Draft Letter of Offer (Private and Confidential) For equity shareholders of the Company only
GIC HOUSING FINANCE LIMITED (Incorporated on 12th December, 1989 under the Companies Act, 1956 as GIC Grih Vitta Limited and renamed to GIC Housing Finance Limited on 16th November, 1993. A certificate for commencement of business was issued on 12th January 1990.) Registered and Corporate Office: Universal Insurance Building, 3rd Floor, Sir P.M. Road, Fort, Mumbai - 400 001. Tel: (022) - 2285 1765-7, (022) - 2285 3866/8 Fax: (022) - 2288 4985. E-mail: [email protected]; website: www.gichfindia.com Issue of 2,69,25,533 Equity Shares of Rs.10 each for cash at a premium of Rs. [•] per Equity Share aggregating to Rs. [•] lacs on rights basis to the existing Equity Shareholders of GIC Housing Finance Ltd. (the “Company”/GICHFL”) in the ratio of One Equity Share for Every One Equity Share (i.e. 1:1) held as on the record date i.e. [•], 2006. The face value of the Equity Shares is Rs. 10/- per share and the Issue Price is [•] times the face value PRICE BAND: Rs.37 TO Rs.42 PER EQUITY SHARE OF FACE VALUE OF RS. 10
GENERAL RISKS Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds in this issue unless they can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely on their own examination of the Issuer and the Issue including the risks involved. The securities have not been recommended or approved by the Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or the adequacy of this document.
The attention of investors is drawn to the statement of Risk Factors appearing on page nos. [•] to [•] of this Letter of Offer. ISSUER’S ABSOLUTE RESPONSIBILITY The Issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this Letter of Offer contains all information with regard to the Issuer and the Issue, which is material in context of the Issue, that the information contained in this Letter of Offer is true and correct in all material respects and is not misleading in any material respect, that the opinions and intentions, expressed herein are honestly held and that there are no other facts, the omission of which makes this document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The Company's existing Equity Shares are listed on BSE (the designated stock exchange), NSE and CSE. The Company has passed resolution for delisting of its equity shares from CSE and MSE in its AGM on September 15, 2005 and made application for delisting to CSE & MSE. MSE vide their letter dated December 21, 2005 has granted delisting approval. Delisting approval from CSE is yet to be received by the Company. The Equity Shares to be issued through this Issue would be listed on BSE and NSE. The Company has received the in-principle approvals for listing from BSE and NSE vide their letters dated ______and ______.
LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE
IDBI CAPITAL MARKET SERVICES LIMITED SHAREPRO SERVICES (INDIA) PVT. LIMITED 5th Floor, Mafatlal Centre, Satam Estate, 3rd Floor, Nariman Point, Mumbai-400021 Above Bank of Baroda, Cardinal Gracious Raod, Tel: (022) 56371212 / 15 Chakala, Andheri (East), Mumbai-400 099. Fax (022) 2288 5850 Tel: (022) 2821 5168 / 2834 8218 / 2832 9828 Website: www.idbicapital.com Fax:(022) 2837 5646 E-mail: [email protected] Website: www.shareproservices.com E-mail: [email protected] ISSUE OPENS ON: [•] 2006 LAST DATE FOR RECEIVING REQUESTS FOR SPLIT FORMS [•] 2006 ISSUE CLOSES ON: [•] 2006
TABLE OF CONTENTS Section Description Page Nos. I DEFINITION & ABBREVIATIONS Conventional /General Terms Offer Related Terms Company / Industry Related Terms Abbreviations Forward Looking Statements II RISK FACTORS III INTRODUCTION Industry Overview Company Overview Selected Financial Information IV GENERAL INFORMATION Company Board of Directors Issue Management Team V CAPITAL STRUCTURE VI PARTICULARS TO THE ISSUE Objects of the Issue Capital Adequacy Ratio Basic Terms of Issue Basis of Issue Price Statement of Tax Benefits VII ABOUT THE ISSUER COMPANY Industry Overview Business Overview Details of Properties of the Company Debt Profile of the Company Key Industry Regulations VIII HISTORY & CORPORATE STRUCTURE OF THE COMPANY IX MANAGEMENT Board of Directors & related details Compliance with Corporate Governance Management Organisation Structure Key Management Personnel X PROMOTERS / PRINCIPAL SHAREHOLDERS XI FINANCIAL STATEMENT Financial information Financial information of Group Companies Management Discussion & Analysis of Financial condition and Results of
Operations as Reflected in Financial Statement XII LEGAL & OTHER INFORMATION Outstanding litigations & Material Developments Government Approvals/ Licensing Arrangements XIII OTHER REGULATORY & STATUTORY DISCLOSURES XIV TERMS OF ISSUE Issue Procedure General Instructions XV OTHER INFORMATION Material Contracts Declaration
I. DEFINITIONS AND ABBREVIATIONS
Conventional/ General Terms
Act : The Companies Act, 1956 as amended The Issued, Subscribed and Paid Up Equity Share Capital of the Equity Shares : Company and the additional equity shares of the Company offered
pursuant to the Rights Issue Equity Shareholders Means a holder/beneficial owner of equity shares of the GIC : Housing Finance Limited as on the Record Date i.e. [•]. Depository A depository registered with SEBI under the SEBI (Depository and : Participant) Regulations, 1996, as amended from time to time. Guidelines / SEBI SEBI (Disclosure and Investor Protection) Guidelines, 2000 and Guidelines / SEBI (DIP) Guidelines : subsequent amendments thereto
ISIN International Securities Identification Number allotted by the : depository Being the price band of a minimum price of Rs.37 and the maximum Price Band : price of Rs.42
General Insurance Company Limited, National Insurance Company Limited, The New India Assurance Company Limited, The Oriental Promoters : Insurance Company Limited, United India Insurance Company Limited and IFCI Ltd. Sole Lead Manager/IDBI Capital : IDBI Capital Market Services Limited Registrars / Registrars To The Sharepro Services (India) Pvt. Ltd. Issue/ Registrar And Share Transfer :
Agent / R&T Agents Present Issue of 2,69,25,533 Equity Shares of Rs. 10 each at a Rights Issue/Issue : premium of Rs. [•] per share. UIN : Unique Identification Number
Offer Related Terms CAF : Composite Application Form Bankers to the Issue : IDBI Ltd. LOF / Letter of Offer Letter of Offer of the Company for the Rights Issue of 2,69,25,533 : Equity Shares of Rs. 10 each at a premium of Rs. [•] per share Record Date : [•], 2006
Company/ Industry Related Terms Articles or AOA : Articles of Association of the Company The Board of Directors of the Company or the Committee Board : authorized to act on its behalf Company/Issuer/GICHFL : GIC Housing Finance Limited Memorandum or MOA : Memorandum of Association
Abbreviations Act : The Companies Act, 1956 and amendments thereto ACA : Associates of Chartered Accountants AY : Assessment Year ALM : Assets Liability Management AGM : Annual General Meeting Accounting Standard as issued by The Institute of Chartered AS : Accountants of India
i BSE/Designated Stock Exchange : The Bombay Stock Exchange Ltd. CAF : Composite Application Form CAR : Capital Adequacy Ratio CBI : Central Bureau of Investigation CDSL Central Depository Services (India) Limited COD : Chief of Department CSE : The Calcutta Stock Exchange Association Limited DEMAT : Dematerialized (Electronic/Depository as the context may be) DP : Depository Participant DPG : Deferred Payment Guarantee DRT : Debt Recovery Tribunal EBIDTA : Earnings Before Interest Depreciation and Tax EGM : Extra-Ordinary General Meeting EMI : Equated Monthly Instalments EPS : Earnings Per Share Foreign Exchange Management Act 1999, and the subsequent FEMA : amendments thereto FERA : Foreign Exchange Regulation Act, 1973 Foreign Institutional Investor As Defined Under SEBI (Foreign Institutional Investors) Regulations, 1995 registered with SEBI and FII : as defined under FEM (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 and under other applicable laws in India FY : Financial Year FDR : Fixed Deposit Receipt GoI / Government : Government of India GIC : General Insurance Company Ltd. GIC AMC : GIC Assets Management Company Ltd. HDFC : Housing and Development Finance Corporation HFC : Housing Finance Company HUDCO : Housing and Urban Development Corporation HUF : Hindu Undivided Family ICWA : Institute of Cost and Work Accountants IFCI : IFCI Ltd. ICICI : Industrial Credit and Investment Corporation of India IVCS : IFCI Venture Capital Fund Ltd. IT : Income Tax Act, 1961 Lead Manager to the Issue IDBI Capital Market Services Ltd. LoF : Letter of Offer MIS Management Information System New India : The New India Assurance Company Limited NHB : National Housing Bank NI : Negotiable Instrument NICL : National Insurance Company Limited NPA : Non Performing Assets NR : Non Resident NRE ACCOUNT : Non Resident External Account NRI : Non Resident Indian NRO ACCOUNT : Non Resident Ordinary Account NSDL : National Securities Depository Limited NSE : National Stock Exchange of India Limited MSE : Madras Stock Exchange OICL : Oriental Insurance Company Ltd. OCB : Overseas Corporate Bodies
ii PAT : Profit after Tax Income Tax Permanent Account Number/General Index PAN/GIR No. : Reference Number PBIDT : Profit before Interest, Depreciation and Tax QAC : Quality Assurance & Control RI : Resident Indian RBI : Reserve Bank of India SBI : State Bank of India SEBI : Securities and Exchange Board of India SEBI (SAST) Regulations, 1997 SEBI (Substantial Acquisition of Shares and Takeovers) : Regulations, 1997 and subsequent amendments thereto Stock Exchanges : BSE and NSE referred to collectively SUUTI : Specified Undertaking Unit Trust of India USD : United States Dollars UTI : Unit Trust of India
In this Letter of Offer, all references to “Rs.” or “INR” refer to Rupees, the lawful currency of India. References to the singular also refer to the plural and one gender also refers to any other gender wherever applicable.
iii Forward-Looking Statements
Statements included in this Letter of Offer which contain words or phrases such as “will”, “aim”, “will likely result”, “believe”, “expect”, “will continue”, “anticipate”, “estimate”, “intend”, “plan”, “contemplate”, “seek to”, “future”, “objective”, “goal”, “project”, “should”, “will pursue” and similar expressions or variations of such expressions, that are “forward-looking statements”. Actual results may differ materially from those suggested by the forward looking statements due to risks or uncertainties associated with the Company’s expectations with respect to, but not limited to, the Company’s ability to successfully implement its strategy, its growth and expansion, technological changes, its exposure to market risks, general economic and political conditions in India which have an impact on its business activities or investments, the monetary and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in India and globally, changes in domestic and foreign laws, regulations and taxes and changes in competition in the industry.
For further discussion of factors that could cause the Company’s actual results to differ, see the section entitled “Risk Factors” beginning on page no. [•] of this Letter of Offer. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. In accordance with SEBI requirements, the Company will ensure that investors are informed of material developments until such time as the grant of listing and trading permission by the Stock Exchanges for the equity shares being issued.
Use of Market Data
Unless stated otherwise, macroeconomic and industry data used throughout this Letter of Offer has been obtained from publications prepared by Government sources, industry sources and data generally available in the public domain. Such publications generally state that the information contained therein has been obtained from sources believed to be reliable but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although we believe that industry data used in this Letter of Offer is reliable, it has not been independently verified.
iv II. RISK FACTORS
An investment in Equity Shares involves a high degree of risk. The investor should carefully consider all of the information provided in this Letter of Offer, including the risks and uncertainties described below, before making an investment in the Company’s Equity Shares. If any of the following risks actually occur, Company’s business, results of operations and financial condition could suffer, the trading price of the Company’s Equity Shares could decline and the investors may lose all or part of their investment.
Note: Unless specified or quantified in the relevant risk factors below, we are not in a position to quantify the financial or other implications of any risks mentioned herein under:
(The Letter of Offer also includes statistical data regarding the Housing Finance Industry. This data has been obtained from industry publications, reports and other sources that the Company and the Lead Manager believe to be reliable. Neither the Company nor the Lead Manager has independently verified such data.)
A. INTERNAL RISK FACTORS
The Company is yet to receive the confirmation from IFCI Ltd., one of the Promoters for participating in the present Rights Issue
Management Perception:
Except for the above, other Promoters have given their consent to participate in the Rights Issue. IFCI’s Board Meeting is being held on January 30, 2006 and the confirmation for participation in the present Rights Issue is one of the agenda items.
The Company is involved in certain legal proceedings
The Company is involved in certain legal proceedings claims in relation to certain civil criminal and taxation matter incidental to the business of the Company. These legal proceedings are pending at different levels of adjudication before various courts and tribunals. Further more a claim is determined against the Company and the Company is required to pay all or a portion of disputed amount, it could have a material adverse effect on our results and operations and the cash flows. Similarly delay in recovery of bad loans and lengthy legal procedures may affect the liquidity position of the Company. Please refer to page no. __ for further details.
Following transactions in the Equity Shares of the Company has been taken place by the Promoters / Promoter Group during last 6 months:
Sr. Name of the shareholder No. of shares No. of shares Date of Price No. bought sold transaction (in Rs.) 1 Oriental Insurance Company Ltd Nil 5000 05.10.05 46.86 Nil 10000 06.10.05 46.84 Nil 10000 07.10.05 46.36 Nil 10000 11.10.05 44.93 Nil 5000 13.10.05 44.99 Nil 10000 16.01.06 51.87 Nil 5000 17.01.06 51.82 Nil 5000 17.01.06 51.82 Nil 10000 18.01.06 51.38 Nil 10000 19.01.06 51.44 Nil 10000 20.01.06 54.31
v
2. General Insurance Corporation 50000 Nil 14.12.05 49.68 of India 31382 Nil 14.12.05 49.85 23436 Nil 14.12.05 49.85 16000 Nil 15.12.05 49.89 3350 Nil 16.12.05 49.82 5203 Nil 20.12.05 49.70
NHB vide their Direction No. NHB-HFC.DIR.11/CMD/2005 dated October 1, 2005 increased the risk weightage for the standard individual housing loan assets from 50% to 75% due to which, CAR as on 31st March 2006 would be below the minimum stipulated level of 12% unless fresh capital will be infused. If the CAR as on March 31, 2006 would fall below the minimum stipulated level, the company would be subject to certain penalties from NHB.
Management Perception:
Steps are being initiated to infuse addition capital through Rights Issue to fulfill the Capital Adequacy Requirements.
The Promoters of the Company and Companies promoted by the Promoters are involved in certain legal proceedings
The Promoters of the Company and the Companies promoted by the Promoters are involved in certain legal proceedings and the Company can give no assurance that the legal proceedings will be decided in favour of our Promoters and the Companies promoted by them. Please refer to page no. __ for further details.
Company has not been able to get updated information on the litigations as well as operations of its Promoters and the Companies Promoted by them.
Management Perception:
Adequate steps have been taken to obtain the necessary information form Promoters and the companies promoted by them.
M/s Khandelwal Jain & Co., Chartered Accountants in their inspection report dated June 4, 2005 made the following major findings;
i. In ALM Report the mismatch arises during the time bucket of 0-3 years and 3-5 year. The Company had not explained to us as to how they are going the bridge the gap. Further the Company also does not have any policy to bridge the mismatch. ii. In Thane branch, few of the Loans accounts have not been classified as NPA and certain accounts are wrongly classified as NPA iii. Delay has been observed in filing of NHB returns iv. The Company does not carry out Concurrent Audit in respect of the Housing Loans provided by the Company.
Management Perception:
i. The Company proposes to bridge short-term gap through short-term borrowings. The ALM Policy being finalized. ii. The Recovery module and system was malfunctioning for certain period of time due to which NPA classification was done manually, lead to the crisis. However the same has since been rectified. Generation of recovery report has since been computerized for all branches. iii. The filing of certain returns was delayed. However in the year 2004-05 all the returns were filed on time. iv. There is no Concurrent Audit carried out by the Company, however internal audit are carried out by independent Chartered Accountant firms on quarterly basis.
vi The housing finance companies, including GICHFL face Market Risk because of lack of hard data and historical performance measures to assess the real risk. This is typical of developing markets like India.
Management Perception:
The setting up of Credit Information Bureau of India Ltd. (CIBIL) is a step in the direction of mitigating this risk.
Housing companies, including GICHFL face credit risk on account of the inherent nature of the business.
Management Perception:
GICHFL has a strong credit control mechanism in place with clear policies and guidelines in respect of security of any loan proposal. The effective appraisal system is in place and followed uniformly. These measures minimizes the credit risk to a great extent.
GICHFL faces Asset Liability Mismatch caused due to difference in maturity profile of assets and liabilities. Assets generated by HFCs have an average tenor of 10-15 years as against this; liabilities contracted are of a lesser tenor.
Management Perception:
The average tenor of the Assets generated by GICHFL is 13 years, whereas funds from banks are available for a maximum tenor of 7-8 years. This is a peculiar risk faced by Housing Finance companies.
The borrowing of GICHFL are largely linked to benchmarks like the PLR of banks and institutions and hence our debts is mainly floating in nature, exposing us to interest rate risk.
Management Perception:
The interest rate risk of the Company is minimized due to the fact that in the past 2 years around 80% of the loans disbursed has floating rate of interest.
NPAs (Net) of the Company account 5.84% of the total Loans as on September 30, 2005. Any further increase in the NPA levels may affect the liquidity position of the Company adversely.
Management Perception:
The Company has identified loans given to builders as one of the major reasons for NPAs. Accordingly, from the financial year 2000-01, the Company has stopped sanctioning loans under this category. Currently 98% of the loan portfolio of the Company is to individual housing loan category in which the Net NPAs have reduced to 4.58% as on December 31 2005 as compared to 5.90% in March 31 2005.
The Company has a contingent liability not provided for on account of three tax disputes in appeal amounting to Rs. 31. 20 lacs as on March 31, 2005. To the extent of this contingent liability becomes actual liability, it will adversely affect our results of operations and financial condition.
Management Perception:
The Company has already paid the said dues to the Income Tax Department and there will not be any cash outflow from the Company on account of this contingent liability.
The investments made by the Company during the period 1995-1997 in equity shares (unquoted), redeemable preference shares (unquoted) and non convertible bonds worth Rs. 13785 lacs have been reduced to Rs. 139 lacs as on September 30, 2005.
vii Management Perception:
The Company has been writing off the investments in the books over a period of time to reflect the diminution in the value of investments. Further, as a policy the company has not been making fresh investments since 2001, except in short term money market mutual funds.
The Company's name reflects that General Insurance Corporation of India (GIC) is one of the major shareholders in the Company whereas the holding of GIC in the Company is only 8.03%.
Management Perception:
GIC Housing Finance Limited was promoted by GIC and the erstwhile subsidiaries of GIC namely, NICL, OICL, New India and United India. GIC alongwith its erstwhile subsidiaries, was holding 33% of the equity capital in GICHFL. Subsequently the Government of India delinked NICL, OILC, New India and United India from GIC thereby diluting GICs stake in GICHFL. As a result the equity stake held by GIC was split between these entities. Hence as on date GIC only holds 8.03% equity stake while its four erstwhile subsidiaries cumulatively hold 25.91% equity stake.
B. EXTERNAL RISK FACTOTRS
Risk of Competition
The Company faces competition from Banks and Cooperative Sector in the business who offers Housing Finance at the competitive rates. Share of Housing Finance Companies in the housing finance sector was 50.78% in 2001, which decreased to 38.58% in 2004. Whereas the share of Cooperative Sector was increased from 38.81% in 2001 to 55.70% in 2004.
The housing finance industry has witnessed the entry of banks in the past few years. These banks have access to cheap funds and are therefore able to lend to customers at lower interest rates resulting in intense competition in the housing finance industry, and finer spreads.
The Company specializes in providing housing finance with focus and core competence in housing finance. Banks on the other hand have banking as their main business activity and housing finance is an ancillary business for them.
The housing finance industry depends on: a) Prices in the real estate market, b) Interest rate prevalent in the market and c) Fiscal benefits provided by the Government from time-to-time. Any changes in the above may affect the disbursements and consequently the margins of the Company.
In view of the large population, the Company expects demand for housing to outstrip supply and hence any change in the above factors will not have a major effect on the Company's business. The Company has presence in semi-urban areas of the country, which present an opportunity for the Company to garner more business. Further, the Union Budget has emphasized on Housing in the Rural Sector, which provides an added avenue for generating business.
Any change in the government policies may affect the performance of the company
NHB vide their Direction No. NHB (ND)/DRS/REGU/DIR/01-69/2004 dated January 1, 2004 reduced the classification period of NPA from 180 days to 90 days. This will result in additional provisioning of the NPA of the HFC, which will result in decline in their profits. Further NHB vide their Direction No. NHB- HFC.DIR.11/CMD/2005 dated October 1, 2005 increased the risk weightage for the standard housing loan assets from 50% to 75% due to with the CAR of the HFC has declined. Any such further change in the policies by the government or the regulatory authority will adversely affect the performance of the Company.
viii NOTES TO RISK FACTORS
Pre-issue Networth (as on 30/09/2005) Rs. 13831 Lacs Adjusted Pre-issue Net Asset Value (as on 30/09/2005) Rs. 51.41 Issue Size Rights Issue of 2,69,25,533 Equity Shares of Rs. 10/- each for cash at a premium of Rs. [•] per Equity Share aggregating Rs. [•] lacs.
2. There is no interest of Promoters/Directors/Key Management Personnel other than as stated in this Letter of Offer. 3. No transactions of the Equity Shares of the Company has been taken place by the Promoters / Promoter Group during last 6 months except as mentioned herein:
Sr. Name of the shareholder No. of shares No. of Date of Price No. bought shares sold transaction (in Rs.) 1. Oriental Insurance Company Ltd Nil 5000 05.10.05 46.86 Nil 10000 06.10.05 46.84 Nil 10000 07.10.05 46.36 Nil 10000 11.10.05 44.93 Nil 5000 13.10.05 44.99 Nil 10000 16.01.06 51.87 Nil 5000 17.01.06 51.82 Nil 5000 17.01.06 51.82 Nil 10000 18.01.06 51.38 Nil 10000 19.01.06 51.44 Nil 10000 20.01.06 54.31 2. General Insurance Corporation of 50000 Nil 14.12.05 49.68 India 31382 Nil 14.12.05 49.85 23436 Nil 14.12.05 49.85 16000 Nil 15.12.05 49.89 3350 Nil 16.12.05 49.82 5203 Nil 20.12.05 49.70
4. For Related party disclosures under Accounting Standard 18 issued by the Institute of Chartered Accountants of India please refer to para under ‘Related Party Transactions’ on page no. [•] of this Letter of Offer. 5. The Lead Manager and the Company shall update this Letter of Offer and keep the shareholders/public informed of any material changes till the listing and trading commencement.
ix III. INTRODUCTION
INDUSTRY
Industry Overview
Housing is the one of the basic needs for every human being. Housing is an important component and a measure of socio–economic status of the people. It is regarded as a critical sector in terms of policy initiatives and interventions. The relevance of housing as a social need is long recognized and has therefore influenced the policy making at different levels, viz. national, state and local levels. This is reflected in the efforts of the Government undertaken to improve the housing and habitat conditions by way of financial allocations in the Five Year Plans and fiscal measures related to housing announced in the Union Budgets.
In India, housing is basically a state level activity though the Central Government is responsible for the formulation of a broad policy framework for the housing sector and overseeing the effective implementation of the same. The importance of the housing sector can be judged by this fact that we consider house as the best investment and want to invest our hard earned money or saving in a house.
Housing Finance
The Housing Finance Companies (HFCs) have stepped up their lending over the years contributing significantly to the growth of the housing sector, however they are still far from realising their full potential. Their strength lies in their specialised set of skills in lending exclusively for housing. The performance of the HFCs in recent years has been overshadowed by the competing banking sector with aggressive lending abilities, the relatively high cost of funds, higher regulatory capital requirement and lower degree of penetration in terms of geographical presence and market segments of the HFCs. Till June 30, 2004 there were 45 HFC’s registered with NHB.
