building B - Alpha, Kanjurmarg (East), Mumbai 400 042 Tel No. : 022-30753400 Fax No.: 022-30753435 Website : www.hdfcsec.com Corporate Identity Number (CIN) - U67120MH2000PLC152193 Registrar & Share Transfer Agents Datamatics Business Solutions Limited, Plot No B-5, Part B Crosslane, MIDC, Marol, Andheri (East), Mumbai - 400 093 Tel. No.: 66712213/2214 Fax No.: 66712011 CONTENTS Page Directors’ Report 1 - 16 Auditors Report 17 - 23 Balance Sheet 24 Profit & Loss Account 25 Statement of Changes in Equity 26 Cash Flow Statement 27 - 28 Notes to the Accounts 29 - 68 DIRECTORS’ REPORT have resulted in a net profit after tax of Rs.329.82 crore as against Rs. 344.73 crore in the previous year. TO THE MEMBERS The Company has emerged as a strong player in the Your Directors are pleased to present the financial services space offering complete financial 19th Annual Report on the business and operations services along with the core broking product. The of the Company together with audited accounts for Company had 278 branches across 165 cities in the the year ended 31 March, 2019. FY19 was the first country as on 31 March 2019 and also has multiple year of applicability of Indian Accounting Standards digital platforms to enable its customers have easy (IND AS) that have been harmonised with access to its products. International Financial Reporting Standards (IFRS). PROSPECTS AND OUTLOOK FOR THE FINANCIAL RESULTS AS PER IND AS FUTURE (Previous years’ figures restated) Economic Outlook (Rs. in Crore) Output: Year Year ended ended The RBI in its April 2019 policy has projected GDP 31-3-2019 31-3-2018 growth for FY20 at 7.2 % – in the range of 6.8-7.1 % in H1:FY20 and 7.3-7.4 % in H2:FY20 – with risks Total Income 782.05 800.07 evenly balanced. Total Expenses 268.18 260.32 The growth outlook is likely to be influenced by Profit before depreciation 513.87 539.75 weakening domestic investment activity as reflected Depreciation and in a slowdown in production and imports of capital Amortisation 18.64 15.13 goods. The moderation of growth in the global Profit before tax 495.23 524.62 economy might impact India’s exports. However, Provision for Tax 165.41 179.89 business expectations continue to be optimistic. On the positive side, higher financial flows to the commercial Profit after tax 329.82 344.73 sector augur well for the economic activity. Private Balance brought forward 945.45 759.66 consumption, which has remained resilient, is also Amount available for expected to get a fillip from public spending in appropriation 1275.27 1104.39 rural areas and an increase in disposable incomes of households due to tax benefits. According to the Dividend (Interim and 155.85 132.05 Indian Meteorological Department (IMD) forecast, Final) 2019 monsoons are expected to be near normal at Tax including surcharge 96% of the Long Period Average (LPA). The IMD and education cess on doesn’t expect any adverse impact on the monsoons dividend 32.04 26.89 from El Nino pattern. However according to Skymet Balance carried over to Weather, India Monsoon 2019 is likely to be ‘below Balance Sheet 1087.38 945.45 normal’ to the tune of 93% of the LPA of 887 mm for the four-month period from June to September OPERATIONS with 55% chance of below normal (seasonal rainfall During the year under review, the Company’s total that is between 90 to 95% of LPA). If this prediction income amounted to Rs.782.05 crore as against comes out to be true, it may impact economic growth Rs.800.07 crore in the previous year. The operations prospects. Overall we remain cautiously optimistic. 1 Inflation: Foreign direct investment in India fell 7% to USD 33.5 billion in the nine months to December India’s retail inflation saw a marginal increase to 2018, signalling slowing investment before upcoming 2.86% in March 2019 from 2.57% in February 2019, on the back of rise in prices of food articles and fuel. elections. The decline in foreign direct investment in The cumulative CPI inflation has declined to 3.41% India is in contrast to the boom seen in its Southeast in FY19 compared with 3.59% in FY18. The CPI Asian peers most likely due to global headwinds inflation has consistently declined from 5.9% in and political uncertainty spawned by the upcoming FY15 to 4.9% in FY16, 4.5% in FY17, 3.6% in FY18 elections and further down to 3.4% in FY19. Capital Markets Wholesale