The Indian housing finance sector is crowded with players of all sizes and nature ranging from government organisations, insurance companies, banks, housing finance companies and co-operative organisations like HUDCO and NHB to others. Major players in the Industry are HDFC, LIC Housing Finance, Dewan Housing, Can Fin Homes, SBI Home Finance and Gujarat Rural Housing.
COMPANY OVERVIEW
GIC Housing Finance Limited was incorporated as 'GIC Grih Vitta Limited' on 12th December 1989. The Company was issued the Certificate for Commencement of Business dated 12th January 1990. The name is changed to its present name vide fresh Certificate of Incorporation issued on 16th November 1993. The Company was formed with the objective of entering in the field of direct lending to individuals and other corporates to accelerate the housing activities in India. The primary business of GICHFL is granting housing loans to individuals and to persons/entities engaged in construction of houses/flats for residential purposes.
The Company was promoted by General Insurance Corporation of India and its erstwhile subsidiaries namely, National Insurance Company Limited, The New India Assurance Company Limited, The Oriental Insurance Company Limited and United India Insurance Company Limited together with erstwhile UTI, ICICI, IFCI, HDFC and SBI, all of them contributing to the initial share capital. HDFC, SBI, ICICI and SUUTI have since sold off their holding in the Company and have ceased to be the Promoters of the Company.
GIC Housing Finance Limited is in the business of providing housing finance to individuals and those into construction business. GICHFL offers the following products to its customers:
Own Your Home Scheme:
This scheme is perfectly suited to individual home loan borrowers, aiming to own a house. The Company offers a bouquet of options to the borrower in terms of tenure, rate of interest and value added services.
1 Home loan to NRI:
This product specifically caters to the needs of NRIs who want to purchase their own home in India. Generally these transactions prove to be very fruitful to the Company because of the creditworthiness of the NRI as well as the high value of the transaction.
Tailor made products:
The Company has designed tailor made products to suit individual needs and specifications depending on various criteria.
Loans Sanctioned and Disbursement
The company has cumulatively approved loans of Rs. 2781 crores comprising 76411 units upto March 31, 2005. Cumulative disbursement till March 31, 2005 stands at Rs. 2427 crores. Loans sanctioned and disbursed during the last 4 years and till the half year ended September 30, 2005 is given below: (Rs. Lacs) Till half year ended Particulars 2002 2003 2004 2005 September 30, 2005 Loans Sanctioned 25743 33285 55076 80461 20131 Loans Disbursed 22519 29559 44881 65923 23519
Loans Outstanding
Total amount of housing finance outstanding as on September 30, 2005 is Rs. 171149 lacs. Out of the total outstanding on September 30, 2005, 98.34% is granted to individuals and 1.41% is outstanding with corporate clients. A clients wise breakup of the loans outstanding at the FY ended 2002, 2003, 2004, 2005 and as on September 30, 2005 is given below: (Rs. lacs) Half year ended Particulars 2002 2003 2004 2005 September 30, 2005 Individuals 64769 79604 106624 154542 168303 Corporates 5254 4494 3644 2776 2415 Others 815 660 631 500 430 Total 70838 84758 110899 157819 171149
2 SELECTED FINANCIAL INFORMATION
Following selected financial data have been prepared in accordance with Indian Accounting Standards, in conjunction with our financial statements and related notes and "Management's Discussions and Analysis". The audited financial statements have been prepared in Indian rupees and have been prepared in accordance with Indian Accounting Standards for the fiscal years ended 2001,2002, 2003, 2004, 2005 and six months period ending on 30th September, 2005.
GIC Housing Finance Ltd. Statement of Profits and Losses Rs. in lacs Particulars For the Financial Year SIX MONTHS 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 30.09.2005 Income: Operating Income 9,095 9,163 9,676 9,920 12,453 7,583 Investment and other Income 85 74 77 90 108 38 Total (A) 9,180 9,237 9,753 10,010 12,561 7,621 Expenditure: Interest 6,849 7,599 7,272 6,990 7,865 4,784 Staff Expenses 153 162 199 185 236 128 Other Expenses 347 383 450 567 808 425 Miscellaneous expenses written off 6 6 5 5 10 5 Depreciation 72 56 43 40 44 23 Non-Performing assets written off 965 342 823 200 - - Provision for Non-performing assets (Net) 145 521 201 565 1,524 386 Total (B) 8,537 9,069 8,993 8,552 10,487 5,751 Net Profit Before Tax and Extra ordinary Items (A-B) 643 168 760 1,458 2,074 1,870 Less:Taxation 210 150 235 526 856 473 Deferred Tax Assets - (102) (136) (180) (558) (124) Fringe Benefit Tax - - - - - 3 Extraordinary Items ------Net Profit After Tax and Extra ordinary items 433 120 661 1,112 1,776 1,518
3
GIC Housing Finance Ltd. Statement of Assets and Liabilities Rs. in lacs Particulars Position as at Financial Year Ended Six Months 31-Mar-01 31-Mar-02 31-Mar-03 31-Mar-04 31-Mar-05 30-Sep-05
A Housing Loans: 62,742 70,839 84,758 110,900 157,819 171,149 Less: Provision for non performing Loans 410 693 1,061 1,562 3,086 3,451 62,332 70,146 83,697 109,338 154,733 167,698 B Fixed Assets Gross Block 584 598 617 652 666 676 Less: Depreciation 252 308 344 382 380 402 Net Block 332 290 273 270 286 274 Less: Revaluation Reserve ------Net Block after Revaluation Reserve 332 290 273 270 286 274 C Investments Cost of Investments 1,699 1,489 1,488 1,387 1,379 1,476 Less; Provision for Non Performing Inv 671 802 1,033 1,218 1,218 1,239 1,028 687 455 169 161 237 D Current Assets: Sundry Debtors (Secured) 1,395 745 826 677 320 422 Cash and Bank Balance: 1,269 2,201 1,388 1,611 1,707 1,815 Loans & Advances 3,163 3,148 3,666 4,491 4,554 5,021 Other Current Assets 311 149 98 199 93 377 6,138 6,243 5,978 6,978 6,674 7,635 Total E =A+B+C+D 69,830 77,366 90,403 116,755 161,854 175,844 F Deferred Tax Asset - 238 375 555 1,113 1,237 G Total Assets - G= A + B +C+D+F 69,830 77,604 90,778 117,310 162,967 177,081
Loan Funds, Current Liabilities and Provision H Liabalities & Provisons Loan Funds: Secured Loans 59,276 66,435 74,375 89,521 127,022 141,694 Unsecured Loans 155 102 5,022 15,018 20,005 17,503 59,431 66,537 79,397 104,539 147,027 159,197
I Current Liabilities and Provisons 2,132 2,717 2,611 3,189 3,633 4,053 Total J =H+I 61,563 69,254 82,008 107,728 150,660 163,250
K Net Worth (K = G-J ) 8,267 8,350 8,770 9,582 12,307 13,831 Represented by: L Share Capital 1,797 1,797 1,797 1,797 2,693 2,693 M Reserves 6,486 6,563 6,978 7,785 9,652 11,172 N Misc. Expenditure not written-off 16 10 5 - 38 34
O Total = L+ M – N 8,267 8,350 8,770 9,582 12,307 13,831
4 IV. GENERAL INFORMATION
GIC HOUSING FINANCE LIMITED (Incorporated on 12th December, 1989 under the Companies Act, 1956 as GIC Grih Vitta Limited and renamed to GIC Housing Finance Limited on 16th November, 1993. A Certificate for Commencement of Business was issued on 12th January 1990.) Registered and Corporate Office: Universal Insurance Building, 3rd Floor, Sir P.M. Road, Fort, Mumbai - 400 001. Tel: (022) - 2285 1765-67, (022) - 2285 3866/8 Fax: (022) - 2288 4985. E-mail: [email protected]; website: www.gichfindia.com Registration No. 11-54583 Address of the Registrar of Companies: Registrar of Companies Mumbai, Maharashtra.
Dear Shareholder(s),
Pursuant to the resolutions passed by the Board of Directors of the Company at its meeting held on December 26, 2005 and resolution passed by the shareholders in the Extra Ordinary General Meeting held on January 23, 2006, it has been decided to make the following offer to the Equity Shareholders of the Company:
Right Issue of 2,69,25,533 Equity Shares of Rs.10 each for cash at a premium of Rs. [•]/- per Equity Share aggregating to Rs. [•] lacs on rights basis to the Equity Shareholders of GIC Housing Finance Limited (the “Company”/ “GICHFL”) in the ratio of One Equity Share for every One Equity Share held on the record date i.e. [•], 2006. The company has fixed the price band of Rs.37 to Rs.42, the Floor Price being Rs.37 and Cap Price being Rs.42. The Issue Price will be fixed on or before the fixation of Record Date.
Statutory Declaration
In the reasonable opinion of the Board, there are no circumstances that have arisen since the date of the last financial statement disclosed in the Letter of Offer, that materially or adversely affect or are likely to affect the performance or profitability of the Company or value of its assets or its ability to pay its liabilities within the next twelve months.
Important
1. This Issue is applicable only to those shareholders whose names appear as beneficial owners as per the list to be furnished by Depositories in respect of the Equity Shares held in the electronic form and on the Register of Members of the Company in respect of the Equity Shares held in physical form at close of business hours on [•], 2006, i.e. the Record Date. 2. Shareholders' attention is drawn to RISK FACTORS appearing on Page [•] of this Letter of Offer. 3. Please ensure that the CAF is received with this Letter of Offer. 4. Please read this Letter of Offer and the instructions contained therein and in the CAF carefully, before filling in the CAF. The instructions contained in the CAF are an integral part of this Letter of Offer and must be carefully followed. Application is liable to be rejected if it is not in conformity with the terms of the Letter of Offer and/or the CAF. 5. All enquiries in connection with this Letter of Offer or CAF should be addressed to the Registrars to the Issue, Sharepro Services (India) Pvt. Ltd., quoting the registered Folio Number/DP ID/Client ID number and the Serial Number of the CAF and his/her full name and address. 6. In case the original CAF is not received, lost or misplaced by the shareholder, the Registrars/Company will issue a duplicate CAF on the request of the shareholder who should furnish the registered Folio Number/DP ID/Client ID number and his/her full name and address to the Registrars/Company. Please note that those applicants who are making the application in the duplicate CAF should not utilize the original CAF for any purpose including renunciation, even if it is received/found subsequently. In case the original and the duplicate CAFs are lodged for subscription, allotment will be made on the basis of the duplicate CAF and the original CAF will be ignored. 7. The Rights Issue will be kept open for a minimum period of 30 days. If extended, it will be kept open for a maximum period of 60 days.
5 8. The Lead Manager and the Company shall make all information available to the Equity Shareholders and no selective or additional information would be available for a section of the Equity shareholders in any manner whatsoever including at presentations, in research or sales reports etc. after filing of the draft Letter of Offer with SEBI/Stock Exchange 9. The Lead Manager and the Company shall update the Letter of Offer and keep the public informed of any material changes till the listing and trading commences. 10. All the legal requirements as applicable till the filing of the Letter of Offer with the Designated Stock Exchange have been complied with.
BOARD OF DIRECTORS:
Sr. No. Name of the Director Position held 1. Mr. R.K Joshi Nominee Director 2. Mr. B Chakrabarti Non Executive Director 3. Mr. M.K Garg Non Executive Director 4. Mr. M Ramadoss Non Executive Director 5. Mr. V Ramasaamy Non Executive Director 6. Mr. Manu Chadha Independent & Non Executive Director 7. Mr. R.M. Malla Non Executive Director 8. Mr. M.K. Tandon Independent & Non Executive Director 9. Mr. B. P. Deshmukh Independent & Non Executive Director 10. Mr. Arun Datta Independent & Non Executive Director 11. Mr. N. R Ranganathan Nominee Director 12. Mr. A. K Guha Executive Director
For more details regarding our Board of Directors please refer to page no. [•] of this draft Letter of Offer.
Issue Schedule
ISSUE OPENS ON LAST DATE FOR RECEIVING ISSUE CLOSES ON REQUESTS FOR SPLIT FORM [•] 2006 [•] 2006 [•] 2006
ISSUE MANAGEMENT TEAM
Company Secretary and Compliance Officer
Mr. S. Sridharan Company Secretary and Asst Vice President GIC Housing Finance Limited, 3rd Floor, Universal Insurance Building, Sir P.M. Road, Fort, Mumbai - 400 001 Tel: (022) 2288 1783 Fax: (022) 2288 4985 Email: [email protected]
6 Bankers to the Company
Bank of India D.N. Road Branch, Sadhana Reyon House, Fort, Mumbai-400001 Tel No: (022) 2261 4878 Fax No: (022) 2261 0168
HDFC Bank Limited Motwani Chembers, Manikji Wadia Building Mumbai-400 023. Tel No: (022) 5657 3602 Fax No: (022) 2270 3392
ISSUE MANAGEMENT TEAM
Lead Manager to the Issue:
IDBI Capital Market Services Limited 5th floor, Mafatlal Centre, Nariman Point, Mumbai – 400 021 Tel: (022) 5637 1212 Fax: (022) 2288 5848 E-mail: [email protected] Website: www.idbicapital.com Contact Person: Mr. Saurabh Jain
Registrar to the Issue:
Sharepro Services (India) Pvt. Ltd. Satam Estate, 3rd Floor, Above Bank of Baroda, Cardinal Gracious Raod, Chakala, Andheri (East), Mumbai-400 099. Tel: (022) 2821 5168/2834 8218/ 2832 9828 Fax:(022) 2837 5646 Website: www.shareproservices.com Contact Person: Mr. Ashok Gupta
Legal Advisers to the Issue:
ANS Law Associates Advocates & Solicitors 41-A Filmcenter 68, Tardeo Road Mumbai-400 034 Tel: (022) 5660 4761/62 Fax:(022) 5660 4763 Contact Person: Mr. Sharad Abhyankar Email: [email protected]
7 Bankers to the Issue:
IDBI Ltd. 224, Mittal Court, A- Wing, 2nd Floor, Nariman Point, Mumbai – 400 021 Tel.: (022) 5658 8273 Fax: (022) 2288 0131
Auditors of the Company:
M/s M.P. Chitale & Company Chartered Accountants 1st Floor, Hamam House, Ambalal Doshi Marg, Fort, Mumbai-400001. Tel No: (022) 2265 1186 Fax No: (022) 2265 5334 Email: [email protected]
INTER SE ALLOCATION OF RESPONSIBILITIES
Not Applicable
CREDIT RATING
This being a rights issue of Equity Shares, credit rating is not required.
TRUSTEES
This being a rights issue of Equity Shares, appointment of Trustees is not required.
MONITORING AGENCY
Not Applicable
APPRAISING ENTITY
Not Applicable
MINIMUM SUBSCRIPTION i. If the Company does not receive the minimum subscription of 90% of the Issue, the entire subscription amount shall be refunded to the applicants within 42 days from the date of closure of the Issue. ii. If there is a delay in refund of subscription amount by more than 8 days after the Company becomes liable to pay the subscription amount (i.e. 42 days after closure of the Issue), the Company will pay interest for the delayed period, at rates prescribed under sub-sections (2) and (2A) of Section 73 of the Companies Act, 1956.
8 V. CAPITAL STRUCTURE OF THE COMPANY
No. of shares Nominal Issue Amount Value
A. Authorised Capital* 10,00,00,000 Equity Shares of Rs.10/- each 100,00,00,000/- -- 50,00,000 Redeemable Cumulative Participating or Non 50,00,00,000/- -- Participating Preference Shares of Rs. 100/- each B. Issued Capital - 2,69,25,533 Equity Shares of Rs.10/- each 26,92,55,330 -- - NIL Redeemable Cumulative Participating or Non NIL Participating Preference Shares of Rs. 100/- each C. Subscribed and Paid-up Capital - 2,69,25,533 Equity Shares of Rs.10/- each 26,92,55,330 -- - NIL Redeemable Cumulative Participating or Non NIL Participating Preference Shares of Rs. 100/- each D. Present Rights Issue in the ratio of one Equity Share for every Equity Share held as on [•] (Record Date) - 2,69,25,533 Equity Shares of Rs.10/- each at a premium of 26,92,55,330 [•] Rs. [•]/- per share E. Post Issue Capital 5,38,51,066 Equity Shares of Rs.10/- each 53,85,10,660 -- F. Share Premium Account Before the Offer 37,29,66,466 After the Offer [•]
* The Company has reclassified its Authorised Capital in its AGM on September 15, 2005 from Rs. 150 crores divided into 5,00,00,000 Equity Shares of Rs.10/- each and 1,00,00,000 Redeemable Cumulative Participating or Non Participating Preference Shares of Rs. 100/- each to Rs. 150 crores divided into 10,00,00,000 Equity Shares of Rs.10/- each and 50,00,000 Redeemable Cumulative Participating or Non Participating Cumulative Preference Shares of Rs. 100/- each.
NOTES TO CAPITAL STRUCTURE:
1. Share Capital History:
Sr. Date of No. of Cumulative Face Value Issue Conside Particulars No allotment shares number of (Rs.) Price ration Equity (Rs.) Share 1 Incorporation 11 11 10 10 Cash Initial subscription to the Memorandum 2 30/03/1991 500000 5000011 10 10 Cash First Allotment 3 02/12/1993 500011 10000022 10 10 Cash Rights Issue 4 10/01/1995 8004900 18004922 10 50 Cash Initial Public Offering and Allotment to Promoters 5 30/06/2004 (53800) 17951122 10 - - Forfeited and Cancelled 6 27/11/2004 8975561 2,69,25,533 10 16 Cash Rights Issue of one Equity Share for every two Equity Shares held at Rs. 16 per share (including Premium)
9 3. Promoters’ Contribution and Lock-in:
The present issue being a rights issue, provisions of Promoters’ contribution and lock-in are not applicable.
4. Present Rights Issue:
Type of Instrument Ratio Face Value No. of Issue Price Consideration (Rs.) shares (Rs.) Equity Shares 1:1 10/- 2,69,25,533 [•] Cash
5. Shareholding pattern of the Company as on December 31, 2005 is given below:
Category No. of Shares Held % of Share Holding Promoter's Holding Promoters Indian Promoters 11370531 42.23 Sub Total 11370531 42.23 Non Promoter's Holding Institutional Investors Mutual Funds and UTI 5500 0.02 Banks, Financial Institutions, 509123 1.89 Insurance Companies FIIs 1396068 5.19 Sub Total 1910691 7.10 Others Private Corporate Bodies 3996980 14.84 Indian Public 9541487 35.44 NRIs / OCBs 105844 0.39 Sub Total 13644311 50.67 Grand Total 26925533 100.00
Notes: a) The following Promoters have communicated their intention to subscribe to their own entitlement in this rights issue in full.
Name of the Promoter Date of Letter New India Assurance Company Limited January 13, 2006 General Insurance Corporation of India January 23, 2006 The Oriental Insurance Company Limited January 10, 2006 United India Insurance Company Limited January 25, 2006 National Insurance Company Limited January 27, 2006
b) IFCI Ltd., one of the Promoters is yet to give their consent to participate in the present Rights Issue
c) The allotment to the Promoters even if they subscribe to unsubscribed portion to the fullest extent will not result in public shareholding falling below the permissible minimum level. Thus the provisions of Clause 17 of SEBI (Delisting of Securities) Guidelines, 2003 are not applicable.
7. The Company has not issued any warrant, option, convertible loan, debenture or any other securities convertible at a later date into equity, which would entitle the holders to acquire further equity shares of the Company.
10 8. The Equity Shares of the Company are being traded in compulsory dematerialised mode. The market lot of the equity shares is 1 (one).
9. No transactions of the Equity Shares of the Company has been taken place by the Promoters / Promoter Group during last 6 months except as mentioned herein:
Sr. Name of the shareholder No. of shares No. of Date of Price No. bought shares sold transaction (in Rs.) 1 Oriental Insurance Company Ltd Nil 5000 05.10.05 46.86 Nil 10000 06.10.05 46.84 Nil 10000 07.10.05 46.36 Nil 10000 11.10.05 44.93 Nil 5000 13.10.05 44.99 Nil 10000 16.01.06 51.87 Nil 5000 17.01.06 51.82 Nil 5000 17.01.06 51.82 Nil 10000 18.01.06 51.38 Nil 10000 19.01.06 51.44 Nil 10000 20.01.06 54.31 2. General Insurance Corporation of 50000 Nil 14.12.05 49.68 India 31382 Nil 14.12.05 49.85 23436 Nil 14.12.05 49.85 16000 Nil 15.12.05 49.89 3350 Nil 16.12.05 49.82 5203 Nil 20.12.05 49.70
10. The ten largest shareholders two years prior to the date of filing of this Letter of Offer with Stock Exchanges are as follows: Sr. Name of the Shareholders Number of Percentage of No. Equity Shares shareholding (%) 1. IFCI Ltd. 1575000 8.74% 2. National Insurance Company Ltd. 1197000 6.64% 3. The New India Assurance Company Ltd. 1197000 6.64% 4. The Oriental Insurance Company Ltd. 1197000 6.64% 5. United Indian Insurance Company Ltd. 1197000 6.64% 6. General Insurance Corporation Ltd. 1071422 5.95% 7. SU UTI 985793 5.47% 8. CD Equisearch Pvt. Ltd. 558630 3.10% 9. EXIM Scrip Dealers Pvt. Ltd. 289901 1.61% 10. UTI – SUS 1999 164716 0.91%
11 11. The ten largest shareholders as on 10 days prior to the date of filing of the Letter of Offer with Stock Exchanges are as follows: Sr. Name of the Shareholders Number of Percentage of No. Equity Shares shareholding (%) 1. IFCI Ltd. 2200000 8.17% 2. General Insurance Corporation Ltd. 2162769 8.03% 3. The New India Assurance Company Ltd. 1936750 7.19% 4. United Indian Insurance Company Ltd. 1886750 7.01% 5. The Oriental Insurance Company Ltd. 1597512 5.93% 6. National Insurance Company Ltd. 1586750 5.89% 7. Caledonia Investments Plc 1336068 4.96% 8. Tata Investment Corporation Ltd. 665400 2.47% 9. CD Equifinance Pvt. Ltd. 642000 2.38% 10. Dilip B. Desai 316480 1.17%
12. The ten largest shareholders as on the date of filing of the Letter of Offer with Stock Exchanges are as follows:
Sr. Name of the Shareholders Number of Percentage of No. Equity Shares shareholding (%) 1. IFCI Ltd. 2200000 8.17% 2. General Insurance Corporation Ltd. 2162769 8.03% 3. The New India Assurance Company Ltd. 1936750 7.19% 4. United Indian Insurance Company Ltd. 1886750 7.01% 5. National Insurance Company Ltd. 1586750 5.89% 6. The Oriental Insurance Company Ltd. 1567512 5.82% 7. Caledonia Investments Plc 1336068 4.96% 8. Tata Investment Corporation Ltd. 665400 2.47% 9. CD Equifinance Pvt. Ltd. 642000 2.38% 10. Dilip B. Desai 316480 1.17%
13. The Company/Promoters/Directors/Lead Merchant Bankers have not entered into buyback or similar arrangements for purchase of securities issued by the Company.
14. IDBI Capital Market Services Ltd., Lead Manager to the Issue is holding 140267 Equity Shares of the Company amounting to 0.52% of the total Pre-Issue Capital of the Company as on December 31, 2005. IDBI Capital Market Services have not traded in the Equity Shares of the Company after its appointment as the Lead Manager to the Issue.
15. The entire price of Rs. [•]/- per share is payable on application. Since the shares allotted will be fully paid – up at the time of allotment, the Forfeiture Clause of SEBI (DIP) Guidelines will not be applicable to the Equity Shares being allotted in terms of this Letter of Offer.
16 The Company has not availed of “bridge loans” to be repaid from the proceeds of the Issue, for incurring expenditure on the Objects of the Issue.
17. The present Rights Issue is being made in the ratio of one equity share to every one equity share held (ie, 1:1) and will not lead to creation of fractional entitlement.
18. The total number of shareholders as on the date of filing the Letter of Offer with the stock exchange is 24175.
12 19. At any given time there shall be only one denomination for the shares of the Company and the disclosures and accounting norms specified by SEBI from time to time will be complied with.
20. The Company shall not make any further issue of capital whether by way of issue of bonus shares, preferential allotment, rights issue or public issue or in any other manner during the period commencing from the submission of the Letter of Offer to SEBI for the Rights Issue till the securities referred in the Letter of Offer have been listed or application money refunded on account of failure of the Issue.
21 The Company does not propose to alter the capital structure by way of split or consolidation of the denomination of the shares or the issue of shares on a preferential basis or issue of bonus or rights or further public issue of shares or any other securities within a period of six months from the date of opening of the present Issue.
13 VI. PARTICULARS OF THE ISSUE
OBJECTS OF THE ISSUE
The main object of the offering is:
1. To strength Capital Adequacy norm as specified by National Housing Bank 2. To meet the Issue expenses
Capital Adequacy Ratio (CAR)
As per the NHB Housing Finance Company Direction, 2001 dated 27th September 2001, every Housing Finance Company shall maintain a minimum Capital Adequacy Ratio (CAR) of 12%. The Capital Adequacy Ratio of GICHFL as on 30th September 2005 is 13.14%. NHB vide their Direction No. NHB-HFC.DIR.11/CMD/2005 dated October 1, 2005 increased the risk weightage for the standard individual housing loan assets from 50% to 75%. The CAR as on 31st March 2006 would be below the minimum stipulated level of 12% unless fresh capital will be infused. In view of the additional business and to maintain the CAR above the minimum stipulated level of 12%, infusion of fresh capital is required.
Particular of the CAR for last five years is given below: (Rs. in lacs) Year Ended March 31st 2001 2002 2003 2004 2005 Eligible Tier I Capital 8267 8350 8771 9583 11194 Eligible Tier II capital - - - - - Total Capital 8267 8350 8771 9583 11194 Total Risk Adjusted Assets 72045 66904 59038 75783 91041 Capital Adequacy Ratio (%) 11.47 12.48 14.85 12.64 12.30
Meet the Issue Expenses
The expenses of the Issue include payment of fees for the Lead Manager, other Intermediaries, printing and other Issue expenses, Legal Fees, advertisements expenses and listing fees payable to the Stock Exchanges amongst others:
The expenses of the Rights Issue to be incurred by the Company are estimated to be around Rs. 79.50 lacs as detailed below:
Particulars Rs. In Lacs Fees for the Lead Manager 25.00 Fees for the Registrar to the Issue 1.70 Fees to Legal Advisor to the Issue 5.00 Fees to auditors to the Issue 0.30 Additional listing fees for Stock Exchanges 1.00 SEBI Filing Fees 2.50 Corporate Action Fees 1.25 Statutory Advertisement Expenses 7.50 Printing of Offer Documents 5.25 Printing of CAF 0.25 Postage Charges 18.00 Printing of Share Certificate 0.50 Other Expenses 1.25 Stamp Duty 10.00 Total 79.50
14 Means of Finance and Deployment of funds
The funds of Rs. [•] raised by the Company through the proposed Rights Issue will be deployed as under:
Particulars Rs. In Lacs Housing Finance Activities [•] Issue Expenses [•] Total [•]
BASIC TERMS OF ISSUE
The Equity Shares now being offered are subject to the terms of this Letter of Offer, the CAF, the Memorandum and Articles of the Company, approvals under the Foreign Direct Investment scheme of Government of India, FEMA, if applicable, Guidelines issued by SEBI, the Act, the guidelines, notifications and regulations for the Issue of capital and for the listing of securities issued by the Government and/or other Statutory Authorities and bodies from time to time and such terms and conditions as may be incorporated in the Letter of Allotment/Share Certificate or any deed or document executed by the Company regarding the Rights Issue. The principal terms and conditions of the Issue are as follows: i. Present Issue: Rights Issue of 2,69,25,533 equity shares of Rs. 10/- each in a ratio of 1:1 ii. Face Value: Each Equity Share shall have a face value of Rs.10/-. iii. Issue Price: Rs. [•]/- per Share. The company has fixed the price band of Rs.37 to Rs.42, the Floor Price being Rs.37 and Cap Price being Rs.42. The Issue Price will be fixed on or before the fixation of Record Date.
15 BASIS OF THE ISSUE PRICE
Qualitative Factors
Profit making and dividend paying Company since 1995
Quantitative Factors
1. Earning per Share (EPS)
Financial Year EPS Weight used (Rs.) 2002-03 3.67 1 2003-04 6.17 2 2004-05 7.60 3 Weighted Average 6.47
2. Price Earnings Ratio (P/E Ratio)
Price Earning Ratio at EPS for the financial period ended March 31, 2005 based 6.84 on the price of January 16, 2006
3. Industry P/E
Highest 27.2 Average 23.3 Lowest 4.3 (Source: Capital Market Vol. XX/22 Jan 02 to Jan. 15, 2006 Segment: Finance - Housing)
4. Return on networth
Financial Year Return on Net Weight Worth (%) used 2002-03 7.54% 1 2003-04 11.61% 2 2004-05 14.44% 3 Weighted Average 12.34%
5. Net Asset Value (NAV) per share
As on 30/09/2005 (Rs.) 51.41 After the issue based on 30th September, 2005 results [•]
6. Minimum Return on Networth after Issue required for maintaining Pre-Issue EPS of Rs. 7.60
EPS Minimum Return of Networth after Issue Rs. 7.60 [•]
16 7. Peerset Analysis
There are few companies is in the same line of business as GICHFL. A comparison with some of the Housing Finance Companies is as follows: (Figures as on March 31, 2005) Name of the Company Income PAT Equity EPS P/E Price as on (Rs. In (Rs. In (Rs. In (Rs.) (x) 27/12/2005 Lacs) Lacs) Lacs) LIC Housing Finance Ltd. 106870 14370 8499 16.2 10.1 196.45 Dewan Housing Finance Ltd. 16380 2710 5109 5.0 9.6 64.50 GIC Housing Finance Ltd. 12560 1776 2693 7.6 5.6 55.05 Can Fin Homes 12730 2110 2050 10.0 4.4 52.70 GRUH Finance 8550 1670 2650 6.0 10.9 86.90 (Source: Capital Market Vol. XX/22 Jan 02 to Jan. 15, 2006 Segment: Finance Housing, Company Data and BSE)
17 TAX BENEFITS TO THE COMPANY AND ITS SHAREHOLDERS
The Company has received tax benefit certificate from M/s M. P. Chitale & Co, Chartered Accountants specifying the tax benefits available to the Company and its shareholders under the Direct Tax Laws. The contents of the same are given below. Unless otherwise specified, sections referred to are sections of the Income Tax Act, 1961.
To the Company
A Under the Income Tax Act, 1961
1. In accordance with and subject to the provisions of Section 112 of the Income Tax Act, 1961, long term capital gain accruing to the Company will be subject to tax as stated below instead of normal rate of 35% (plus applicable surcharge) applicable to the Company.
(a) If long term capital gain is computed with indexation @ 20% (plus applicable surcharge) (b) If long term capital gain is computed without indexation @ 10% (plus applicable surcharge)
The Company is eligible to claim exemption in respect of tax on long term capital gains u/s. 54EC and 54ED if the amount of capital gains is invested in certain specified bonds / securities subject to the fulfillment of the conditions specified in those sections.
2. The Company is not liable to pay long term capital gains tax in respect of shares of the company held by then for a period of more than twelve months by virtue of Section 10(38) of the Act, subject to the fulfillment of the following conditions:
(a) The transaction of sale of such equity share is entered into on or after 1 October, 2004. (b) The transaction is chargeable to securities transaction tax under Chapter VII of the Finance (No.2) Act, 2004.
3. Short term capital gains arising on transfer of equity shares of a company would be liable to tax at the rate of 10% (plus applicable surcharge and education cess) by virtue of Section 111 A if the following conditions are satisfied:
(a) the transaction of sale of such equity share is entered into on or after 1 October, 2004. (b) the transaction is chargeable to securities transaction tax under Chapter VII of the Finance (No.2) Act, 2004.
4. Benefits of unabsorbed business/ long term capital losses and allowances
Company has unabsorbed losses/ allowances under the Act, which can be carried forward for set off against the income under the Act of future years as under:
(i) As per Section 72 of the Act, Company can carry forward the unabsorbed business losses for a period of eight assessment years immediately succeeding the assessment year in which the loss was first computed. (ii) As per Section 32 of the Act, Company can carry forward the unabsorbed depreciation allowance of earlier years for an indefinite period to be set off against business income under the Act of future years. (iii) As per Section 74 of the Act, Company can carry forward the unabsorbed long term capital losses for a period of eight assessment years immediately succeeding the assessment year in which the loss was first computed to be set off against long term capital gains under the Act of future years.
5. The Company is entitled to a deduction of 40% of its profits from the business of providing long term finance u/s 36(1) (viii) of the Income-tax Act, 1961. The said deduction is subject to the condition that the Company is required to create and maintain a special reserve to the extent of the deduction. If the aggregate amount carried to such reserve exceeds twice the amount of the paid up share capital and general reserves of the Company, the deduction is restricted to such amount only.
18
6. Dividend Income received from Domestic Companies is exempt under section 10(34) of the Income-tax Act, 1961.
7. In accordance with and subject to the provisions of Section 10(35) of the Act, the following income shall be exempt in the hands of the Company:
(i) Income received in respect of the units of a Mutual Fund specified under Clause (23D) of Section 10 of the Act; or (ii) Income received in respect of units from the Administrator of the specified undertaking; or (iii) Income received in respect of units from the specified company.
Under Wealth Tax Act, 1957
The Company is liable to pay wealth tax as per the provisions of Wealth Tax Act, 1957 at the rate of 1% in respect of certain assets owned by the Company, subject to the basic exemption of Rs.15 lacs.
To the Resident Members of the Company
B. Under the Income Tax Act, 1961
1. Dividend Income received from Domestic Companies is exempt under section 10(34) of the Income-tax Act, 1961.
2. The shareholders are not liable to pay long term capital gains tax in respect of shares of the company held by then for a period of more than twelve months by virtue of Section 10(38) of the Act, subject to the fulfillment of the following conditions:
(a) The transaction of sale of such equity share is entered into on or after 1 October, 2004. (b) The transaction is chargeable to securities transaction tax under Chapter VII of the Finance (No.2) Act, 2004.
Proviso to the section specifies that in case of individual and HUF, where the total income as reduced by such short term capital gains is below the maximum amount not chargeable to tax, then such short term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to tax and the tax on the balance of such short term capital gains shall be computed at the rate of ten percent.
3. Short term capital gains arising on transfer of the company’s shares would be liable to tax at the rate of 10% (plus applicable surcharge and education cess) by virtue of Section 111 A if the following conditions are satisfied:
(a) the transaction of sale of such equity share is entered into on or after 1 October, 2004 (b) the transaction is chargeable to securities transaction tax under Chapter VII of the Finance (No.2) Act, 2004.
Further, the public issue of shares of the Company would also qualify as an eligible issue of capital and long term capital gains would qualify for the benefit of Section 54ED of the Act if the capital gains are invested in shares of the Company.
Under Wealth Tax Act, 1957
Shares held in Domestic Company are not “asset” under the Wealth-Tax Act 1957, hence not liable to wealth tax in the hands of the holder of the said shares
19 To The Non-Resident Members Of The Company
C. Under the Income Tax Act, 1961
1. Under Section 115E of the Act, where shares in the company are acquired or subscribed for in convertible foreign exchange by a Non Resident Indian, capital gains arising to the non-resident Indian on transfer of shares held for a period exceeding 12 months, shall, of the Act, be concessionally taxed at the rate of 10% (plus applicable surcharge and education cess). (Reference may also be made to the provisions of Section 115D of the Act).
2. Under section 115F of the Income Tax Act, 1961 the Long Term Capital gain as referred to in 1 above shall be exempted from income tax entirely / proportionately if he/she invest all or a portion of the net consideration in specified assets as defined in section 115C (f) of the Income Tax Act, 1961 within 6 months of the date of transfer. The amount so exempted shall, however, be chargeable to tax under the provisions of section 115F(2) if the specified assets are transferred or converted in to money within three years from the date of acquisition thereof as specified in the said section.
3. Under provisions of Section 115G of the Act, it shall not be necessary for a Non-Resident Indian to furnish his return of Income if his only source of income is investment income or long term capital gains or both arising out of assets acquired, purchased or subscribed in convertible foreign exchange and tax deductible at source has been deducted there from.
4. As per Section 115-I of the Act, a non-resident Indian (i.e. an individual being a citizen of India or person of India origin who is not a “resident”) elects not to be governed by the provision of Chapter XII-A of the Income Tax Act, 1961, than his/her total income shall be computed and charged in accordance with other provisions of the Act.
5. By virtue of Section 10(34) of the Act, income earned by way of dividend income from domestic company referred to in Section 115-O of the Act, are exempt from tax in the hands of the shareholders.
6. Where any Double Taxation Avoidance Agreement [DTA] entered into by India with any other country provides for a concessional tax rate or exemption in respect of income from the investment in the company’s shares, those beneficial provisions shall prevail over the provisions of the Income Tax Act, 1961 in that regard.
Under Wealth Tax Act, 1957
Share held in Domestic Company are not “asset” under the Wealth-Tax Act 1957, hence not liable to wealth tax in the hands of the holder of the said shares
To The Foreign Institutional Investors (FII's)
D. Under the Income Tax Act, 1961
1. Under Section 115AD (1)(b)(ii) of the Act, Income by way of Short Term Capital Gain arising from the transfer of shares held in the Company for a period of less than twelve months will be taxable @ 30% (plus applicable surcharge). 2. Under Section 115AD (1)(b)(iii) of the Act, Income by way of Long Term Capital Gain arising from the transfer of shares held in the Company will be taxable @ 10% (plus applicable surcharge) 3. Income by way of dividend received on shares of the Company is exempt u/s. 10(34) of the Income Tax Act, 1961." 4. Where any Double Taxation Avoidance Agreement [DTA] entered into by India with any other country provides for a concessional tax rate or exemption in respect of income from the investment in the company’s shares, those beneficial provisions shall prevail over the provisions of the Income Tax Act, 1961 in that regard.
20 Notes:
i. All the above benefits are as per the current tax laws as amended by the Finance Act, 2005. ii. The current position of tax benefits available to the company and to its shareholders is provided for general information purposes only. In view of the individual nature of tax consequences, each investor is advised to consult his/ her own tax advisor with respect to specific tax consequences of his /her participation in the issue. iii. The tax benefits listed above are not exhaustive and are based on information explanations and representations obtained from the Company and on the basis of our understanding of the business activities and operations of the company. While all reasonable care has been taken in the preparation of this opinion, M. P. Chitale & Co. accepts no responsibility for any errors or omissions therein or for any loss sustained by any person who relies on it. iv. Unless otherwise specified, sections referred to are sections of the Income Tax Act, 1961 (the Act).
M. P. Chitale & Co Chartered Accountants
Place: Mumbai Date: January 25, 2006
21 VII. ABOUT THE ISSUER COMPANY
INDUSTRY OVERVIEW
Housing is the one of the basic needs for every human being. Housing is an important component and a measure of socio–economic status of the people. It is regarded as a critical sector in terms of policy initiatives and interventions. The relevance of housing as a social need is long recognized and has therefore influenced the policy making at different levels, viz. national, state and local levels. This is reflected in the efforts of the Government undertaken to improve the housing and habitat conditions by way of financial allocations in the Five Year Plans and fiscal measures related to housing announced in the Union Budgets.
In India, housing is basically a state level activity though the central government is responsible for the formulation of a broad policy framework for the housing sector and overseeing the effective implementation of the same. The importance of the housing sector can be judged by this fact that we consider house as the best investment and want to invest our hard earned money or saving in house.
Current Scenario
Housing
India’s total population of 102.86 crore as per Census of India, 2001, consists of 19.20 crores households residing in 18.72 crores housing units. It may be observed therein that the average number of persons per house in urban area has declined continuously from 6.06 in 1951 to 5.50 in 2001. On the contrary, the scenario in rural sector has been somewhat fluctuating. The figure was 5.52 in 1951, which increased to 6.03 in 1981, but declined to 5.50 in 2001. Occupancy i.e., the number of persons per house, in both the urban and rural areas has become almost equal by 2001. The percentage of pucca houses in urban areas increased from 64.0 percent in 1971 to 74.8 percent in 2001, whereas the percentage of semi-pucca and kutcha houses in the urban areas has declined during this period. The percentage of pucca houses in rural areas increased from 18.5 percent in 1971 to 35.4 percent in 2001. In absolute terms the number of pucca houses in rural areas has increased from 33.34 million units in 1991 to 47.48 million by the year 2001. This implies that use of permanent building materials for the construction of walls and roofs is becoming more popular in rural areas also.
The tendency to own a house has shown an increasing trend among the urban households. The percentage of houses owned by the rural households is above 95 percent. A percentage wise tenure status in urban and rural areas are given below:
Particulars 1961 1971 1981 1991 2001 Urban Owned 46.2 47.1 53.5 65.9 71.5 Rented 53.8 52.9 46.5 34.1 28.5 Rural Owned 93.6 93.8 93.0 94.5 95.4 Rented 6.4 6.2 7.0 5.5 4.6 Source: Census of India
Housing Finance
The Housing Finance Companies (HFC) have stepped up their lending over the years contributing significantly to the growth of the housing sector, however they are still far from realising their full potential. Their strength lies in their specialised set of skills in lending exclusively for housing. The performance of the HFCs in recent years has been overshadowed by the competing banking sector with aggressive lending abilities, the relatively high cost of funds, higher regulatory capital requirement and lower degree of penetration in terms of geographical presence and market segments of the HFCs. Till June 30, 2004 there were 45 HFC’s registered with NHB.
The Indian housing finance sector (the sector) is crowded with players of all sizes and nature ranging from government organisations, insurance companies, banks, housing finance companies and co-operative organisations
22 like HUDCO and NHB to others. Major players in the Industry are HDFC, LIC Housing Finance, Dewan Housing, Can Fin Homes, SBI Home Finance and Gujarat Rural Housing.
Though the sector has been witnessing increased competition, there is scope for contribution from all institutions active in housing finance. Cost of funds notwithstanding, efficient customer servicing is emerging as the cutting edge in the industry. The sector has witnessed increased awareness among the borrower community about the industry practices and there are increased expectations about transparency and information disclosures from the perspective of depositors as well as borrowers. With these developments, the market is expected to mature further with the businesses becoming more robust and stable. The housing finance companies have also been resorting to securitisation as a measure to improve their Liquidity, Capital Adequacy, and better Asset-Liability Management. As a funding source, the HFCs have availed refinance from NHB, mostly under the Liberalised Refinance Scheme (introduced by NHB with effect from April 2002) customized to the market demand.
The aggregate housing loans outstanding (comprised of housing loans outstanding of HFCs, Banks, and Co-operative Sector) as on March 31, 2004 was 153219.12 crores. The graphical break of the same is as below:
90000 80000 70000 60000 HFCs 50000 Banks 40000 Cooperative Sector (Rs. Crores) 30000 20000 10000 0 2001 2002 2003 2004 Years
Source: Report on Trends and Progress of Housing in India – June 2004
The aggregate outstanding housing loans of HFCs, which were Rs.49,238 crores as on March 31, 2003 increased by 20.1 per cent and stood at Rs.59,111 crores as on March 31, 2004. Term wise housing loans outstanding of HFCs for 2003-2004 is given below:
(Rs. Crores) Term of Housing Loans 2002-2003 % of total 2003-2004 % of total Upto 1 year 2695.31 5.5% 4089.14 6.9% 1 to 3 Years 4670.82 9.5% 7849.98 13.3% 3 to 5 Years 4510.48 9.2% 6839.28 11.6% 5 to 7 years 4620.91 9.4% 4910.42 8.3% Above 7 years 32740.45 66.5% 35422.62 59.9% Total 49237.97 100% 59111.44 100% Source: Report on Trends and Progress of Housing in India – June 2004
Assets Quality of Housing Finance Companies
Out of 45 registered HFCs there were 30 HFCs having asset base of Rs. 10 crore and more as on June 30, 2004. The proportion of gross NPAs to total assets of these companies increased from a level of 2.23% as at March 31, 2002 to 2.39% as on March 31, 2003, which further increased to 4.45% by March 31, 2004.
23 Demand in Industry
In response to the high population growth, rapid urbanization and economic growth and changing sociological patterns, housing demand has been growing explosively in India. According to the Tenth Five Year Plan (2003-07) the investments required for the housing sector was estimated at Rs. 7,26,300 crore and it has been estimated that not more than 44% of this would flow from Banks and HFCs.
Strength
There has been no dearth of demand for housing and consequently for finances for the same have been abundant. Tax sops provided by the Government of India is a significant step towards upholding the future prospects of this industry.
Critical success factors
Housing Finance industry is facing tough competition from banks and witnessing declining spread (for HFCs). Hence, the players should have sustainable advantages to remain profitable in the long-term.
a) Cost of Funds
Cost of funds is the most crucial determinant of profitability for HFCs in the housing finance business. After the entry of banks in this business, which have access to low cost deposits, the spread of the HFCs has come under pressure.
b) Intermediation cost
Intermediation cost or cost of operation is also critical in determining the profitability, more importantly from the point of view of HFCs. The average intermediation cost of HFCs ranges from 0.7 per cent to 1 per cent of average total assets (one time cost). Banks are also expected to have the average operating cost for housing finance operation in similar range.
c) Management of NPAs
The average gross NPA of the industry is estimated at around 2-2.5 per cent of outstanding portfolio. However, within the industry, the NPA levels vary from less than 1 per cent to 7 per cent. With declining spreads, one of the crucial factors determining the profitability of HFCs will be the management of NPAs and their recovery. Hence, credit appraisal mechanism and recoveries will assume significant importance.
d) Product features
Housing Finance industry is being increasingly commoditised. Features like adjustable rate plans, lower processing fees, monthly rest, low interest rates, low EMI, lower margin money, have become common across the industry. As a result, loan products can be differentiated by offering free add-ons. However, in future, add-ons may not remain the differentiating factor for the products.
To make the loan products more attractive, finance companies have also begin to include the cost of registration, stamp duty, society charges and other associated costs while sanctioning loans. This has further lowered the threshold limit for purchasing a house.
e) Distribution reach
Distribution reach is critical for HFCs for deposit mobilization as well as loan disbursements. HDFC, the largest player, had the maximum reach across the nation. The company has extension counters at several companies as well as loan desks at HDFC Bank branches. Banks enjoy a distinct advantage over the Housing Finance Companies in terms of having a branch presence across the country. However, most banks (except private sector banks and some nationalized banks) lack a clear focus on home loan product.
24 Threat in the Industry
Market dynamics play a pivotal role in determining the lending rates. The entry of banks into the housing finance sector has posed a serious threat to already existent players in the field. Key issues affecting the Profitability of HFCs in the long term, the profitability of the housing finance industry will depend on the certain issues such as:
a) Declining Spreads
The spreads in the business have declined significantly after the aggressive entry of banks in direct lending. Banks have the advantage of lower cost of funds due to access to retail deposits. As a result, they have been aggressively cutting the interest rates on housing loans. Apart from lower interest rates banks offer lower or no processing fees (processing fees accounts for a large portion of administration cost of HFCs), monthly or daily rest loans and lower pre-payment charges, which affects the yields of the housing finance industry.