price inflation rose to a 3-month high of 3.18 % in March 2019 on costlier food and fuel as The equity market moves, and the way ahead: compared to 2.93% in February 2019 and 2.74% in The year was marked by several issues starting from March 2018. high crude oil prices, rupee faltering to new record In RBI’s April 2019 monetary policy, inflation is now lows, liquidity crisis in the Non-Banking Financial projected downwards at 2.4% in Q4:FY19, 2.9-3% Companies (NBFCs), US-China trade tensions and in H1:FY20 and 3.5-3.8% in H2: FY20 with risks delay in Brexit breakthrough among others. broadly balanced. Despite these challenges, the Indian equities market The fiscal and external situation: emerged as one of the best performers globally in Although direct tax collections have surged by 20.4% FY19. The BSE Sensex rose nearly 17.3% in FY19, to Rs 11.4 lakh crore for FY19, they have fallen short while the Nifty50 rose by 14.9% during same period by ~Rs 60,000 crore of the Rs 12 lakh crore collection – the rise in both being the highest in any fiscal since target. Goods and Services Tax (GST) collection FY10. However, the broader markets underperformed in March 2019 rose 15.6% from a year ago to hit frontliners with the Nifty Midcap100 Index falling Rs 1.06 lakh crore, the highest since the new indirect 2.7% and Nifty Smallcap100 declining 14.4% in tax system took effect on 1 July 2017. GST mop-up FY19. for the whole of FY19 stands at Rs 11.77 lakh crore, ahead of the revised estimate of Rs 11.47 lakh crore. A total of Rs 56,440 crore was raised through the public equity markets in FY19, a year marked by Trade deficit in FY19 increased to USD 176.42 billion, volatile stock market trends alongside underlying compared to USD 162.05 billion in the previous year. sluggishness in corporate investments. This amount Exports of goods in FY19 registered a 9.06 % growth was 68 % lower than Rs 1.75 lakh crore that was to hit a new high of USD 331 billion, breaching the raised in the preceding year, according to Prime previous high of USD 314 billion clocked in 2013- Database. 14. Imports in FY19 grew 8.99 % to USD 507 billion. In FY19 the Depositories’ data showed that Foreign The country’s current account deficit widened to 2.5% of GDP (USD 16.9 billion) in the third quarter of the Portfolio Investors (FPIs) pulled out a net sum of current fiscal from 2.1% (USD 13.7 billion) a year Rs 88 crore from equities and Rs 42,357 crore from ago, primarily on account of a higher trade deficit the bonds market, taking the total net outflow to though the foreign exchange reserves continued to Rs 42,445 crore. In comparison, FPIs had infused soar. India’s foreign exchange reserves however a net amount of Rs 25,635 crore in the equities and stood high at USD 413.78 billion in the week ended over Rs 1,19,036 crore in the debt market, a total net 5 April , 2019. investment of Rs 1,44,671 crore in the previous fiscal. 2 Growth is slowing across the globe – in the Euro area EXTRACT OF ANNUAL RETURN including Germany, USA (seems to be in late cycle), China etc. This is happening despite continued soft Pursuant to Section 134 (3) (a) extract of Annual monetary policies and indicates the ineffectiveness Return as provided under sub-section (3) of Section of monetary policies beyond a point in influencing 92 is available on the web-site of the company growth rates. This is likely to keep growth slow and www.hdfcsec.com shallow, credit conditions easy and waning financial BOARD MEETINGS market volatility in focus. During the year under review, 6 (six) Board Meetings In India, GDP growth has been slowing; consensus were held. The meetings were held on 16 April, 2018, forecasts are being revised down. A sharp monetary 22 June, 2018, 27 September, 2018, 29 November, contraction is slowing the economy as growth in 2018, 14 January, 2019 and 1 March, 2019. money supply is lagging the GDP growth. While Bank credit growth has picked pace lately, the total Details of attendance of Directors at the Board credit growth is yet to rise at a similar pace. This Meetings, directorship in other Companies and sitting slowdown is driven by consumption (especially high fees paid to the Directors for attending Board and value discretionary- as the effect of pay commission various Committee meetings during the year under arrears payout is fading now).