In the medium term, the pressure on housing finance spread is expected to increase as banks are expected to compete on interest rates with the HFCs for increasing their market share.
b) Pre-payment
Pre-payment is undertaken largely on the higher yield loans when the interest rates are on a downward trend, due to refinancing of the outstanding loan amount by another HFC / Bank. This erodes the portfolio of the HFCs. Pre-payment results into a lower than expected profitability for a Housing Finance Company. Pre-payment penalty is largely applicable on the fixed rate loans while, adjustable rate loans have zero pre- payment charge.
Industry Outlook
Demand for housing loan, particularly for big ticket ones, is likely to go up. The home loan rates, though they inched up 0.50%-0.75% since last year, are still ruling lower than what they were five years ago. Property prices, meanwhile, have climbed up steeply resulting in a decline in rental income return to 5-6% per annum at present. However, capital appreciation at 10-15% per annum still looks strong on the back of a buoyant market.
The home loans market grew more than 30 per cent in the Financial Year ended 2005 and expected to maintain the current growth rate in the next few years. The growth in the housing sector will be aided by an increase in jobs in service sectors such as information technology and banking. The service sector is growing and people in this sector are investing in houses. Cities such as Bangalore, Hyderabad, Gurgaon, Noida and Pune will see higher growth, apart from the metros.
The home loan boom, which began three years ago, is likely get a further boost through Budget proposals. The thrust on infrastructure is another positive that will indirectly help housing loans. Another added attraction has been the reduction of stamp duty rates by several States.
Relaxing the norms for Foreign Direct Investment in real estate will also help the housing sector. The Foreign Direct Investment in real estate sector is 100% through Automatic Route. This will provide easy entry for foreign developers and will lead to an increased supply of residential and commercial establishments. In future, the ability to foreclose defaulting mortgage assets will become a key competency for profitability in Housing Finance markets. HFCs and banks are increasingly looking at smaller towns for growth. The average loan size in these towns tends to be lower and yields marginally higher due to low competition. However, the cost of foreclosure (attaching the defaulters house property and recovering through sale) in these centres may be high. As a result, credit management (appraisal, checking and recovery) skills will be of critical importance in future.
25 BUSINESS OF THE COMPANY
GIC Housing Finance Limited was incorporated as 'GIC Grih Vitta Limited' on 12th December 1989. The Company was issued the Certificate for Commencement of business dated 12th January 1990. The name has been changed to its present name vide fresh Certificate of Incorporation issued on 16th November 1993. The Company was formed with the objective of entering in the field of direct lending to individuals and other corporates to accelerate the housing activities in India. The primary business of GICHFL is granting housing loans to individuals and to persons/entities engaged in construction of houses/flats for residential purposes.
The Company was promoted by General Insurance Corporation of India and its erstwhile subsidiaries namely, National Insurance Company Limited, The New India Assurance Company Limited, The Oriental Insurance Company Limited and United India Insurance Company Limited together with erstwhile UTI, ICICI, IFCI, HDFC and SBI, all of them contributing to the initial share capital. HDFC, SBI, ICICI and SUUTI have since sold off their holding in the Company and have ceased to be the Promoters of the Company.
GIC Housing Finance Limited is in the business of providing housing finance to individuals and those into construction business. GICHFL offers the following products to its customers:
Own Your Home Scheme:
This scheme is perfectly suited to individual home loan borrowers, aiming to own a house. The Company offers a bouquet of options to the borrower in terms of tenure, rate of interest and value added services.
Home loan to NRI:
This product specifically caters to the needs of NRIs who want to purchase their own home in India. Generally these transactions prove to be very fruitful to the Company because of the creditworthiness of the NRI as well as the high value of the transaction.
Tailor made products:
The Company has designed tailor made products to suit individual needs and specifications depending on various criteria.
Marketing And Selling Arrangements
GICHFL has set-up 23 branch/satellite offices covering major cities and towns for soliciting business. It has got a strong marketing team, which is further assisted by Direct Selling Agents (DSAs). The Company also caters to walk-in customers among others. It has direct tie-ups with reputed builders to provide finance to individual borrowers. Besides this, the Company is active in advertising and marketing arrangements through property exhibitions and housing loan melas organized from time to time.
Loans Profile
Loans Sanctioned and Disbursement
The company has cumulatively approved loans of Rs. 2781 crores comprising 76411 units upto March 31, 2005. Cumulative disbursement till March 31, 2005 stands at Rs. 2427 crores. Loans sanctioned and disbursed during the last 4 years and till the half year ended September 30, 2005 is given below: (Rs. lacs) Till half year ended Particulars 2002 2003 2004 2005 September 30, 2005 Loans Sanctioned 25743 33285 55076 80461 20131 Loans Disbursed 22519 29559 44881 65923 23519
26 Loans Outstanding
Total amount of housing finance outstanding as on September 30, 2005 is Rs. 171149 lacs. Out of the total outstanding on September 30, 2005, 98.34% is granted to individuals and 1.41% is outstanding for corporate clients. A clients wise breakup of the loans outstanding at the Financial Year ended 2002, 2003, 2004, 2005 and as on September 30, 2005 is given below: (Rs. lacs) Half year ended Particulars 2002 2003 2004 2005 September 30, 2005 Individuals 64769 79604 106624 154542 168303 Corporates 5254 4494 3644 2776 2415 Others 815 660 631 500 430 Total 70838 84758 110899 157819 171149
27 DETAILS REGARDING THE PROPERTIES OF THE COMPANY
Details of Properties on Lease and Leave and Licences
Sr. Property address Lessor Name Property Sq. Monthly Lease Instrument No. Used as ft. Rent Period
1. 3rd Floor, Universal The Saregama Corporate 3500 Rs. 10 years Indenture of Insurance Building, India Ltd. Off. Sq. 1,61,000/- Sub - Lease Fort, Mumbai - 400 Ft. 001.
2 United India United India Hyderabad 817.5 Rs. 3 years Lease Deed Insurance Building, Insurance 0 Sq. 11,105/- no.3-5-817/818, Company Ft. Basheerbagh, Limited. Hyderabad.
3 Vandana Bldg.,7th Santosh Sethi New Delhi 1027 Rs. 3 year Lease Deed Floor, Cannaught Sq. 35945/- Place, Tolstoy Marg, Ft. 20% New Delhi - 110 001 increase after 3 Vandana Bldg., 9th R.P.Sethi year Floor, Cannaught Lease Deed Place, Tolstoy Marg, Rs. 3 year New Delhi - 110 001 473 26005/- Sq. Ft.
4 Leo Shopping Leo Shopping Bangalore 2280 Rs. 36480 5 years Lease Deed Complex, Complex, Sq. 44-45, Residency Ft. Road, Bangalore.
5 1st Floor, Manchu K.V.P. Kochin 1000 Rs. 3 years Lease Towers, T.D. Road, Krishna Sq. 10890/- Agreement Kochi - 11. Kumar Ft.
K.V.P. Damodaran
Jayshree Ajithkumar
6 1, Ascon Residency Shree G Trichy 725 Rs. 8500/- 3 years Lease Deed Aprt, Manikandan Sq. Ground Floor, Ft. Shastri Road Trichy
7 S.S.Kovli Road, P.T.C. Towers Trivandrum 980 Rs. 3 years Lease Thampanoor, Sq. 9878/- Agreement Thiruvanathapuram - Ft. 695 001.
28 Sr. Property address Lessor Name Property Sq. Monthly Lease Instrument No. Used as ft. Rent Period
8 Orient Chambers, Mrs. N. A. Chinchwad 718 Rs. 27 months CTS No.5753, Samjani Sq. 10000/- Leave & Mumbai -Pune Road, Ft. Licence opp.KSB Pumps Ltd., Pimpari, Pune - 411 018.
27 months A.J. Samhani Rs. Leave & 308 5000/- Licence Sq. Ft.
9 Shop no.40, Ground Mr. Fateh i) New 572 Rs. 5280/- 3 years Leave & floor, Kukreja Plaza, Singh Jauhal Mumbai Sq. Licence Plot no.46, 47 & 55, & Mrs. (Vashi Ft. Sector - 11, C.B.D., Narinderjit Godown) Belapur, Navi Kaul Jauhal Mumbai.
Shop no.45, Ground Shri Rajaram New Rs. Floor,Kukreja Plaza, M. Ghatvisave Mumbai 4,800/- 3 years Leave & Plot no.46,47 & 55, Godown 601 Licence Sector - 11, CBD, Sq.Ft. Belapur, Navi Mumbai.
604, Arjena Corner, Plot no 71, Sec-17, Wel Fare Vashi – Navi Finelease Pvt. ii) New Rs. Mumbai 400 705 Ltd. Mumbai 70,000/- 33 months Leave & (Office) 1580 Licence Carpe t Sq. Ft.
10 Satya Ashish, Mr. C. R. Thane 350 Rs. 4350/- 33 months Leave & 1st Floor, Zende & Mr. Sq. Licence Opp Sopan society, S.D. Kand Ft. Ram Maruti Rd. Panchpakhadi, Thane 400 602.
Satya Ashish, A.M. Koshti Rs. 33 months Falat no. 301, M.E. Koshti 22000/- Leave & 3rd Floor, 1050 Licence Opp Sopan society, Sq. Ram Maruti Rd. Ft. Panchpakhadi,
29 Sr. Property address Lessor Name Property Sq. Monthly Lease Instrument No. Used as ft. Rent Period
Thane 400 602.
11 SCO – 69, M/s. Chawla Chandigarh 480 29000/- 4 years Lease Deed Sector 20/C, Promoters & Sq. (Increase Chandigarh. Developers Ft. of 15% after 4 years)
12 No.216 & 217, Peters Ramaniyam Chennai 2442 Rs. 10 years Lease Road, Royal Pettah, Real Estates Sq. 47160/- Agreement Chennai - 600 014. Ltd. Ft.
13 Shop no.D in ground R.M.Venkatac Madurai 501.6 Rs. 10 years Lease floor of halam & Smt. 2 Sq. 10000 Agreement K.R.V.Arcade, A.R. V. Sivagamy Ft. (20 % Plaza. Increase after 3 years) Mrs. P.V. Shop no.C in ground Vaishnavi Rs. 7429/- 10 years floor of 437 (15 % K.R.V.Arcade, A.R. Sq. increase Plaza. Ft. after 3 years)
14 1044 Cross Road, Mr. Coimbatore 400 Rs. 2000/- Cut Road, Govindrajulu Sq.Ft. Gandhipuram, Coimbatore
15 Radha Krishna R.C.Sharma Lucknow 1950 Rs. 11 months Memorandum Bhuvan, Sq. 18000/- of Lease Park Road Ft. Lucknow.
16 GIC HOUSING Smt. Kamala Kolkota 910 Rs. 4600/- 3 years Lease Deed FINANCE LTD. Singhvi & Shri Sq. "Shantiniketan", 8, Mahaveer Ft. 2nd Floor, Room no.4, Mall Singhvi Camac Street, Calcutta- 700017. Rs. 4600/- 3 years 910 Sq. Ft.
17 Vishal Chambers, B- Smt. Sunita Noida 720 Rs. 6 years Lease Deed 104, 1st Floor, Plot Nijhvan Sq. 14,400/- no.P-1, Sector- 18, & Ft. Noida. U. P. Brig.V.K. Nijhvan
30 Sr. Property address Lessor Name Property Sq. Monthly Lease Instrument No. Used as ft. Rent Period
Lease Deed Vishal Chambers, Rs. 5 years Premises No. 105, Mrs. Raj Sidhu ii) Noida 14,400/- First Floor, Plot 536 Bearing no.P-1, Sector –18, Noida Rs. 10,000/-
18 No.138, First Floor, Shri. Jaipur 1115 Rs. 6 years Lease Deed Ganpati Plaza, Bachhuram (supe 20000/- Jaipur Chippa & r (Increase Shri. Area) of 15% Kunjbihari 858 after 3 (built years) Area)
19 11, Janpath, Hari Om Bhubneshwa 600 Rs. 6000/- 6 years Lease Deed Satyanagar, Goyal r Sq. Bhubneshwar Ft. 751 007
20 S-2, Darius Roes Ahmed Panaji - Rs. 4000/- 3 years Lease Deed Residency, Khan Mizorama Panji
31 Details Of Owned Properties
Name of the Property address Service Centre
Owned property: Office Vizag: 306, 307, III floor, Sai Shopping Centre, 47-14-1, Dwarka Nagar, Vishakhapattanam 695 001.
Panaji: B-202, 2nd Floor, Akash Byavan, 18th June Road, Panaji-403 001.
Pune: Neelkanth, C.T.SNO. 1018 F.P. NO. 370, Deep Banglow chowk, Model colony, Shivajinagar Bhamburda Pune 411 016`
RESIDENTIAL PROPERTY
Occupied by: Joseph Sudhakar (Area in Flat no.301, 3rd floor Charge) Norita, Hiranandani gardens Powai, Mumbai-400076 Tel-55715254
Occupied by: K. Diwakar (Group Head) Flat no.3, Ground Floor Homedale Apartment No.36 Dhanraj Heerachand Cross Road, Division no.75 Cox Town Bangalore 560 005 Occupied by: K. Jagdish (Executive) Flat no.304, 3rd floor Norita, Hiranandani gardens Powai, Mumbai-400076 Tel no.56941794
Occupied by: Lalith Kumar Sr Executive A-2 408 Lok Gaurav Co-operative Hsg. Society 4th floor, Vikroli (West) Mumbai – 400083 Tel no (R) 25790255
Occupied by: Ramesh More (Executive) A-2 408 Lok Gaurav Co-operative Hsg. Society 4th floor, Vikroli (west) Mumbai – 400083 Tel no (R) 25790255
Occupied by: Shri Rajib De B-10,2nd floor ( Vice President) The Sagar Darshan Co-Op Hsg society ltd 106,Kakad Estate Dr. R. G. Thadani Marg, Pincode - 400 018
32 Name of the Property address Service Centre
Occupied by: Shri S.K.Mahishi B 201 2nd floor, ( Asst. Vice President) Silver oak co-operative hsg society, Hiranandani gardens Powai, Mumbai-400076 Pin code-400 076
Occupied by: Shri Shridharan (Company 203, A & B Lake Castle, Secretary & Asst. Vice President) Building Society Hiranandani Gardens Powai, Mumbai-400076 Pin Code-400071
Vacant A-2/306 3rd floor Lok Gaurav Co-op housing Society Ltd Vikroli (West) Mumbai-400 083
33 DEBT PROFILE OF THE COMPANY:
I. The Company has taken long-term secured loans from the following Banks:
Sr. Name of the Bank Amount of loan Date of loan Term of loan No (Rs. in crores) agreement (in months)
1. Union Bank of India-I 100 11-3-04 108 The amount of loan has been secured by hypothecation of book debts vide a hypothecation agreement dated 11th March, 2004. 2. State Bank of Hyderabad-I 50 01-03-04 84 The amount of loan has been secured by hypothecation of book debts vide a hypothecation agreement dated 1st March, 2004.
An irrevocable power of attorney has been executed in the favor of the bank, authorizing it to recover money directly from the borrowers of the Company and to issue notices or recall the money due and to file suits in the name of the Company.
An irrevocable power of attorney has been executed in the favor of the banks, authorizing it to create/execute or mortgage or charge in its favor in the event the bank comes to the conclusion that its security is prejudiced on account of breach by the Company.
Negative Covenants: i) The Company shall not sell, transfer, mortgage, charge, pledge, hypothecate any of the above said charged properties and assets without previous written consent of the Bank. ii) The Company shall carry out, whenever called upon by the Bank, such further alterations and additions in the MOA and AOA as may be deemed in the option of the Bank to safeguard its interest. iii) Unless the Bank agrees the Company shall not: a) transfer or otherwise dispose off its undertaking or any of its capital or fixed assets; b) undertake or permit any merger, consolidation, scheme of arrangement or compromise with its creditors or shareholders; c) give any corporate or financial guarantee.
3. Lord Krishna Bank 20 17-03-04 72
The amount of loan has been secured by hypothecation of book debts and receivables vide a hypothecation agreement dated 17th March, 2004
Negative Covenants: The Company covenants vide this loan agreement to issue a certificate that the loan has been used for priority sector financing as per RBI guidelines.
4. Vijaya Bank 50 17-7-03 72
34 Sr. Name of the Bank Amount of loan Date of loan Term of loan No (Rs. in crores) agreement (in months)
The amount of loan has been secured by hypothecation of supply bills and book debts vide a hypothecation agreement dated 17th July, 2003.
Negative Covenants:
The Company shall not sell, transfer, mortgage, charge, pledge, hypothecate any of the above said charged properties and assets without previous written consent of the Bank.
5. Vijaya Bank-II 50 6-1-04 72
The amount of loan has been secured by hypothecation of supply bills and book debts vide a hypothecation agreement dated 6th January, 2004
Negative Covenants: The Company shall not sell, transfer, mortgage, charge, pledge, hypothecate any of the above said charged properties and assets without previous written consent of the Bank.
6. Andhra Bank 50 11-09-01 84
The amount of loan has been secured by hypothecation of book debts vide a hypothecation agreement dated 11th September, 2001
An irrevocable power of attorney has been executed in the favour of the bank, authorizing it to recover money directly from the borrowers of the Company and to issue notices or recall the money due and to file suits in the name of the Company.
An irrevocable power of attorney has been executed in the favour of the bank, which states that in the event of default by the Company, the Bank shall have a pari-passu mortgage/charge over the movable and immovable properties of the Company.
Negative Covenants:
i) The Company shall not sell, transfer, mortgage, charge, pledge, hypothecate any of the above said charged properties and assets without previous written consent of the Bank. ii) Unless the Bank agrees the Company shall not: a) transfer or otherwise dispose off its undertaking or any of its capital or fixed assets; b) undertake or permit any merger, consolidation, scheme of arrangement or compromise with its creditors or shareholders; c) amend MOA and AOA or alter the capital structure except as specified in the loan agreement.
7. Kalyan Janata Sahakari Bank Ltd 3.80 22-03-01 84
35 Sr. Name of the Bank Amount of loan Date of loan Term of loan No (Rs. in crores) agreement (in months)
The amount of loan has been secured by hypothecation of book debts vide a hypothecation agreement dated 22nd March, 2001
An irrevocable power of attorney has been executed in the favor of the bank, authorizing it to recover money directly from the borrowers of the Company and to issue notices or recall the money due and to file suits in the name of the Company.
Negative Covenants:
The Company shall not sell, transfer, mortgage, charge, pledge, hypothecate any of the above said charged properties and assets without previous written consent of the Bank.
8. Oriental Bank of Commerce 100 13-8-03 72
The amount of loan has been secured by hypothecation of book debts vide a hypothecation agreement dated 13th August, 2003
Negative Covenants:
i) The Company shall not sell, transfer, mortgage, charge, pledge, hypothecate any of the above said charged properties and assets without previous written consent of the Bank. ii) The Company shall not change its constitution more particularly in Promoters, directors or in the core management team or any merger, requisition, amalgamation without the prior written permission of the Bank. iii) The Company shall not undertake any new project, any further expansion without the prior written permission of the Bank.
9. Oriental Bank of Commerce-II 50 10-2-04 72 The amount of loan has been secured by hypothecation of book debts vide a hypothecation agreement dated 10th February, 2004
Negative Covenants:
i) The Company shall not sell, transfer, mortgage, charge, pledge, hypothecate any of the above said charged properties and assets without previous written consent of the Bank. ii) The Company shall not change its constitution more particularly in Promoters, directors or in the core management team or any merger, requisition, amalgamation without the prior written permission of the Bank. iii) The Company shall not undertake any new project, any further expansion without the prior written permission of the Bank.
10. State Bank of Indore 50 11-9-03 84
The amount of loan has been secured by hypothecation of book debts vide a hypothecation agreement dated 11th September, 2003.
Negative Covenants: N.A.
11. New India Co-op Bank Ltd 13 24-2-03 84
36 Sr. Name of the Bank Amount of loan Date of loan Term of loan No (Rs. in crores) agreement (in months)
The amount of loan has been secured by hypothecation of book debts, housing loan receivables vide a hypothecation agreement dated 24th February, 2003.
Negative Covenants:
The Company shall not sell, transfer, mortgage, charge, pledge, hypothecate any of the above said charged properties and assets without previous written consent of the Bank.
12. Bank of Punjab Ltd-III 30 26-9-03 84
The amount of loan has been secured by hypothecation of book debts and receivables vide a hypothecation agreement dated 26th September, 2003.
An irrevocable power of attorney has been executed in the favour of the bank, authorizing it to recover money directly from the borrowers of the Company and to issue notices or recall the money due and to file suits in the name of the Company
Negative Covenants:
The Company shall not release or compound any of the above-hypothecated debts without the prior consent in writing of the bank and shall not do anything whereby the recovery thereof may be delayed, imbedded or become time barred.
13. Punjab National Bank-I 50 4-12-00 120
The amount of loan has been secured by hypothecation of book debts and receivables vide a hypothecation agreement dated 4th December, 2000
An irrevocable power of attorney has been executed in the favour of the bank, authorizing it to recover money directly from the borrowers of the Company and to issue notices or recall the money due and to file suits in the name of the Company.
An irrevocable power of attorney has been executed in the favour of the bank, authorizing it to create/execute or mortgage or charge in its favour in the event the bank comes to the conclusion that its security is prejudiced on account of breach by the Company.
Negative Covenants:
In the event of any other financial institutions such as GIC, NIC, NIA, OICL, UTI, any scheduled commercial bank and any other participating bank or institution assisting the project imposes any restrictive condition on the Company, such of those conditions as may be considered appropriate by the Bank shall be deemed to apply to the Company.
14. Punjab National Bank-II 100 3-7-03 84
37 Sr. Name of the Bank Amount of loan Date of loan Term of loan No (Rs. in crores) agreement (in months)
The amount of loan has been secured by hypothecation of book debts and receivables vide a hypothecation agreement dated 3rd July, 2003
An irrevocable power of attorney has been executed in the favour of the bank, authorizing it to recover money directly from the borrowers of the Company and to issue notices or recall the money due and to file suits in the name of the Company.
An irrevocable power of attorney has been executed in the favour of the bank, authorizing it to create/execute or mortgage or charge in its favour in the event the bank comes to the conclusion that its security is prejudiced on account of breach by the Company.
Negative Covenants:
In the event of any other financial institutions such as GIC, NIC, NIA, OICL, UTI, any scheduled commercial bank and any other participating bank or institution assisting the project imposes any restrictive condition on the Company, such of those conditions as may be considered appropriate by the Bank shall be deemed to apply to the Company.
15. Bank of India – III 50 27-9-99 84
The amount of loan has been secured by hypothecation of book debts vide a hypothecation agreement dated 27th September, 1999
An irrevocable power of attorney has been executed in the favour of the bank, authorizing it to recover money directly from the borrowers of the Company and to issue notices or recall the money due and to file suits in the name of the Company.
Negative Covenants:
i) The Company shall not sell, transfer, mortgage, charge, pledge, hypothecate any of the above charged properties and assets without previous written consent of the Bank. ii) The Company shall not release or compound any of the above hypothecated debts without the prior consent in writing of the bank and shall not do anything whereby the recovery thereof may be delayed, imbedded or become time barred.
16. Bank of India –IV 50 28-12-01 84
The amount of loan has been secured by hypothecation of book debts vide a hypothecation agreement dated 28th December, 2001
An irrevocable power of attorney has been executed in the favour of the bank, authorizing it to recover money directly from the borrowers of the Company and to issue notices or recall the money due and to file suits in the name of the Company.
Negative Covenants:
i) The Company shall not sell, transfer, mortgage, charge, pledge, hypothecate any of the above said charged properties and assets without previous written consent of the Bank. ii) The Company shall not release or compound any of the above hypothecated debts without the prior consent in writing of the bank and shall not do anything whereby the recovery thereof may be delayed, imbedded or become time barred.
38 Sr. Name of the Bank Amount of loan Date of loan Term of loan No (Rs. in crores) agreement (in months)
17. Bank of India –V 50 30-7-03 96
The amount of loan has been secured by hypothecation of book debts vide a hypothecation agreement dated 30th July, 2003
An irrevocable power of attorney has been executed in the favour of the bank, authorizing it to recover money directly from the borrowers of the Company and to issue notices or recall the money due and to file suits in the name of the Company.
Negative Covenants:
i) The Company shall not sell, transfer, mortgage, charge, pledge, hypothecate any of the above said charged properties and assets without previous written consent of the Bank. ii) The Company shall not release or compound any of the above hypothecated debts without the prior consent in writing of the bank and shall not do anything whereby the recovery thereof may be delayed, imbedded or become time barred.
18. Corporation Bank 150 26-9-05 96
The amount of loan has been secured by hypothecation of book debts vide a hypothecation agreement dated 26th September, 2005
Negative Covenants:
i) The Company shall not without the written consent of the Bank and or IDBI, NABARD, SIDBI, create in any manner any charge, lien or other encumbrances on the security given to the Bank in respect of such advance or cerate an interest in such security in favour of any other party or person. ii) The Bank shall be entitled to change or alter the rate of interest chargeable to the Company on the balance outstanding in the term loan either due to variation in IDBI, NABARD, SIDBI refinance rates or banks lending rated in conformity with the directives of RBI or otherwise.
19. Syndicate Bank-III 100 17-11-05 120
The amount of loan has been secured by hypothecation of book debts vide a hypothecation agreement dated 17th November, 2005
An irrevocable power of attorney has been executed in the favour of the bank, authorizing it to recover money directly from the borrowers of the Company and to issue notices or recall the money due and to file suits in the name of the Company.
Negative Covenants:
i) The Company shall not sell, transfer, mortgage, charge, pledge, hypothecate any of the above said charged properties and assets without previous written consent of the Bank. ii) The Company shall not release or compound any of the above hypothecated debts without the prior consent in writing of the bank and shall not do anything whereby the recovery thereof may be delayed, imbedded or become time barred.
20. Andhra Bank - III 150 28-6-05 84
39 Sr. Name of the Bank Amount of loan Date of loan Term of loan No (Rs. in crores) agreement (in months)
The amount of loan has been secured by hypothecation of book debts vide a hypothecation agreement dated 28th June, 2005
An irrevocable power of attorney has been executed in the favour of the bank, authorizing it to recover money directly from the borrowers of the Company and to issue notices or recall the money due and to file suits in the name of the Company.
Negative Covenants:
The Company shall not sell, transfer, mortgage, charge, pledge, hypothecate any of the above said charged properties and assets without previous written consent of the Bank.
21. Andhra Bank –II 50 10-11-04 84
The amount of loan has been secured by hypothecation of book debts vide a hypothecation agreement dated 10th November, 2004
An irrevocable power of attorney has been executed in the favour of the bank, authorizing it to recover money directly from the borrowers of the Company and to issue notices or recall the money due and to file suits in the name of the Company.
Negative Covenants:
The Company shall not sell, transfer, mortgage, charge, pledge, hypothecate any of the above said charged properties and assets without previous written consent of the Bank.
22. State Bank of Hyderabad –II 100 10-11-04 84
The amount of loan has been secured by hypothecation of book debts vide a hypothecation agreement dated 10th November, 2004
Negative Covenants:
The Company shall not release or compound any of the above hypothecated debts without the prior consent in writing of the bank and shall not do anything whereby the recovery thereof may be delayed, imbedded or become time barred.
23. Bank of India - VI 100 7-2-05 96
The amount of loan has been secured by hypothecation of plant and machinery, stock and book debts vide a hypothecation agreement dated 7th February, 2005
An irrevocable power of attorney has been executed in the favour of the bank, authorizing it to recover money directly from the borrowers of the Company and to issue notices or recall the money due and to file suits in the name of the Company.
Negative Covenants:
The Company shall not sell, transfer, mortgage, charge, pledge, hypothecate any of the above said charged properties and assets without previous written consent of the Bank. 24. Syndicate Bank-II 100 24-9-04 120
40 Sr. Name of the Bank Amount of loan Date of loan Term of loan No (Rs. in crores) agreement (in months)
The amount of loan has been secured by hypothecation of book debts and receivables vide a hypothecation agreement dated 24th September, 2004
An irrevocable power of attorney has been executed in the favour of the bank, authorizing it to recover money directly from the borrowers of the Company and to issue notices or recall the money due and to file suits in the name of the Company
Negative Covenants:
The Company shall not sell, transfer, mortgage, charge, pledge, hypothecate any of the above said charged properties and assets without previous written consent of the Bank. 25. State Bank of Mysore 50 29-6-04 84
The amount of loan has been secured by hypothecation of book debts vide a hypothecation agreement dated 29th June, 2004
An irrevocable power of attorney has been executed in the favour of the bank, authorizing it to recover money directly from the borrowers of the Company and to issue notices or recall the money due and to file suits in the name of the Company.
Negative Covenants:
i) The Company shall not release or compound any of the above hypothecated debts without the prior consent in writing of the bank and shall not do anything whereby the recovery thereof may be delayed, imbedded or become time barred.
ii) The Company shall not during the subsistence of the liability of the Company to the Bank under or in respect of any other credit facilities without the written consent of the Bank effect any scheme of amalgamation or reconstitution.
26 100 1-9-04 108 Union Bank of India -II
The amount of loan has been secured by hypothecation of book debts vide a hypothecation agreement dated 1st September, 2004
Negative Covenants:
The Company shall not without the prior written permission of the Bank:
i) transfer or otherwise dispose of its undertaking or any of its capital or fixed assets or except in the ordinary course of business part with any of its other assets including machinery stores and machinery spares both present and future;
ii) undertake or permit any merger, consolidation, reorganization scheme of arrangement or compromise with its creditors/shareholders.
27 Canara Bank 100 17-8-05 72
41 Sr. Name of the Bank Amount of loan Date of loan Term of loan No (Rs. in crores) agreement (in months)
The amount of loan has been secured by hypothecation of book debts and housing loan receivables vide a hypothecation agreement dated 17th August, 2005
An irrevocable power of attorney has been executed in the favour of the bank, authorizing it to recover money directly from the borrowers of the Company and to issue notices or recall the money due and to file suits in the name of the Company.
An irrevocable power of attorney is executed in the favour of the banks, authorizing it to create/execute or mortgage or charge in its favour in the event the bank comes to the conclusion that its security is prejudiced on account of breach by the Company.
Negative Covenants:
The Company shall carry out, whenever called upon by the Bank, such further alterations and additions in the MOA and AOA as may be deemed in the option of the Bank to safeguard its interest.
28 Bank of Maharashtra 50 7-6-04 72
The amount of loan has been secured by hypothecation of book debts vide a hypothecation agreement dated 7th June, 2004
An irrevocable power of attorney has been executed in the favour of the bank, authorizing it to recover money directly from the borrowers of the Company and to issue notices or recall the money due and to file suits in the name of the Company.
Negative Covenants:
The Company shall not release or compound any of the above hypothecated debts without the prior consent in writing of the bank and shall not do anything whereby the recovery thereof may be delayed, imbedded or become time barred.
II. The Company has taken unsecured loans from the following Banks:
Sr. Name of the Bank Amount of loan Date of loan Term of loan No. agreement 1. Karnataka Bank Ltd 50 crores 5-8-05 180 days 2. Andhra Bank 75 crores 22-12-05 90 days
42 Competition
The competition in the housing finance sector has increased tremendously with many players (mainly banks) entering into the market in the recent years. Commercial Banks have entered the housing finance sector in a big way, attracted as they are backed by the mortgage-based security, and helped by their access to large funds at a relatively low-cost. Also housing finance is now classified as priority sector lending for banks and therefore more banks are entering this field.
Competition has propelled the players to engage in price wars. Aggressive rate cuts were employed by the players to attract consumers. Housing loan rates have inched by 0.50 to 0.75% in the last one-year. The benchmark 10-year government securities (G-sec) rate itself increased by around 0.50% from January 1 2005. In the scenario where the interest rates are going up HFCs will find pressure on their interest margins.
Other reason that resulted in keeping the interest rate on housing loans under check is the fact that there is enough liquidity in the system. Banks are flush with funds but have limited deployment avenues. Since the housing finance segment is showing good growth rates, banks are diverting funds in this sector making the competition stiffer.
KEY INDUSTRIAL REGULATIONS
1. National Housing Bank Act, 1987
The National Housing Bank (NHB) having considered it necessary in public interest had issued Housing Finance Companies (NHB) Directions 1989, to every housing finance company in exercise of the powers conferred on it under the NHB Act 1987.
NHB Act 1987 has been amended further by the National Housing Bank (Amendment) Act, 2000 (15 of 2000) further to enable the NHB to safeguard the interest of depositors and promote healthy and universal growth of Housing Finance Companies in the country. The NHB have in exercise of powers conferred under sections 30, 30A, 31 and 33 of the National Housing Bank Act 1987 issued the Housing Finance Companies (NHB) Directions, 2001
2. Reserve Bank of India Act, 1934
43 VIII. HISTORY AND MAJOR EVENTS
History of the Company GIC Housing Finance Limited was incorporated as 'GIC Grih Vitta Limited' on 12th December 1989. The Company was issued the certificate for commencement of business dated 12th January 1990. The name is changed to its present name vide fresh Certificate of Incorporation issued on 16th November 1993. The Company was formed with the objective of entering in the field of direct lending to individuals and other corporates to accelerate the housing activities in India. The primary business of GICHFL is granting housing loans to individuals and to persons/entities engaged in construction of houses/flats for residential purposes.
The Company was promoted by General Insurance Corporation of India and its erstwhile subsidiaries namely, National Insurance Company Limited, The New India Assurance Company Limited, The Oriental Insurance Company Limited and United India Insurance Company Limited together with erstwhile UTI, ICICI, IFCI, HDFC and SBI, all of them contributing to the initial share capital. HDFC, SBI, ICICI and SUUTI have since sold off their holding in the Company and have ceased to be the Promoters of the Company.
Major Events in the Company's history
Year Event 1989 Company was incorporated with the name "GIC Grih Vitta Limited". 1989-91 The Company started its operations from 8 locations. 1991-92 The Company launched Employee and Builder Scheme Housing Scheme. 1992-93 Company's name changed to "GIC Housing Finance Limited". Apna Ghar Yojana was introduced by the Company. 1993-94 The Company made a rights issue of 1:1; the capital crossed the Rs. 10 crores mark. 1994-95 The authorized share capital was increased to Rs. 150 crores; maiden Initial Public Offer (IPO) by the Company. New service centres were started in Navi Mumbai, Vizag and Coimbatore. 1996-97 The Company started the process of branch interlinking and computerization. 2003-04 The Company has crossed Rs. 500 crores business in individual housing loan and the total portfolio has crossed Rs. 1000 crores. 2004-05 Rights Issue of 89,75,561 Equity Shares at Rs. 16 in the ratio of 1 equity share for every 2 shares held
Main objects of the Company:
The main objects of the Company as set out in its Memorandum and Articles of Association inter-alia are:
To carry on the business of providing long-term finance to any person or persons, company or corporation, society or association enabling borrower to construct or purchase in India a house or flat for residential purposes, upon such security and such terms and conditions as the Company may deem fit and also provide long-term finance to persons engaged in the business of construction of houses in India or flats in India for residential purposes to be sold by them by way of hire purchase or on deferred payment or other similar basis upon such terms and conditions as the Company may think fit and proper.
Subsidiary Companies The Company has no subsidiaries within the meaning of Section 4 of the Act.
Shareholders Agreement The Company has not entered into any shareholder agreement till date.
Strategic Partners The Company does not have any strategic or financial partners.
Collaboration The Company does not have any Collaboration.
44 IX. OUR MANAGEMENT
Board Of Directors:
The Company is currently managed by a Board of Directors comprising of 12 Directors. Mr. R.K Joshi is our Chairman and Mr. A. K. Guha is our Managing Director.
The Following table sets forth the details regarding our Board of Directors. Sr. Name, Age, Designation, address & Other Directorship No Occupation of Directors 1 Mr. R.K Joshi 1. Kenindia Assurance Co Limited. Age: 58 years 2. General Insurance Corporation of India Limited Chairman 3. The New India Assurance Company Limited 11-A, IL Palazzo, 4. GIC Asset Management Company Limited. Little Gibbs Road 5. Life Insurance Corporation of India Malabar Hills 6. The Andhra Pradesh Paper Mills Limited Mumbai-400006 7. ICICI Bank Limited Occupation: Service 8. Export Credit Guarantee Corporation of India Limited. 9. Indian Register of shipping
10. Deposit Insurance and Credit Guarantee Corporation. 11. Loss Prevention Association of India Limited. 12. Asian Reinsurance Corporation 13. Governing Body of National Insurance Academy, Pune 2 Mr. B. Chakrabarti 1. The New India Assurance Co (Trinidad & Tobago) Ltd Age: 56 years 2. India International Pte Limited Non Executive Director 3. Prestige Assurance Plc B-21, 2nd Floor, Mayfair Garden, 4. The New India Assurance Company Limited Little Gibbs Road, Malabar Hills 5. General Insurance Corporation of India Mumbai-400 006 6. The New India Assurance Co (Sierra Leone) Limited Occupation: Service 7. Saudi Indian Insurance Company 8. Loss Prevention Association of India Limited 9. Schenectady Herdillia Limited 10. Alfa Laval (India) Limited 11. Tariff Advisory Committee (Member) 12. General Body of Insurance Council (Member) 3 Mr. M.K. Garg 1. Kenindia Assurance Co Limited. Age: 52 years 2. United India Insurance Co. Limited Non Executive Director 3. Loss Prevention Association of India Limited 9, Harrington Road, 2nd Avenue, Chetpet, Chennai- 600031 Occupation: Service 4 Mr. M Ramadoss 1. Loss Prevention Association of India Limited Age: 52 Years 2. The Oriental Insurance Company Limited Non Executive Director 545, Asaid Village, New Delhi- 110049 Occupation: Service 5 Mr. V. Ramasaamy 1. Modern Denim Limited Age: 56 Years 2. National Insurance Co. Limited Non Executive Director Flat No 25, Alipore Estate, 8/6/1, Alipore Road, Kolkata: 700027 Occupation: Services
45
6 Mr. Manu Chadha 1. Himalayan Crest Power Limited Age: 50 Years 2. Kotla Hydro Power Ltd Independent and Non Executive Director 3. Dena Bank. B-30, Connaught Place, 4. TRC Financial Services Limited New Delhi-110 001 5. SBI Fund Management Private Limited Occupation: Professional 6. Ispat Industries Ltd.
7 Mr. R. M. Malla 1. Assets Care Enterprises Ltd Age: 52 Years 2. Haldia Petrochemicals Limited Non Executive Director 3. IFCI Limited C-4/19, Safdurjung Development Area, 4. Tourisim Finance Corporation of India Limited New Delhi-110 019. 5. Management Development Institute Occupation: Service 6. Rashtriya Gramin Vikas Nidhi
8 Mr. M. K. Tandon 1. Welspun Syntex Limited. Age: 64 years 2. GIC Asset Management Company Limited Independent & Non Executive Director 3. Coromandel Fertilizers Limited 205, Challenger Tower IV, Thakur Village, Kandivali (West), Mumbai. Occupation: Service 9 Mr. B. P. Deshmukh 1. Saurashtra Cements Industries Limited Age: 61 Years 2. Larsen & Tourbo Limited Independent & Non Executive Director 3. Madras Cement Limited Flat No: 1, Snehal Apartment, Pestom 4. Dalmia Securities Private Limited Sagar, Road No. 6, Chembur Mumbai - 400 089 Retired Insurance Executive 10 Mr. Arun Datta 1. Engineering Projects (India Limited) Limited Age: 58 Years 2. Jay Engineering Limited Independent & Non Executive Director 3. Metal Box Limited Aspen Green –74 Nirvana Country Near South City –II, Sector –50 Gurgaon - 122 101 Occupation: Service 11 Mr. N. R Ranganathan NIL Age: 67 years Nominee Director 4B Laxmi Villa No. 7, First Cross Road, Raja Annamalaipuram Chennai – 600 028 Occupation: Retiring 12 Mr. A. K Guha NIL Age: 58 Years Managing Director 3, Hill park, Malabar Hills, Mumbai-400006 Occupation: Service
46 Brief Profile of our Directors
Mr. R. K. Joshi: Mr. Joshi, Chairman – cum – Managing Director of General Insurance Corporation of India was appointed as a Chairman of the Company w.e.f. February 21 2005. After graduating as a Mechanical Engineer in 1970, he was with Aluminum and Heavy Engineering Industries for duration of four years. He joined General Insurance Corporation of India in 1974 and was deputed to National Insurance Company Limited with headquarters at Calcutta, India. He worked in various departments at various levels in the operating offices including overseas operations at National Insurance Company’s Singapore branch for three years and was also instrumental in the formation of India International Insurance Private Limited. Shortly after returning from Singapore, he was made the Regional in-charge for National Insurance Company’s Regional office at Hyderabad, India. After completing a successful tenure of three years in 1996, he was transferred to the Tariff Advisory Committee, Delhi, a body responsible for controlling the pricing of Insurance and Insurance related products in India. He returned to General Insurance Corporation of India in the year 1998 as Assistant General Manager (Technical) and General Manager in charge of Reinsurance Department in the year 2000 after GIC was declared as an Indian Reinsurer. On February 1, 2005, Mr. R. K. Joshi has taken over as the first Chairman-cum-Managing Director of GIC of India.
Mr. A. K. Guha: Mr. Guha, M. Com, A.C.A., joined United India Insurance Company Limited in the year 1975. He has vast experience and knowledge in financial areas of Insurance Industry. During his deputation in New India Assurance Company Limited as Assistant General Manager, he had undergone training on Investment Management at Business School, Manchester, U.K., in the year 2000. Before deputation to GIC Housing from 1st January 2003 as Chief Executive, he was heading the Mumbai regional office I and II of United India Insurance. GICHFL business and profitability have increased manifold since Mr. Guha has taken charge of the Company. In recognition of his contribution, Mr. Guha has been inducted on the Board as Managing Director w.e.f. 21st June 2004.
Mr. B. Chakrabarti: Mr. Chakrabarti, Chairman-cum-Managing Director of National Insurance Company Limited was appointed as an Additional Director of the Company w.e.f 19th January, 2005. He started his career in the year 1974 as a Technical Officer of United India Insurance Company Limited. He has done his B.Com (Hons) from Calcutta University and is a Chartered Accountant from the Institute of Chartered Accountants of India. He has technical proficiency in general insurance subjects as he joined the industry as a Technical Officer. On successive promotions, he had marketing and business development profiles, being the heads of divisions and regions in United India Insurance Company Limited. Subsequently, he had a wide exposure in the Management of Investment portfolio in GIC as Assistant General Manager and General Manager. He headed personnel and human resources wing in United India Insurance Company Limited as a General Manager. During his tenure as General Manager (Personnel), he galvanized the activities of the Learning Center, M.S.D and H.R.D. He was the Chief Vigilance Officer and had a stint in the Marketing and Reinsurance Department in United India Insurance Company Limited.
Mr. M. K. Garg: Mr. Garg, Chairman-cum-Managing Director of United India Insurance Company Limited was appointed as an Additional Director of the Company w.e.f 19th January, 2005. He joined the General Insurance Industry in 1976 and possesses a rich experience of more than two decades. He is a Chartered Accountant by profession and a fellow member of the Insurance Institute of India. As a young and promising direct recruit Officer, he joined The New India Assurance Company Limited in the cadre of Assistant Administrative Officer. During his long career spanning more than over two decades, he had held many assignments. He worked as a Regional Manager of the Jaipur branch of The New India Assurance Company Limited from 1993 to 1997. During his stint as RM- Jaipur, he earned the best RO award consecutively for two years. He was transferred to Chandigarh and posted as Regional Manager and subsequently, in the year 1998, he was promoted as Assistant General Manager. He again earned the best RO award for Chandigarh. In the year 2000, Delhi R.O. was placed under his charge and with his sheer and exemplary hard work, he was promoted and posted as General Manager at New India Head Office, Mumbai where he was looking after Investments, Credit Insurance, Technical, Secretarial Department, Grievance and Customer Service, Estate, Establishment and Property Cell, Foreign Administration etc. He was a member of Vision 2000 Core Group founded by the General Insurance Corporation of India and submitted recommendations for Insurance Sector reforms. He has a passion for perfection in whatever he does and is untiring in learning thoroughly the nuances of any department that is placed in his charge.
47 Mr. M. Ramadoss: Mr. Ramadoss, Chairman-cum-Managing Director of Oriental Insurance Company Limited was appointed as an Additional Director of the Company w.e.f 10th March, 2005. Mr. Ramadoss is a First Class Commerce Graduate from Madras University and a Chartered Accountant from the Institute of Chartered Accountants of India. He is also a Fellow of Insurance Institute of India and an Associate of Chartered Insurance Institute of U. K. He joined the Insurance Industry in 1976 as direct recruit Class I Officer in New India Assurance Company Limited and has worked in various positions. In 2001, he was promoted as General Manager and posted to London branch for 3 years. He returned to India and joined Head Office in mid November 2004. He has a unique experience of having worked in the Insurance Industry in different parts of the country. Besides working in the Insurance Industry, he is also a visiting faculty in National Insurance Academy, Pune. He regularly takes classes in Company Training Colleges. He has also written articles in magazines and he is a member of a Working Group constituted by the Institute of Chartered Accountants of India to finalize Accounting Guidelines for General Insurance Companies.
Mr. N. R. Ranganathan: Mr. Ranganathan is an alumnus of the Presidency College, Madras, Law College, Madras and the London School of Economics. He joined the Indian Administrative Services in 1960 and held many important positions. He was Secretary (Personnel) to Government of India and Member Secretary of the Planning Commission, Government of India.
Mr. M. K. Tandon: Mr. Tandon was appointed as Director of the Company w.e.f. 2nd September 1999. He is M. Com, LLB, Associate Part I (Insurance Institute of India). He started his career in insurance industry in 1964. He has immense knowledge and experience in insurance industry for the past four decades. He was the Managing Director of General Insurance Corporation of India during from 04th March 1999 to 04th March 2001. Thereafter he was the Chairman-Cum-Managing Director of National Insurance Co. Ltd. from 05th March 2001 to 30th September 2001.
Mr. B. P. Deshmukh: Mr. Deshmukh joined the Company as an Additional Director w.e.f. 15th October 2004. His academic qualifications include M.Com and LL.B. He is also a fellow member of the Institute of Company Secretaries of India. He worked with Maharashtra State Financial Corporation from 1967 – 1976 and got exposure in project appraisal and monitoring of advances in the form of term loan. He also got a comprehensive training in Industrial Finance conducted by the Reserve Bank of India. He resigned as Assistant Secretary in 1976. He joined the New India Assurance Company Limited as a Financial and Investment Analyst as a direct recruit officer. He got regular promotions and became a Manager in 1991. While in New India Assurance Company, he got extensive training in project appraisal, analysis and interpretation of accounts, equity research, capital market and treasury management. He was heading the Investment and Credit Insurance Department till 1994-95. In 1994, he was transferred to General Insurance Corporation of India as Company Secretary and Manager (Investment). He retired as ‘General Manager’, Investment and Credit Insurance, Life Reinsurance and Corporate Secretariat Department. During his stay in GIC, he attended various training programmes including a programme on ‘Advanced Investment Management’ at Manchester Business School (United Kingdom). He also delivered lectures and submitted papers on various subjects related to Finance and Investment, Credit Insurance etc. at various forums such as ‘Faculty of Management Studies’, Delhi University, ICWA Annual Convention, Bengal Chamber of Commerce, FICCI, etc. He is well versed in capital market, equity and debt research as also corporate matters and investment monitoring.
Mr. R. M. Malla: Mr. Malla, Executive Director of IFCI Limited, was appointed as Director of the Company on 28th June 2002. He academic qualifications include M.Com from University of Delhi, MBA from Faculty of Management Studies, University of Delhi, PGDBM from Management Development Institute, Gurgaon and CAIIB from Indian Institute of Bankers.
Mr. Manu Chadha: Mr. Chadha was appointed as Director of the Company on 29th April 2002. His academic qualifications include B. Com (Hons), FCA, LLB and is a practicing Chartered Accountant since 1979 and is a Senior Partner with M/s. T R Chadha & Co, Chartered Accountants. He is also on the Board of Dena Bank, SBI Mutual Fund and other body corporate. The Government of India has nominated him on the Investor Education and Protection Fund.
48 Mr. Ramasaamy: Mr. Ramasaamy was appointed as a director of the company on December 26, 2005. He is a CA, and was recruited as Direct Recruit Officer in 1976 in National Insurance Company Limited and after serving in Investment Department for 9 years was promoted to the cadre of Assistant Manager and posted to Regional Office, Chennai. He was posted as Senior Divisional Officer in Delhi and as Manager in Ludhiana. Subsequently he was posted Regional Manager at Regional Office Madurai and then as Assistant General Manager at Banaglore office for nearly 2 years. He got promoted as General Manager in 2002 and allocated the portfolios like Technical Department, Foreign Business, MSD and Grievance Departments.
Mr. Arun Datta: Mr. Arun Datta was appointed as the director of the company on October 24, 2005. He holds a Bachelor Degree in Mechanical Engineering, along with post-graduate degree in Marketing. He has extensive experience in retail and institutional sales, corporate Business Development, project management and administration. He has been involved in managing large sales organization with responsibility for brand management, distributions networks and logistics. He has also assisted top executive in strategic decision making as well as day-to-day administration
Borrowing Powers of the Board:
The shareholders has given consent under section 293(1)(d) of the Companies Act, 1956 vide a resolution passed at the 14th AGM of the Company held on 17th September 2004, to the Board for borrowing up to a sum of Rs. 3,000 crores.
Compensation to Managing Director:
Mr. A. K Guha was appointed as Managing Director of our Company for the period 21st June 2004 to 31st August 2007 vide resolution passed at the Annual General Meeting held on 17th September 2004. The terms and conditions of the said resolution are stated:
Particulars Per Month (in Rs.) Basic 22900 Dearness allowances 11377 City Compensatory Allowances 375 Fixed Personal Allowances 500 Special Allowances 2000 Deputation Allowances 1000 Total 38125 Other yearly allowances are as under: Domiciliary Mediclaim 10500 Dress Code Allowances 10000 Brief Case allowances 3000 Ex-Gratia 33961 PF- Company Contribution 33696 Leave Encashment 38889 LTS 120459 Total 250505
49 CORPORATE GOVERNANCE:
The Company is committed to the principles of good corporate governance. According to the Company corporate governance is the combination of voluntary practices and compliance with laws and regulations leading to effective control and management of the Company. The Company believes that good corporate governance contemplates that corporate actions balance the interest of all stakeholders and satisfy the tests of accountability, transparency and fair play. The Company believes that all its operations and actions must be directed towards enhancing overall shareholder value.
The Company has complied with SEBI guidelines in respect of corporate governance, especially with respect to the appointment of independent directors on the Board and constitution of its Board committees, the shareholder/investor grievance committee and the audit committee. The Company has complied with all the requirements of the listing agreements with the Stock Exchanges and regulations and SEBI guidelines. Further, there is no penalty/stricture levied by any statutory authority against the Company in relation to corporate governance.
Structure of the Board of Directors
Sr. No. Name of Directors Nature of Directorship 1 Mr. R.K Joshi Nominee Director 2 Mr. B. Chakrabarti Non Executive Director 3 Mr. M. K Garg Non Executive Director 4 Mr. M. Ramadoss Non Executive Director 5 Mr. V. Ramasaamy Non Executive Director 6 Mr. Manu Chadha Independent & Non Executive Director 7 Mr. R.M. Malla Non Executive Director 8 Mr. M.K. Tandon Independent & Non Executive Director 9 Mr. B. P. Deshmukh Independent & Non Executive Director 10 Mr. Arun Datta Independent & Non Executive Director 11 Mr. N. R Ranganathan Nominee Director 12 Mr. A. K Guha Executive Director
Audit Committee:
Audit Committee was constituted in April 1996. The Audit Committee provides directions to and reviews functions of the Audit Department. The Committee evaluates internal audit policies, plans, procedures and performance and reviews the other functions through various internal audit reports and other year-end certificates issued by the Statutory Auditors. Quarterly and Annual Accounts are placed before the Audit Committee, prior to being presented to our Board along with the recommendations of the Audit Committee. The terms of reference of Audit Committee complies with the requirements of Clause 49 of the listing agreement. The committee consists of following Directors:
Composition of the Audit Committee:
Sr. No Name of Director Nature of Directorship 1 Mr. M. K. Tandon Independent & Non Executive 2 Mr. B. P. Deshmukh Independent & Non Executive 3 Mr. R. M. Malla Non Executive
The Chairman of the Audit Committee is an Independent and Non-Executive Director.
The terms of reference of the Audit Committee are given below:
i. To have discussions with the auditors periodically about internal control systems, the scope of audit including the observations of the auditors and to review the half-yearly and annual financial statements before submission to the Board and ensure compliance of internal control systems. ii. To oversee the Company's financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible.
50 iii. Recommending the appointment and removal of external auditor, fixation of audit fee and also approval for payment for any other services. iv. Reviewing with management the annual financial statements before submission to the Board. v. Reviewing with the management, external and internal auditors, the adequacy of internal control systems. vi. Reviewing the adequacy of internal audit function, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit. vii. Discussions with internal auditors on any significant findings and follow up thereon. viii. Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board. ix. Discussions with external auditors before the audit commences, nature and scope of audit as well as to have post- audit discussion to ascertain any area of concern. x. Reviewing the Company's financial and risk management policies. xi. To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non-payment of declared dividends) and creditors, if any.
Investor’s Grievance Committee
We have designated personnel to solve investors’ problems along with our Share Transfer Agents, Sharepro Services (India) Pvt. Ltd. The Investors Grievances Committee looks into redressal of shareholder and investor complaints, issue of duplicate/split/consolidated share certificates, allotment and listing of shares and review of cases for refusal of transfer/transmission of shares and reference to statutory and regulatory authorities.
Composition of the Investor’s Grievance Committee:
Sr. No Name of Director Nature of Directorship 1 Mr. M. K. Tandon Independent & Non Executive 2 Mr. B. P. Deshmukh Independent & Non Executive 3 Mr. R. M. Malla Non Executive
Policy on Disclosures and Internal Procedure for Prevention of Insider trading:
The Company is in compliance with and will continue to comply with the provisions of the SEBI (Prohibition of Insider Trading) Regulations, 1992. In compliance with regulation 12(1) of the SEBI (Prohibition of Insider Trading) Regulations, 1992, Company has framed a code of internal procedures and conduct for prevention of insider trading.
Mr. S. Sridharan, Company Secretary is responsible for setting forth policies, procedures, monitoring and adherence to the rules for the preservation of price sensitive information and the implementation of the code of conduct under the overall supervision of the board.
Shareholding of the Directors
The Articles of Association of the Company do not require the Chairman and the Directors to hold any qualification shares.
Interest of the Directors:
All directors of the Company may be deemed to be interested to the extent of fees, if any, payable to them for attending meetings of the Board or any Committee thereof, commission payable to them as well as to the extent of other remuneration, reimbursement of expenses payable to them under Articles of Association by the Company and the housing loan taken by them. The Managing Director is also interested to the extent of remuneration paid to him for services rendered by him. All Directors may also be deemed to be interested to the extent of Equity Shares, if any, already held by them or their relatives, companies, firms and trusts in which they are interested as directors, members, partners or trustees in the Company, or that may be subscribed for and allotted to them and also to the extent of any dividend payable thereon and other distributions in respect of the said Equity Shares of the Company.
51 Payment to Directors for the year ended 31st March, 2005 (Amount in Rs.) Name of Director Sitting Fees Salaries/ Commission Total Perquisites Mr. Manu Chadha 16000 ------16000 Mr. M. K. Tandon 40000 ------40000 Mr. B. P. Deshmukh 16000 ------16000 Mr. N. R Ranganathan 24000 ------24000 Mr. A.K Guha 8000 ------8000 Mr. R.L Baxi 24000 ------24000
Payment to Directors for the period 1st April 2005 to 31st December 2005 (Amount in Rs.) Name of Director Sitting Fees Salaries/ Commission Total Perquisites Mr. Manu Chadha 16000 ------16000 Mr. A Datta 4000 ------4000 Mr. M. K. Tandon 40000 ------40000 Mr. N. R Ranganathan 20000 ------20000 Mr. A.K Guha 4000 ------4000
Note: 1) No other director had drawn sitting fees during the year under consideration. 2) No salary/perquisite/commission was allowed/paid to any of the directors during this period.
Interest as to Property
None of the Directors are interested in the properties of the Company.
Changes in Directors in the last three years
Sr. Name Date of Reason No. Appointment/ Cessation 1. Mr. V. Jagannathan 26-09-2003 Appointed as Additional Director, confirmed at the AGM 2. Mr. Rajendra Beri 26-09-2003 Appointed as Additional Director, confirmed at the AGM 3. Mr. Sham Lal Mohan 26-09-2003 Appointed as Additional Director, confirmed at the AGM 4. Mr. T.S. Laschar 26-09-2003 Retired by rotation from Directorship 5. Mr. R. L. Baxi 26-09-2003 Reappointed at the AGM 6. Mr. Dilip S Phatarphekar 26-09-2003 Retired by rotation from Directorship 7. Mr. H. S. Wadhwa 24-10-2003 Appointed as Additional Director 8. Mr. A. K. Guha 21-06-2004 Appointed as Additional/Managing Director 9. Mr. R. L Baxi 17-09-2004 Retirement from Directorship 10. Mr. R. M. Malla 17-09-2004 Reappointed at the AGM 11. Mr. M.K Tandon 17-09-2004 Reappointed at the AGM
52 12. Mr. Manu Chadha 17-09-2004 Reappointed at the AGM 13. Mr. H.S Wadhwa 17-09-2004 Appointed as Additional Director /confirmed at AGM 14. Mr. A. K Guha 17-09-2004 Appointed as Additional Director/Managing Director/ confirmed at AGM confirmed at AGM 15. Mr. B. P Deshmukh 15-10-2004 Appointed as Additional Director 16. Mr. V Jagannathan 01-11-2004 Resigned as Director 17. Mr. H. S. Wadhwa 01-01-2005 Resigned as Director 18. Mr. M. K. Garg 19-01-2005 Appointed as Additional Director 19. Mr. B. Chakrabarti 19-01-2005 Appointed as Additional Director 20. Mr. P. C. Ghosh 31-01-2005 Resigned as Director 21. Mr. R. K. Joshi 21-02-2005 Appointed as Nominee Director/ Chairman 22. Mr. S. L Mohan 28-02-2005 Resigned as Director 23 Mr. M. Ramadoss 10-03-2005 Appointed as Additional Director 24 Mr. A. Ramamohan Rao 09-08-2005 Resigned as Director 25 Mr. M. K Tandon 15-09-2005 Reappointed at the AGM 26 Mr. Manu Chadha 15-09-2005 Reappointed at the AGM 27 Mr. B. P. Deshmukh 15-09-2005 Appointed as Additional Director /confirmed at AGM 28 Mr. B Chakrabarti 15-09-2005 Appointed as Additional Director /confirmed at AGM 29 Mr. M. K. Garg 15-09-2005 Appointed as Additional Director /confirmed at AGM 30 Mr. M. Ramadoss 15-09-2005 Appointed as Additional Director /confirmed at AGM 31 Mr. Arun Datta 24-10-2005 Appointed as Additional Director 32 Mr. Rajendra Beri 31-10-2005 Resigned as Director 33 Mr. V Ramasaamy 26-12-2005 Appointed as Additional Director
Date of Expiration of the term of current Directors
Sr. Name of the Director Nature of Directorship Date of expiration of term of No office/due for re-appointment 1 Mr. R. K. Joshi Nominee Director Not liable to retire by rotation 2 Mr. B. Chakrabarti Non Executive Director Retire by rotation 3 Mr. M.K Garg Non Executive Director Retire by rotation 4 Mr. M. Ramadoss Non Executive Director Retire by rotation 5 Mr. V. Ramasaamy Non Executive Director AGM 2006 6 Mr. Manu Chadha Independent & Non Executive Retire by rotation 7 Mr. R. M. Malla Non Executive Director Retire by rotation 8 Mr. M. K. Tandon Independent & Non Executive Retire by rotation 9 Mr. B. P. Deshmukh Independent & Non Executive Retire by rotation 10 Mr. Arun Datta Independent & Non Executive AGM 2006 11 Mr. N. R Ranganathan Nominee Director Not liable to retire by rotation 12 Mr. A. K Guha Executive Director August 31, 2007
53 MANAGEMENT ORGANIZATION STRUCTURE:
Managing Director
Sr. Vice President
Vice President
Asst. Vice President Asst. Vice President Asst. Vice President Company Asst. Vice President Recoveries and Marketing and Recovery Secretary and Compliance Accounts and Finance Sanctions Nothern Region
Area Managers
Branch Office / Service Center
54 KEY MANAGERIAL PERSONNEL:
Present Sr. Date of Exp Functional Previously Annual Name Designation Age Qualification No Joining Yrs. Responsibility Employed Compensation (Rs. )
1 Mr. A. K. Guha Managing 58 C.A. 21-10-2002 36 Supervising and United 8.04 lacs Director years Managing the India overall day to Insurance day affairs of the Company Company Limited
2 Mr. Rajib De Vice 40 B.Com 08-01-1992 17 Marketing, HPCL 6.71 lacs President (Hons), years Systems and ACA Internal Audit.
3 Mr. S. Sridharan Company 45 B. Com, 01-03-1994 22 Company United 6.03 lacs Secretary ACA, ACS, years Secretary, India and ICWA, BGL Legal, Recovery Insurance Assistant and Sanctions. Company Vice Limited President
4 Mr. Shrinivas M Assistant 45 BE, PGD in 17-05-1993 16 Recovery Canfin 7.40 lacs Vice Construction years Homes Ltd. President 5 Mrs. Meena V Assistant 47 B.A. (Hons) 12-06-2002 20 Area — 3.89 lacs Vice years Manager, New President Delhi Area office. 6 Mr. Mahesh Assistant 45 B. Com, 14-10-1995 21 Accounts and GIC of 3.54 lacs Ghagre Vice ACA years Resource India President Mobilisation. 7 Mr. K. Divakar Group Head 51 B. Sc 06-02-1992 25 Area Manager, New India 4.94 lacs years Bangalore Assurance Area Office. Company limited
8 Mr. H.D. Group Head 56 B. Com 01-01-1996 28 Administration GIC of 4.03 lacs Thakkar years and Compliance India of NHB guidelines. 9 Mr. Potu Group Head 44 B. Sc, B.L., 29-02-1992 20 Area Manager, Sundaram 4.21 lacs Srinivas PGD IRPM years Chennai Area Finance Office.
10 Mr. S. Group Head 41 B. Sc 18-07-1991 22 Area CMC Ltd. 3.87 lacs Vijayramesh years Manager, Navi Mumbai Area Office. 11 Mr. R. Group Head 54 B. Sc 02-11-1993 15 Area Manager, United 3.87 lacs Jayachandran years Trivandrum India Area Office Insurance Company Limited
55 12 Mr. V.R Group Head 42 B.com LLB 02-05-1993 17 Area Dewan 3.40lacs Joshi MBA Years Manager, Housing Mumbai Finance Area office Ltd 13 Mr. R Group Head 39 M.com 01-05-1995 18 Area Can Fin 3.87lacs Ramachandran Years Manager, Homes Madurai Area Ltd office 14 Mr. Sanjay Group Head 35 B.com 13-05-1993 14 Area Private 3.30lacs Koppikar Years Manager, Company Panaji Area office 15 Mrs. Group Head 42 M.A 16-06-1993 20 Area Private 3.29lacs Mahalakshmi Years Manager, Company Sharma Corporate Office
Share holding of Key Managerial Personnel:
Name Number of Shares Mr. A.K. Guha ---- Mr. Rajib De 200 Mr. S. Sridharan ---- Mr. Shrinivas M 150 Mrs. Meena V 300 Mr. Mahesh Ghagre 300 Mr. K. Divakar 150 Mr. H.D. Thakkar 50 Mr. Potu Srinivas 200 Mr. S. Vijayramesh ---- Mr. R. Jayachandran 300 Mr. Sanjay Koppikar 200 Mrs. Mahalakshmi Sharma 200
Changes in the Key Managerial Personnel in the last three years:
Sr. No Name Appointed/ Resigned Date of Change Reason 1. Mr. A. K. Guha Appointed 21-10-2002 Appointed as Chief Executive 2. Mrs. Meena V Appointed 12-06-2002 Appointed as Group Head 3. Mr. N. Sowmyan Retired 31-12-2002 Retired
Notes:
1. All the Key Managerial Personnel are permanent employees of our Company, except for the Managing Director, who is on deputation from United India Insurance Co. Ltd. 2. There is no understanding with major shareholders, customers, suppliers or any others pursuant to which any of the above mentioned personnel have been recruited. 3. None of our directors and key managerial personnel have any relations amongst them.
56 Employees:
Summary of manpower strength as under:
Particulars No. Officers 89 Award Staff - Sub staff - Total 89
The Company has not issued any Employee Stock Option Scheme to its employees till date.
57 X. OUR PROMOTERS AND THEIR BACK GROUND*
1. General Insurance Corporation of India (GIC)
GIC was incorporated under the Companies Act, 1956, on 22nd November 1972 in terms of General Insurance (Business) Nationalisation Act, 1972 as a private company limited by shares, the undertaking of all Insurance Companies operating in the country were taken over by four companies, the New India Assurance Company Limited , United Insurance Company Limited, National Insurance Company Limited and Oriental Insurance Company Limited and the share holding of these companies was vested with GIC thus making it holding company for the four general insurance companies operating in India. The role of GIC was to supervise and control the business of general insurance and to aid, assists and advice its subsidiaries in the matter of general insurance business, investments etc. With the opening up of the insurance sector, to provide a level playing field, the Government decided to make the subsidiary companies independent. As a result of from March 21 2003, shares of all erstwhile subsidiary companies were transferred to President of India and there by GIC ceased to be the holding company of these companies. GIC has diversifiesd into area like housing finance and management of mutual funds.
GIC with erstwhile Subsidiary of companies floated Mutual Fund in 1991 as Trust Subsequently in 1993 as per SEBI Regulation GIC AMC was formed. In this Company, holding of GIC and erstwhile Subsidiary Companies is 40%, SOROS 40% and balance is held by GICHFL.
The entire general insurance business in India was nationalized by General Insurance Business (Nationalization) Act, 1972 (GIBNA). The Government of India (GOI), through Nationalization took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers carrying on general insurance business.
The Directors on the Board of GIC are:
Mr. R. K. Joshi Mr. G.C. Chaturvedi Mr. A. K. Pawar Mr. A. K. Shukla Mr. B. Chakrabarti
Financial details of GIC for the past three years
(Rs in Lacs) Particulars 2004-05 2003-04 2002-03 Total Income 461387 416297 383279 Net Profit after Tax 20002 103762 26146 Equity Capital 21500 21500 21500 Reserves (excluding revaluation reserves) 404425 391777 295292 Net Worth 425925 41.3277 316735 Earning Per Share (Rs.) 47.00 483.00 131.00 (Face Value Rs.100)
The company is not a sick company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995.
There has been no change in the capital structure and the Company upto March 31, 2005 and has not made any issue of equity shares during the past three years.
Litigation details pertaining to GIC:
For details on litigations and disputes pending against the Company and defaults made by the Company please refer to the paragraph under “ Litigations and Disputes” on page no. ______of this Letter of Offer.
58 2. National Insurance Company Limited (NICL)
NICL was incorporated with registered office at Kolkata on 6th December 1906 under the Companies Act, 1882 to carry on General Insurance Business. Upon nationalization of General Insurance Business in 1971 the Company was restructured by merging 22 foreign and 11 Indian Insurance Companies operating in India as per amalgamation scheme framed under the General Insurance Business (Nationalization) Act, 1972. Under the Act General Insurance Corporation of India was incorporated as a holding company for NICL. The Central Government, vide Gazette notification S.O 329 (E) dated 21st March 2003 has notified the “ Appointed Date “ on which the General Insurance Business (Nationalization Act 2002) has come into force. In view of the said notification the share capital of National Insurance Co. Ltd is now vested with the Central Government & General Insurance Corporation of India has been formally delinked from the said four public sector insurance companies. NICL is now board run autonomous Company.
Besides catering to average insurance requirements of all sections of Indian society, NICL also provides customized and innovative insurance solutions through a wide array of products.
Apart from domestic insurance business, the company also undertakes re-insurance and overseas operations. NICL also provides financial assistance to corporate sector by way of term-loans, underwriting and direct subscription to shares/debentures/bonds etc.
Headquartered in Kolkata, it has an organizational network of over 964 offices with a workforce of over 20,000 trained people. The company also has operations in Hong Kong and Nepal and ranks among the top global business insurers.
The directors on the board of NICL as on March 31, 2005 are as under:
Mr. B. Chakrabarti Mr. O. N. Singh Mr. G. Bhujabal Mr. Y. P. Chopra Mr. T. K. Das
Financial details of NICL for the past three years Rs. in Lacs Particulars 2004-05 2003-04 2002-03 Total Income (Gross Direct Premium 379991 339110 257034 Income) Net Profit after Tax 13118 59021 13491 Equity Capital 10000 10000 10000 Reserves (excluding revaluation reserves) 111627 101520 97217 Earning Per Share (Rs.) 13.12 5.90 1.35
The company is not a sick company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995.
There has been no change in the capital structure and the Company has not made an issue of equity shares during the past three years.
Litigation details pertaining to NICL
For details on litigations and disputes pending against the Company and defaults made by the `Company please refer to the paragraph under “ Litigations and Disputes” on page no. ______of this Letter of Offer.
59 3. United India Insurance Company Limited (United India)
United India, leading General Insurance Company with more than three decades of experience in non-life insurance business was formed by the merger 22 General Insurance Companies and 5 Foreign Operation of Indian Companies and is wholly owned government of India., Consequent to nationalization of general insurance. The Central Government, vide Gazette notification S.O 329 (E) dated 21st March 2003 has notified the Appointed date on which general Insurance Business (Nationalization Act 2002) shall come in to force 21st March 2003. With effect from this date the Book value of the shares in the 4 Public Sector insurance companies held by GIC stands transferred to the Central Government. In view of the said notification the share capital of United India is now vested with the Central Government & General Insurance Corporation of India has been formally delinked from the said four public sector insurance companies. United India now board run autonomous Company.
United India has a countrywide network of 24 regional offices, 371 divisional offices, 717 branch offices and 185 micro offices across the country. The company is in the process of interconnecting all the offices by wide area network.
The directors on the board of United India as on March 31, 2005 are:
Mr. M. K. Garg Mr. G. C. Chaturvedi Mr. T. K. Roy Mr. V. Ramasaamy
Financial details of United India for the past three years Rs in Lacs Particulars 2004-05 2003-04 2002-03 Total Income 49979 50415 224110 Net Profit after Tax 30771 38045 17098 Equity Capital 10000 10000 10000 Reserves (excluding revaluation reserves) 192958 169263 134603 Earning Per Share (Rs.) 30.77 38.45 17.10
The company is not a sick company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995.
There has been no change in the capital structure and the Company has not made an issue of equity shares during the past three years.
Litigation details pertaining to United India
For details on litigations and disputes pending against the Company and defaults made by the `Company please refer to the paragraph under “ Litigations and Disputes” on page no. ______of this Letter of Offer.
60 4. The Oriental Insurance Company Limited (OICL)
Oriental Fire & General Insurance Company Limited (OFGICL) was incorporated on September 12, 1947 & commenced its operation in late 1949. On the Nationalization of General Insurance Business OFGICL became one four subsidiary of General Insurance Corporation of India with the subsequent merger of ten Insurance Companies and 12 foreign insurance companies with OFGICL. To reflect gamut of operation of the Company, the name of the Company was changed in May 1984 from Oriental Fire & General Insurance Company Limited to The Oriental Insurance Company Limited. On 30th August 2003, the Shares held by GIC were transferred to Government of India and since then the Company has ceased to be a subsidiary of GIC. Now a wholly owned Government Company, OICL was delinked from GIC of India by an Act of the Parliament dated March 21 2003.
It is one of the oldest insurance companies and was established in the year 1947. The company headquartered in New Delhi transacts all kinds of general insurance business ranging from very big projects to small rural insurance covers. The company has 21 regional offices, 311 divisional offices and 635 branch offices. It specializes in devising special covers for large projects like power plants, petro-chemical, steel plants and chemical plants.
The directors on the board of OICL are:
Mr. M. Ramadoss Mr. K. N. Prithviraj Mr. Subhash C. Sharma Mr. R. C. Jain
Financial details of OICL for the past three years Rs in Lacs Particulars 2003-04# 2002-03 2001-02 Total Income 290000.00 286800.00 249900.00 Net Profit after Tax 31648.00 6399.00 (25444.00) Equity Capital 10000.00 10000.00 10000.00 Reserves (excluding revaluation reserves) 102218.00 73391 .00 57280.00 NAV (Rs.) 112.22 83.39 67.28 Earning Per Share (Rs.) 31.65 6.40 (25.44) # The final accounts for the year 2003-04 have been adopted by the board and the figures provided are subject to Comptroller & Auditor General (GAG) comments and shareholders approval.
The company is not a sick company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995.
There has been no change in the capital structure and the Company has not made an issue of equity shares during the past three years.
Litigation details pertaining to OICL:
For details on litigations and disputes pending against the Company and defaults made by the `Company please refer to the paragraph under “ Litigations and Disputes” on page no. ______of this Letter of Offer.
61 5. The New India Assurance Company Limited (New India)
New India, incorporated on 23rd July 1919, founded by the House of Tatas was nationalized in 1973. Currently its 100% equity is held by Government of India.
The New India has earned total gross income premium of Rs. 5103.16 crores in the year 2004-05 as against Rs. 4921.47 crores in the year 2003-204. As on 31st March 2005 the Company has assets of Rs. 1987.19 Crores. During the year company operated in domestics market through a network of 26 regional Office, 393 Divisional offices , 614 branch offices and 34 Direct Agents Branches. New India is Rank No.1 in the Indian market. New India is a Largest Non-Life insurer in Afro-Asia excluding Japan. New India is the first Indian non-life company to cross Rs. 5000 crores Gross premium. New India has overseas presence in countries like Japan, U. K, Middle East, Fiji and Australia.
New India is a leading global insurance group, with offices and branches throughout India and various countries abroad. The company’s overseas operation commenced in 1920. New India operates in 24 countries spanning 5 Continents in the year 2005. New India operates through a network of 19 branches, 12 Agencies, 2 Associates Companies and 2 subsidiary companies in the year 2005. The New India overseas premium is Rs. 892.35 crores in the year 2004-2005.
New India has been rated "A" (Excellent) by A.M. Best Co., making it the only Indian insurance company to have been rated by an international rating agency.
The directors on the board of New India are:
Mr. B. Chakrabarti Mr. Girish Chandra Mr. Ramkumar Joshi Mr. Anil Khendelwal Mr. Ayalur Vedom Mr. Jitendra Kumar Gupta
Financial details of New India for the past three years Rs in Lacs Particulars 2004-05 2003-04 2002-03 Total Income (Net Premium Income) 389411 363494 351643 Net Profit after Tax 40223 59021 25581 Equity Capital 15000 10000 10000 Reserves (Excluding Revaluation Reserves) 416641 384350 3304.0 Net Worth 431641 394350 340400 Earning per share (Rs.) 26.81 59.02 25.58
The company is not a sick company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995.
There has been no change in the capital structure and the Company has not made an issue of equity shares during the past three years.
Litigation details pertaining to New India:
For details on litigations and disputes pending against the Company and defaults made by the `Company please refer to the paragraph under “ Litigations and Disputes” on page no. ______of this Letter of Offer.
62 6. IFCI Limited (IFCI)
At the time of independence in 1947, India's capital market was relatively under-developed. Although there was significant demand for new capital, there was a dearth of providers. Merchant bankers and underwriting firms were almost non-existent and commercial banks were not equipped to provide long-term industrial finance in any significant manner.
It is against this backdrop that the government established IFCI on 1st July 1948, as the first Development Financial Institution (DFI) in the country to cater to the long-term finance needs of the industrial sector. The newly established DFI was provided access to low-cost funds through the Central Bank's Statutory Liquidity Ratio (SLR), which in turn enabled it to provide loans and advances to corporate borrowers at concessional rates.
This arrangement continued until the early 1990s when it was recognized that there was need for greater flexibility to respond to the changing financial system. It was also felt that IFCI should directly access the capital markets for its fund requirements. It is with this objective that the constitution of IFCI was changed in 1993 from a statutory corporation to a company under the Indian Companies Act, 1956. Subsequently, the name of the company was also changed to "IFCI Limited" w.e.f. October 1999.
Directors of IFCI
Mr. P. S. Shenoy Mr. Atul Kumar Rai Mr. K. Sridhar Mr. V. K. Saxena Mr. S. Ravi Prof. I. M. Panday Mr. R. M. Malla
Shareholding pattern of IFCI as on 31st December 2005
Category No. of Shares held % of Shareholding Non Promoter's Holding Institutional Investors Mutual Funds and UTI 5718382 0.9 Banks, Financial Institutions, Insurance Companies 248561794 38.92 FIIs 56072686 8.78 Sub Total 310352862 48.59 Others Private Corporate Bodies 70226161 11 Indian Public 253871484 39.75 NRIs / OCBs 4225255 0.66 Sub Total 328322900 51.41 Grand Total 638675762 100
63 Financial details of IFCI for the past three years
Rs in Lacs Particulars 2004-05 2003-04 2002-03 Total Income 131785 110517 143324 Net Profit after Tax (44340) (322978) (25970) Equity Capital 63868 63868 63868 Reserves (excluding revaluation reserves) 21462 21836 22910 Net Worth (318369) (285550) 37819 Earning per share (Rs.) (5.79) (51 .28) (4.78)
Share Price Data
The Highest and lowest market price of the equity shares on the BSE during the past six months is given below:
Date High (Rs.) Low (Rs.) Close (Rs.)
July 2005 13.55 17.85 13.25
August 2005 17.05 18.25 15.30 September 2005 16.95 18.45 15.15 October 2005 16.15 16.40 11.40 November 2005 12.40 13.72 9.29 December 2005 10.48 10.72 9.52 January 2006 10.00 12.77 10.00
The company is not a sick company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995.
There has been no change in the capital structure and the Company has not made an issue of equity shares during the past three years.
Litigation details pertaining to IFCI
For details on litigations and disputes pending against the Company and defaults made by the `Company please refer to the paragraph under “ Litigations and Disputes” on page no. ______of this Letter of Offer.
* NOTE: THE INFORMATION RELATING TO THE PROMOTERS GENERALLY AND IN PARTICULAR CONCERNING FINANCIAL DETAILS AND OTHER INFORMATION IS BASED ON THE INFORMATION RECEIVED BY THE COMPANY FROM THE PROMOTERS AND WHICH INFORMATION HAS NOT BEEN INDEPENDENTLY VERIFIED. EXCEPT AS PROVIDED HEREIN THE COMPANY HAS NOT RECEIVED ANY UPDATED INFORMATION IN RESPECT TO FINANCIAL DETAILS AND OTHER INFORMATION WITH REGARDS TO THE OPERATIONS OF THE PROMOTER COMPANIES.
64 FINANCIAL INFORMATION OF THE COMPANY
AUDITORS REPORT
The Board of Directors GIC Housing Finance Ltd. P.M. Road, Mumbai.400001
Dear Sirs,
Re: Proposed Rights Issue
Offer to issue and allot 2,69,25,533 Equity Shares of Rs.10/- between a price band to be determined by the Company on Rights basis in the ratio of 1 Equity Share for every 1 Equity Shares held.
We have examined the financial information contained in the statements annexed to this report i.e. Annexures 1 to 12 which are proposed to be included in the Letter of Offer of GIC Housing Finance Ltd. in connection with the proposed Rights Issue as required by Clause B of Part II part of Schedule II of the Companies Act, 1956 and Guidelines titled Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 (‘Guidelines’) issued by the Securities and Exchange Board of India (SEBI) in pursuance of Section 11 of the Securities and Exchange Board of India Act, 1992, and we report that :
1. We have examined the ‘Statement of Profits and Losses’ of the Company for each of the financial years ending 31st March, 2001, 31st March, 2002, 31st March, 2003, 31st March,2004 , 31st March, 2005, & half year ended on September 30, 2005 and ‘Statement of Assets and Liabilities’ as at those dates enclosed as Annexure-1 and Annexure-2 to this report and confirm that:
i. These statements reflect the profits and losses and assets and liabilities for each of the relevant periods as extracted from the Profit and Loss Accounts for the Financial years ended 31st March 2001, 31st March, 2002, 31st March 2003, 31st March 2004, 31st March 2005 and half year ended on September 30, 2005 and the Balance Sheets as on those dates audited by us, after making therein the disclosures and adjustments required to be made in accordance with the provisions of paragraph 6.18.7 (iv)(a) & (b) of the Securities and Exchange Board of India (Disclosures and Investor Protection) Guidelines, 2000, to the extent applicable.
ii. The Significant Accounting Policies adopted by the Company as on September 30, 2005 are enclosed as Annexure-3 to this report.
2. We have examined the ‘Statement of Accounting Ratios’ of the Company for each of the five financial years ended 31st March 2001, 31st March 2002, 31st March 2003, 31st March 2004, 31st March 2005, and the half year ended September 30, 2005 enclosed as Annexure-4 to this report and confirm that they have been correctly computed from the figures as stated in the ‘Statement of Profits and Losses’ and ‘Statement of Assets and Liabilities’ of the Company referred to in paragraph 1 (i) above.
3. We have examined the accompanying ‘Statement of Related Party Disclosure’ to the extent applicable for the half year ended September 30, 2005 and the corresponding previous year enclosed as Annexure-5 to this report and confirm that the relationships and transactions between the Company and its related parties have been appropriately reported in accordance with ‘AS-18’ Related Party Disclosures’ issued by The Institute of Chartered Accountants of India.
4. We have examined the ‘Statement of Dividend Paid’ by the Company in respect of each of the years ended 31st March, 2001, 31st March, 2002, 31st March, 2003, 31st March, 2004 and 31st March, 2005 on the Shares of the Company, enclosed as Annexure-6 to this report and confirm that it correctly records the dividend paid in respect of each of those years.
65 5. We have examined the ‘Statement of Tax Shelter’ for the years ended 31st March, 2001, 31st March, 2002, 31st March, 2003, 31st March, 2004, 31st March, 2005, and the half year ended September 30, 2005 enclosed as Annexure-7 to this report and report that, in our opinion it correctly reflects the ‘Tax Shelter’ for each of those years and period.
6. We have examined the ‘Cash Flow Statement’ in respect of each of the years ended 31st March, 2001, 31st March, 2002, 31st March, 2003, 31st March, 2004, 31st March, 2005 and the half year ended September 30, 2005 enclosed as Annexure-8 to this report and confirm that, in our opinion, these statements have been prepared by the Company in accordance with the requirement of Accounting Standards 3 (Cash Flow Statements) issued by the Institute of Chartered Accountants of India.
7. We have examined the ‘Statement of Secured & Unsecured Loans’ as on September 30, 2005 enclosed as Annexure-9 and Annexure-10 to this report and confirm that they have been correctly extracted from the figures as stated in the ‘Statement of Assets and Liabilities’ of the Company referred to in paragraph 1 (i) above.
8. We have examined the ‘Statement of Capitalization Pre-Issue’ as on September 30, 2005 enclosed as Annexure-11 to this report and confirm that they have been correctly extracted from the figures as stated in the ‘Statement of Assets and Liabilities’ of the Company referred to in paragraph 1 (i) above.
9. We have examined the ‘Statement of Other Income in respect of each of the years ended 31st March, 2001, 31st March, 2002, 31st March, 2003, 31st March, 2004, 31st March, 2005, and the half year ended September 30, 2005 enclosed as Annexure-12 to this report and confirm that they have been correctly extracted from the figures as stated in the ‘Statement of Profits and Losses’ of the Company referred to in paragraph 1 (i) above.
We further report that the information mentioned in the above paras 2-9 above has been correctly computed from the figures as stated in the statements of Profits and Losses and Assets and Liabilities referred to in paragraph 1 above.
This report is intended solely for your information for inclusion in the Letter of Offer in connection with the proposed Rights Issue of the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent.
M/s M. P. Chitale & Co. Chartered Accountants
Place: Mumbai Dated: January 25, 2006
66
Annexure – 1 GIC Housing Finance Ltd. Statement of Profits and Losses Rs. in lacs Particulars For the Financial Year SIX MONTHS 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 30.09.2005 Income: Operating Income 9,095 9,163 9,676 9,920 12,453 7,583 Investment and other Income 85 74 77 90 108 38 Total (A) 9,180 9,237 9,753 10,010 12,561 7,621 Expenditure: Interest 6,849 7,599 7,272 6,990 7,865 4,784 Staff Expenses 153 162 199 185 236 128 Other Expenses 347 383 450 567 808 425 Miscellaneous expenses written off 6 6 5 5 10 5 Depreciation 72 56 43 40 44 23 Non-Performing assets written off 965 342 823 200 - - Provision for Non-performing assets (Net) 145 521 201 565 1,524 386 Total (B) 8,537 9,069 8,993 8,552 10,487 5,751 Net Profit Before Tax and Extra ordinary Items (A-B) 643 168 760 1,458 2,074 1,870 Less:Taxation 210 150 235 526 856 473 Deferred Tax Assets - (102) (136) (180) (558) (124) Fringe Benefit Tax - - - - - 3 Extraordinary Items ------Net Profit After Tax and Extra ordinary items 433 120 661 1,112 1,776 1,518
67 Annexure – 2 GIC Housing Finance Ltd. Statement of Assets and Liabilities Rs. in Lacs Particulars Position as at Financial Year Ended Six Months 31-Mar-01 31-Mar-02 31-Mar-03 31-Mar-04 31-Mar-05 30-Sep-05
A Housing Loans: 62,742 70,839 84,758 110,900 157,819 171,149 Less: Provision for non performing Loans 410 693 1,061 1,562 3,086 3,451 62,332 70,146 83,697 109,338 154,733 167,698 B Fixed Assets Gross Block 584 598 617 652 666 676 Less: Depreciation 252 308 344 382 380 402 Net Block 332 290 273 270 286 274 Less: Revaluation Reserve ------Net Block after Revaluation Reserve 332 290 273 270 286 274 C Investments Cost of Investments 1,699 1,489 1,488 1,387 1,379 1,476 Less; Provision for Non Performing Inv 671 802 1,033 1,218 1,218 1,239 1,028 687 455 169 161 237 D Current Assets: Sundry Debtors (Secured) 1,395 745 826 677 320 422 Cash and Bank Balance: 1,269 2,201 1,388 1,611 1,707 1,815 Loans & Advances 3,163 3,148 3,666 4,491 4,554 5,021 Other Current Assets 311 149 98 199 93 377 6,138 6,243 5,978 6,978 6,674 7,635 Total E =A+B+C+D 69,830 77,366 90,403 116,755 161,854 175,844 F Deferred Tax Asset - 238 375 555 1,113 1,237 G Total Assets - G= A + B +C+D+F 69,830 77,604 90,778 117,310 162,967 177,081
Loan Funds, Current Liabilities and Provision H Liabalities & Provisons Loan Funds: Secured Loans 59,276 66,435 74,375 89,521 127,022 141,694 Unsecured Loans 155 102 5,022 15,018 20,005 17,503 59,431 66,537 79,397 104,539 147,027 159,197
I Current Liabilities and Provisons 2,132 2,717 2,611 3,189 3,633 4,053 Total J =H+I 61,563 69,254 82,008 107,728 150,660 163,250
K Net Worth (K = G-J ) 8,267 8,350 8,770 9,582 12,307 13,831 Represented by: L Share Capital 1,797 1,797 1,797 1,797 2,693 2,693 M Reserves 6,486 6,563 6,978 7,785 9,652 11,172 N Misc. Expenditure not written-off 16 10 5 - 38 34
O Total = L+ M – N 8,267 8,350 8,770 9,582 12,307 13,831
68
ANNEXURE - 3
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON SUMMARY STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES:
1. SYSTEM OF ACCOUNTING:
The Company adopts the accrual concept in the preparation of the Financial Statements, following the historical cost convention.
2. PROVISIONING FOR HOUSING LOANS AND INVESTMENTS:
i. Housing loans and inter corporate loans are classified into “Performing” and “Non-Performing” assets in terms of guidelines laid down by the National Housing Bank. Housing loans are classified as standard, sub-standard, doubtful and loss assets. ii. Provisions for non-performing assets and investments are made on a periodic review in accordance with the directives /guidelines laid down by the National Housing Bank.
3. INCOME ON HOUSING LOANS:
i. Repayment of housing loans is by way of Equated Monthly Installments (EMI) comprising principal and interest. Interest is calculated on the outstanding loan balance at the beginning of every month. EMIs commence once the entire loan is disbursed. Pending commencement of EMIs Pre-EMI interest is payable every month. ii. Interest on Housing Loans which are classified as Non- performing assets is recognised on realisation as per the directives/guidelines laid down by National Housing Bank. iii. Penal Interest, Fees and Other Charges are recognised when received.
4. INVESTMENTS:
i. Investments are accounted and valued at cost plus incidental expenditure incurred in connection with acquisition. ii. Investments are classified into two categories i.e. Long-term investments and Current investments. iii. Income on Investments which are classified as Non performing is recognised on realisation as per the directives/guidelines laid down by National Housing Bank.
5. FIXED ASSETS:
Fixed Assets are capitalised at cost.
6. DEPRECIATION:
Depreciation on Fixed Assets is provided on the reducing balance method at the rates specified by Schedule XIV of the Companies Act, 1956.
7. RETIREMENT BENEFITS:
i. Contribution to Provident Fund is charged to accounts on accrual basis. ii. Provision for leave encashment has been made on the basis of actuarial valuation. iii. Gratuity is accounted for on the basis of the premium paid to Life Insurance Corporation of India under the Group Gratuity Scheme.
8. MISCELLANEOUS EXPENDITURE:
Right Issue expenses are amortised over a period of five years.
69
GIC Housing Finance Ltd. Annexure – 4 Statement of Accounting Ratio Rs. in Lacs Financial Year Six Months Particulars 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 30-09-2005 1 a Net Profit after tax 433 120 661 1,112 1,776 1,518 b No. of Equity Shares 180 180 180 180 269 269 Earning per share= Net profit after tax/No. of equity shares 2.41 0.67 3.67 6.17 7.60 5.64 2 a Net Profit after tax 433 120 661 1,112 1,776 1,518 b Net worth 8,267 8,350 8,770 9,582 12,307 13,831
Return on Net Worth= 0.05 0.01 0.08 0.12 0.14 0.11 Net Profit after tax/Net worth 3 a No. of Equity Shares 180 180 180 180 269 269 b Net Worth 8,267 8,350 8,770 9,582 12,307 13,831
Net Asset Value per share = 45.93 46.38 48.72 53.23 45.75 51.41 Net worth/ No. of Equity Shares Note: Ratios not in Lacs
GIC Housing Finance Ltd. Statement of Accounting Ratio
F.Y. F.Y. F.Y. F.Y. F.Y. SIX MONTHS Particulars 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 30.09.2005
CAPITAL ADEQUACY (%) 11.47 12.48 14.85 12.64 12.30 13.14
DEBT/EQUITY RATIO (TIMES) 7.19 7.97 9.05 10.91 11.95 11.51
INTEREST COVERAGE RATIO (TIMES) 1.09 1.02 1.10 1.21 1.26 1.39
CURRENT RATIO (TIMES) 2.88 2.30 2.29 2.19 1.84 1.88
70 Annexure – 5 Disclosure Required as per Accounting standard 18 (AS 18) ' Related Party Disclosure'
The company has related party relationships with various parties/companies from the financial year 2000-2001 to 2004-05 and six months ended September 30, 2005.
List of Related Parties:
General Insurance Corporation of India. The New India Assurance Company Ltd. National Insurance Company Ltd. The Oriental Insurance Company Ltd. United India Insurance Company Ltd. Shri A.K. Guha (Managing Director) Shri B.P.Deshmukh (Director)
The Company has related party transactions as follows.
Financial Year Name of the party Nature of transaction Amount (Rs in Lacs)
Repayment of 2,183 Secured Loans 2000-2001 GIC and Subsidiaries. Interest Paid 2012 Insurance Premium 16 Paid Repayment of 13,147 Secured Loans 2001-2002 GIC and Subsidiaries. Interest Paid 1264 Insurance Premium 15 Paid Repayment of 0 Secured Loans 2002-2003 GIC and Subsidiaries. Interest Paid 0.2 Insurance Premium 14.02 Paid Repayment of 0 Secured Loans 2003-2004 GIC and Subsidiaries. Interest Paid 0 Insurance Premium 40 Paid 2004-2005 Shri A.K.Guha Salary 5.05 (Managing Director)* Contribution to Pension 0.33 and other funds * Shri A.K.Guha is appointed Perquisites 3.46
71 as Managing Director of the Total: 8.84 Company with effect from 21st June, 2004. The above remun- Housing Loan Balance 1.66 eration is for the full year. The as on 31.03.05. Housing Loan was sanctioned Maximum Balance 1.96 prior to his appointment as During the year Managing Director. (Previous Year - Nil) Shri A.K.Guha Salary 3.82 (Managing Director)* Contribution to Pension 0.17 and other funds * Shri A.K.Guha is appointed Perquisites 0.73 as Managing Director of the Total: 4.72 Half-year ended 30.09.2005. Company with effect from 21st June,2004. The above remun- Housing Loan Balance 3.80 eration is for the half year. as on 30.09.05. Maximum Balance 4.00 During the half year (Previous Year – Rs. 1,07,388/-) Shri B.P.Deshmukh Housing Loan Balance (Director) as on 30.09.05. 1.56
Housing Loan was sanctioned Maximum Balance Half-year ended 30.09.2005. prior to his appointment as Director. During the half year 3.35 (Previous Year – Rs. 4,13,497/-)
72
Annexure - 6 GIC Housing Finance Ltd. Statement of Dividend Paid and Tax Thereon
F.Y. F.Y. F.Y. F.Y. F.Y. SIX MONTHS Particulars 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 30.09.2005 No. of Shares 17,974,572 17,974,572 17,974,572 17,974,572 26,925,533 26,925,533 Paid up value 10 10 10 10 10 10 Rate of Dividend 10% 10% 12.50% 15% 15% N.A. Dividend on above (Rs.) 17,974,572 17,974,572 22,468,215 26,961,858 40,388,300 - Tax on proposed dividend (Rs.) 1,833,406 - 2,878,740 3,454,488 5,664,459 -
73
Annexure - 7 GIC Housing Finance Ltd. Statement of Tax Shelter Rs. in Lacs Financial Year Six Months Particulars 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 30.09.2005
Profit before taxation as per 643 168 760 1,458 2,075 1,871 Profit and Loss a/c Rate of Income Tax 39.55% 35.70% 36.75% 35.875% 36.5925% 33.66% Tax at Notional Rate 254 60 279 523 759 630
Adjustments:
Provision for NPA 145 521 201 565 1,524 386 Difference in depreciation (6) 8 3 1 (2) 3 Dividend income exempt u/s 10(33) (23) (11) (28) (23) (28) (17)
OTHER ADJUSTMENTS Miscellaneous Expenditure 6 6 6 5 - - Provision for leave Encashment - - 5 2 11 - Provision for Bonus - - - - 1 - (Profit)/Loss on sale of Invt. 20 (17) - - - - (profit)/ Loss on Sale of Asset 2 - (1) - - - Deduction u/s 36(1)(viii) (292) (270) (345) (555) (1,250) (881) Prior Period Adjustments - - 7 - - - Net Adjustment (148) 237 (152) (5) 256 (509) Tax Expense/(Shelter) (58) 85 (56) (1) 94 (171)
Tax on profits 196 145 223 522 853 459
74 Annexure - 8 GIC Housing Finance Ltd. Statement of Cash Flows Rs in Lakhs
For the Financial Year SIX MONTHS Particulars 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 30.09.2005
A: Cash Flow From Operating Activities: Net profit before tax and extra ordinary items 643 168 760 1,457 2,075 1,871 Adjusted for: Depreciation 72 56 43 41 44 23 Miscellaneous Expenditure Written off 6 5 5 5 10 5 Non performing Assets written off 965 342 823 200 - - provision for doubtful debts 145 521 202 565 1,524 386 Prior Period Adjustments (Net) (57) - 7 - 9 - (Profit)/Loss on Sale of Investments 20 (17) (13) (3) (32) (15) Dividend and interest income on investment - - (47) (42) (29) (17) Operating Profit before Wk. Capt. Changes 1,794 1,075 1,780 2,223 3,601 2,253 Adjusted for: (Increase)/Decrease in Current Assets (1,083) 737 (569) (857) 400 (853) Increase/(Decrease) in Current Liabilities (489) 585 (150) 532 310 824 Operating Profit After Wk. Capt. Changes 222 2,397 1,061 1,898 4,311 2,224 Adjusted for: (Increase)/Decrease in Housing Loans (5,199) (8,439) (14,324) (26,141) (46,919) (13,330) Cash generated from Operating Activity (4,977) (6,042) (13,263) (24,243) (42,608) (11,106) Taxation (228) (150) (264) (561) (913) (476) Net cash generated from operating activity (5,205) (6,192) (13,527) (24,804) (43,521) (11,582) B: Cash Flow from Investment Activities Acquisition of Fixed Assets (Net) (12) (14) (26) (36) (61) (10) Purchase of Investments (2,165) (6,141) (22,000) (16,330) (82,964) (50,478) Sale of Investment 2,421 6,368 22,013 16,434 83,005 50,395 Dividend and Interest income on investment - - 47 42 29 17 Net cash Generated from Investment Activity 244 213 34 110 9 (76) C: Cash Flow from Financing Activities Calls unpaid Received (Including Premium) - - - - 2 - Amount Received on Rights Issues (Including - - - - 1,436 - Premium) Loans Borrowed (Net of Repayments) 5,302 7,107 12,861 25,141 42,488 12,170 Share issue Expenses - - - - (48) - Dividend (180) (180) (180) (225) (270) (404) Net cash generated from Financing Activity 5,122 6,927 12,681 24,916 43,608 11,766
Net Cash & Cash Equivalents Generated 161 948 (812) 222 96 108 Cash & Cash Equivalents as at Beginning of the 1,919 2,080 2,201 1,389 1,611 1,707 Year Cash & Cash Equivalents as at End of the Year 2,080 3,028 1,389 1,611 1,707 1,815
75
Annexure - 9 GIC Housing Finance Ltd. Statement of Secured Loans Rs. in Lacs
Particulars September 30, 2005 Rate of Date of Last Interest Instalment Secured Loans: From Scheduled Banks
VIJAYA BANK 3,998 6.25% 17.07.2009 VIJAYA BANK - II 4,498 6.25% 06.01.2010 THE KALYAN JANATA SAHAKARI BANK LTD. 158 6.75% 27.03.2008 NEW INDIA CO-OP.BANK LTD. 1,170 6.75% 31.03.2010 ANDHRA BANK 2,483 6.25% 13.09.2008 ANDHRA BANK - II 5,000 6.25% 19.11.2011 ANDHRA BANK - III 3,437 6.75% 29.06.2012 BANK OF PUNJAB LTD.(III) 2,374 6.40% 25.06.2010 PUNJAB NATIONAL BANK (I) 3,121 6.25% 30.09.2010 PUNJAB NATIONAL BANK (II) 9,992 6.25% 04.07.2010 BANK OF INDIA (III) 1,500 6.50% 01.10.2006 BANK OF INDIA (IV) 3,500 6.50% 21.03.2009 BANK OF INDIA (V) 4,375 6.50% 01.07.2012 BANK OF INDIA (VI) 10,000 6.50% 23.03.2013 ORIENTAL BANK OF COMMERCE 7,996 6.25% 29.08.2009 ORIENTAL BANK OF COMMERCE - II 5,000 6.25% 10.02.2010 STATE BANK OF INDORE 4,999 6.35% 10.09.2010 STATE BANK OF HYDERABAD 4,999 6.314% 05.03.2011 STATE BANK OF HYDERABAD - II 9,998 6.10% 22.11.2008 UNION BANK OF INDIA 10,000 6.25% 12.03.2013 UNION BANK OF INDIA - II 9,996 6.25% 10.09.2013 LORD KRISHNA BANK 2,000 6.35% 17.03.2010 STATE BANK OF MYSORE 5,000 6.31% 30.07.2011 SYNDICATE BANK 9,000 6.50% 27.09.2014 BANK OF MAHARASHTRA 5,000 6.22% 30.06.2010 CANARA BANK 9,832 6.45% 23.08.2011 CORPORATION BANK 2,268 6.50% 27.09.2013
From National Housing Bank - - -
The loans are secured by way of first charge on book-debts equivalent to loan outstanding.
Total 141,694
76 Annexure - 10 GIC Housing Finance Ltd. Statement of UnSecured Loans
Rs. in Lacs
As on 30/09/05 Particulars Amount Interest Rate Repayment Schedule
Unsecured Loans Canara Bank 5,000 5.70% 10.12.2005 Andhra Bank 7,500 5.85% 22.12.2005 Karnataka Bank Ltd. 5,000 5.75% 05.02.2006
Last Date of Repayment Deposits from Public 3 12.50% 22.04.2006
Total 17,503
77 Annexure – 11 GIC Housing Finance Ltd. Statement of Capitalisation Statement
Rs. in Lacs
Particulars Pre-issue as at As Adjusted for issue based on 30/9/2005 30/9/2005 figures
Short Term Debt 17,503 17,503 (Repayable in one year)
Long Term Debts From Schedule Banks 141,694 141,694 Interest accrued and Due - - (Secured by way of first charge on Book-debts equivalent to loan outstanding)
From National Housing Bank - - (secured by way of first charge on book-debts equilent to loan outstanding)
Total 159,197 159,197
Shareholders Fund: Share Capital 2,693 [•] Reserves 11,172 [•] Total Shareholders Funds 13,865 [•]
78 Annexure - 12 GIC Housing Finance Ltd. Statement of Other Income Rs. in Lacs For the Financial Year Six Month Particulars 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 30.09.2005
Dividend 23 11 28 23 28 17 (Gross, Tax deducted at source Rs. Nil; Previous year Rs. Nil)
Interest on Investments 22 19 19 19 1 -
Other Interest 31 3 11 12 31 6 (Gross Tax deducted at source) Profit on sale of Investment - 17 12 4 32 15
Other income 9 24 7 32 16 -
Total 85 74 77 90 108 38
79 GROUP COMPANIES*
FINANCIAL INFORMATION OF GROUP COMPANIES
1. GIC Asset Management Company Limited (GIC AMC):
GIC AMC was incorporated on 25th May 1993. It was promoted by GIC and the four Public Sector General Insurance Companies to manage the operations and investments of GIC Mutual Fund.
The directors on the board of GIC AMC are:
i. Mr. R K. Joshi ii. Mr. V. H. Pandya iii. Mr. M. Raghavendra iv. Mr. Ramdas L. Baxi
Financial details of GIC AMC for the past three years Rs in Lacs Particulars 2004-05 2003-04 2002-03 Total Income 301 457 658 Net Profit after Tax 15 172 319 Equity Capital 2000 2000 2000 Reserves (excluding revaluation reserves) Nil Nil Nil Net Assets Value (Rs.) 18.14 17.99 16.28 Earning Per Share (Rs.) 0.07 0.86 1.59
The company is not a sick company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995.
There has been no change in the capital structure and the Company has not made an issue of equity shares during the past three years.
Litigation details pertaining to GIC AMC
For details on litigations and disputes pending against the Company and defaults made by the `Company please refer to the paragraph under “ Litigations and Disputes” on page no. ______of this Letter of Offer.
2. Loss Prevention Association of India Limited (LPA):
LPA is engaged in promoting safety and loss control through education, training and consultancy in India and abroad since 1978. Its work involves both education and engineering aspects of safety. LPA is a company limited by guarantee without Share Capital. It is promoted by General Insurance Corporation of India Limited, The New India Assurance Company Limited, Oriental Insurance Company Limited, National Insurance Company Limited and United India Insurance Company Limited.
The directors on the board of LPA are: .i Mr. K. Sridhar ii. Mr. M. Ramadoss iii. Mr. V. Ramasaamy iv. Mr. M. K. Garg v. Mr. Jai Hiremath vi. Dr. K. C. Mishra vii. Mr. B. Chakrabarti viii. Mr. Lalit Kumar
80 ix. Mr. R. K. Joshi x. Mr. T. R. Viswanathan
Financial details of Loss Prevention Association of India Limited for the past three years Rs in Lacs Particulars 2004-05 2003-04 2002-03 Total Income 455 452 498 Net Profit after Tax (8) 5 44 Equity Capital N.A N.A N.A Reserves (excluding revaluation reserves) 468 468 453 Net Assets Value (Rs.) N.A N.A N.A Earning Per Share (Rs.) N.A N.A N.A
The company is not a sick company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995.
There has been no change in the capital structure and the Company has not made an issue of equity shares during the past three years.
Litigation details pertaining to LPA
For details on litigations and disputes pending against the Company and defaults made by the `Company please refer to the paragraph under “ Litigations and Disputes” on page no. ______of this Letter of Offer.
3. UTI Bank Limited (UTI Bank):
UTI Bank was the first private sector bank to be set up under the new guidelines issued in 1993 by the Government of India, consequent to announcement of a policy of reform of the Indian financial sector. The bank was promoted by erstwhile Unit Trust of India, LIC, GIC, NICL, New India, United India and OICL. Unit Trust of India contributed the entire initial capital of Rs. 100 crores.
UTI Bank obtained the Certificate of Incorporation on 3rd December 1993 and the Certificate of Commencement of Business on 14th December 1993. Its first branch at Ahmedabad was opened in April 1994. The bank has over 318 branches (including 9 service branches) and 95 extension counters as on date in metropolitan, urban and semi urban areas and has developed a wide customer base. The bank also has 1820 ATMs as on 31.12.2005
The directors on the board of UTI Bank are:
i. Mr. P.J. Nayak ii. Mr. Surendra Singh iii. Mr. N.C. Singhal iv. Mr. A. T. Pannir Selvam v. Mr. J.R. Varma vi. Dr. R. H. Patil vii. Ms. Rama Bijapurkar viii. Mr. R. B. L. Vaish ix. Mr. S. Chatterjee x. Mr. M. V. Subbiah xi. Mr. S. B. Mathur xii. Mr. Ramesh Ramanathan
81 Financial details of UTI Bank for the past three years Rs in Lacs Particulars 2004-05 2003-04 2002-03 Total Income 233998 212686 187528 Net Profit after Tax 33458 27831 19218 Equity Capital 23780 23158 23019 Reserves (excluding revaluation reserves) 213439 90484 68792 Earning Per Share (Rs.) 14.32 12.06 10.00
Shareholding pattern of UTI Bank as on 31st March 2005
Category No. of Shares Held % of Share Holding Promoter's Holding Promoters Indian Promoters 122051199 43.81 Sub Total 122051199 43.81 Non Promoter's Holding Institutional Investors Mutual Funds and UTI 19568374 7.02 Banks, Financial Institutions, Insurance Companies 1571389 0.56 FIIS 59238328 21.27 Sub Total 80378091 28.85 Others Private Corporate Bodies 3347499 1.20 Indian Public 15321513 5.50 NRIs/OCBs 236978 0.09
Any Other HSBC Asia Pacific Holdings UK 33950000 12.19 Bank of New York - Depository 23285720 8.36 Sub Total 76141710 27.33 Grand Total 278571000 100.00
Share price Data:
The Highest and lowest market price of the equity shares on the BSE during the past six months is given below:
Month High (Rs.) Low (Rs.) July 2005 273.80 242.00 August 2005 284.40 241.05 September 2005 290.80 248.00 October 2005 268.00 220.00 November 2005 274.50 228.00 December 2005 315.00 269.05 January 2006 373.00 286.35
82 The Company is not a Sick Company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995.
There has been no change in the capital structure and the Company has not made an issue of equity shares during the past three years.
Litigation details pertaining to UTI Bank
For details on litigations and disputes pending against the Company and defaults made by the `Company please refer to the paragraph under “ Litigations and Disputes” on page no. ______of this Letter of Offer.
VENTURES PROMOTED BY THE PROMOTERS:
1. Ventures promoted by GIC:
i. Agricultural Insurance Company of India (AICIL): AICIL was incorporated on 20th December 2002 under the Companies Act, 1956 with a paid up share capital of Rs. 200 crores to transact in crop insurance and other allied agriculture business in India. AICIL was formed to take over agricultural insurance, which was operated by GIC of India since inception of the scheme. GIC of India promoted AICIL in collaboration with NABARD and the four erstwhile subsidiary companies of GIC of India. GIC of India holds 35% equity stake in AICIL.
ii. GIC AMC: GIC and its erstwhile subsidiaries floated a Mutual Fund in the year 1991. Subsequently in 1993, as per SEBI regulations GIC AMC was formed. GIC and its erstwhile subsidiaries hold 40%, SOROS holds 40% and the rest is held by GICHFL.
iii. India International Pte, Singapore: The operations of the erstwhile subsidiary companies in Singapore were merged and the Company was formed collectively by GIC and its erstwhile subsidiary companies to carry out non-life business in Singapore. The shares of this Company are not listed.
iv. Kenindia Assurance Co. Limited, Nairobi: It is a composite Life and Non-Life Insurance Company. The share capital is being held by the GIC and its erstwhile subsidiaries (45%, 9% by each), LIC of India holds 10% and locals hold the balance.
In addition, GIC of India has subscribed to 30% of the initial Share Capital (i.e. $US 65,000) of LIC (Mauritius) Offshore Limited. LIC of India is holding the balance capital.
2. Ventures promoted by The National Insurance Company Limited
i. UTI Bank Limited ii. GIC Asset Management Company Limited iii. Oriental Capital Assurance Berhard (formerly known as United Oriental Assurance Berhard) iv. India International Insurance Pte Limited v. Kenindia Assurance Company Limited vi. Agricultural Insurance Company of India Limited vii. GIC Housing Finance Limited
3. Ventures promoted by United India Insurance Company Limited:
i. Zenith Securities & Investments Limited ii. GIC Housing Finance Limited iii. GIC Asset Management Company Limited iv. UTI Bank Limited v. Oriental Capital Assurance Berhard (formerly known as United Oriental Assurance Berhard) vi. India International Insurance Pte. Limited vii. Kenindia Assurance Company Limited viii. Agricultural Insurance Company of India Limited
83 4. Ventures promoted by New India:
i. The New India Assurance Company (Sierra Leone) Limited ii. The New India Assurance Company (Trinidad & Tobago) Limited iii. Kenindia Assurance Company Limited iv. India International Insurance Pte Limited
5. Ventures promoted by IFCI:
Subsidiaries
i IFCI Venture Capital Funds Limited ii IFCI Financial Services Limited
IFCI Lead* i Assets Care Enterprise Limited ii North India Technical Consultancy Organisation Limited iii Madhya Pradesh Consultancy Organisation Limited iv HARDICON Limited v ICRA Limited vi Himachal Consultancy Organisation Limited vii Foremost Factors Limited viii Rajasthan Consultancy Organisation Limited ix Tourism Finance Corporation of India Limited * IFCI has taken a lead role in promoting these companies.
FINANCIAL DETAILS FOR THE PAST THREE YEARS OF VENTURES PROMOTED BY THE PROMOTERS
1. Agricultural Insurance Company of India Limited (AICIL) Date of Incorporation: 20th December 2002 Nature of Activities: Crop Insurance and other allied agriculture business
Rs in Lacs Financial details 2003-04 Total Income 20569.00 Net Profit after Tax (82.92) Equity Capital 20000.00 Reserves (excluding revaluation reserves) Nil Earning per share (Rs.) (4.08)
2. GIC Asset Management Company Limited
For financial details please refer under the heading Group Company details.
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3. India International Pte, Singapore Date of Incorporation: 3rd December 1987 Nature of Activities: General Insurance and reinsurance In Singapore Dollars (SGD) Financial details For the year ended 31st December 2003 2002 2001 Total Income 163481733.00 120922222.00 77256770.00 Net Profit after Tax 12683079.00 11814684.00 13784549.00 Equity Capital 25000000.00 25000000.00 25000000.00 Reserves (excluding revaluation reserves) 110552173.00 99331594.00 88491910.00 Net Asset Value per share 5.42 4.97 4.54 Earning per share (SGD.) 0.51 0.47 0.55
4. Kenindia Assurance Co. Limited, Nairobi Date of incorporation: 06th December 1978. Nature of Activities: General Insurance and Life Insurance. Rs in Lacs Financial details For the year ended 31st December 2004 2003 2002 Total Income 19478 13763 13433 Net Profit after Tax 516 614 549 Equity Capital 1881 1773 1569 Reserves (excluding revaluation reserves) 856 807 1011 Net Asset Value per share 269.27 221.18 195.07 Earning per share (Rs.) 15.89 20.10 20.31
5. UTI Bank Limited
For financial details please refer under the heading Group Company details.
6. Oriental Capital Assurance Berhard (formerly known as United Oriental Assurance Berhard) Date of Incorporation: 27th December 1976 Nature of Activities: General insurance and re insurance In Malaysian Ringit '000 Financial details For the year ended 31st December 2003 2002 Total Income 128381.00 120099.00 Net Profit after Tax 19323.00 15254.00 Equity Capital 100013.00 100013.00 Reserves (excluding revaluation reserves) 33469.00 21346.00 Net Worth 133482.00 121359.00 Earning per share (In RM) 19.30 15.30
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7. Zenith Securities & Investments Limited Date of Incorporation: 28th March 1916 Nature of Activities: Investments Rs in Lacs Financial details 2004-05 2003-04 2002-03 Total Income 82 52 17 Net Profit after Tax 81 72 13 Equity Capital 10 10 10 Reserves (excluding revaluation reserves) 235 161 92 Earning per share (Rs.) 806 722 126 Net Assets Value (Rs.) - - -
8. The New India Assurance Company (Sierra Leone) Limited Date of Incorporation: 14th May 1973 Nature of Business: General Insurance
Figures in local currency Leone in '000 Financial details For the year ended 31st December 2003 2002 2001 Total Income 25876.00 (35272.00) 82687.00* Net Profit after Tax (105167.00) (35272.00) (6594.00) Equity Capital (Called up) 500.00 500.00 500.00 Reserves (excluding revaluation reserves) (18843.00) 86324.00 121596.00 Net Worth (18343.00) 86824.00 122096.00 * Premium written less reinsurance.
9. The New India Assurance Company (Trinidad & Tobago) Limited Date of Incorporation: 1977 Nature of Business: General Insurance Figures in local currency Trinidad & Tobago USD in '000 Financial details For the year ended 31st December 2003 2002 2001 Total Income 35464.00 32027.00 — Net Profit after Tax 4604.00 7543.00 4695.00 Equity Capital 17617.00 17617.00 17617.00 Reserves (excluding revaluation reserves) 12203.00 7599.00 56.00 Net Worth 29820.00 25216.00 17673.00
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10. IFCI Venture Capital Funds Limited Date of Incorporation: 1975 Nature of Business: Project Financing Rs in Lacs Financial details 2004-05 2003-04 2002-03 Total Income 351 227 243 Net Profit after Tax 236 84 54 Equity Capital 785 785 785 Reserves (excluding revaluation reserves) 457 265 182 Net Asset Value (Rs.) 15.82 13.38 12.31 Earning per share (Rs.) 3.01 1.07 0.69
11. IFCI Financial Services Limited Date of Incorporation: 4th January 1995 Nature of Business: Stock Broking, Corporate Sales Agent for General Insurance and Life Insurance, DP Services, Selling of Mutual Funds. Rs in Lacs Financial details 2004-05 2003-04 2002-03 Total Income 274 233 125 Net Profit after Tax 94 87 19 Equity Capital 690 675 675 Reserves (excluding revaluation reserves) 462 401 337 NAV (per share) (Rs.) 16.12 15.77 14.77 Earning per share (Rs.) 1.43 1.30 0.29
12. Assets Care Enterprise Limited Date of Incorporation: 11th June 2002 Nature of Business: Asset Reconstruction and Securitisation Rs in Lacs Financial details 2004-05 2003-04 2002-03 Total Income 26 81 4 Net Profit after Tax 1 6 0 Equity Capital 500 500 500 Reserves (excluding revaluation reserves) 7 6 0 Net Assets Value (per share) 10.15 10.12 10.00 Earning per share (Rs.) 0.03 0.12 0.00
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13. North India Technical Consultancy Organization Limited Date of Incorporation: 28th March 1984 Nature of Business: Consultancy Services Rs in Lacs Financial details 2004-05 2003-04 2002-03 Total Income 105 96 94 Net Profit after Tax 6 6 3 Equity Capital 10 10 10 Reserves (excluding revaluation reserves) 42 39 35 Earning per share (Rs.) 60.70 60.70 29.79 Net Assets Value - - -
14. Madhya Pradesh Technical Consultancy Organisation Limited Date of Incorporation: 23rd March 1979 Nature of Business: Industrial Consultancy and to promote entrepreneurship through self-employment. Rs in Lacs Financial details 2003-04# 2002-03 2001- Total Income 263.49 260.88 187.20 Net Profit after Tax 11.20 1.28 0.63 Equity Capital 20.00 20.00 20.00 Reserves (excluding revaluation reserves) 39.82 3.08 2.96 Earning per share (Rs.) 559.80 63.86 31.37 Net Worth 59.82 30.88 29.61
# Provisional
15. HARDICON Limited Date of Incorporation: 11th June 1985 Nature of Business: Industrial, Financial and Management Consultancy.
Rs in Lacs Financial details 2003-04# 2002-03 2001-2002 Total Income 49.82 57.64 48.21 Net Profit after Tax 0.70 2.18 2.13 Equity Capital 10.00 10.00 10.00 Reserves (excluding revaluation reserves) 4.73 4.89 5.09 Net Worth 9.90 9.48 7.51 Earning per share (Rs.) (Face value Rs.100/-) 7.00 22.00 21.00
# The operational results for the year ended 31st March 2004 are yet to be adopted by the shareholders of the company at the General Body meeting.
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16. ICRA Limited Date of Incorporation: 16th January 1991 Nature of Business: Credit Rating, Advisory Services, and Information Services. Rs in Lacs Financial details 2004-05 2003-04 2002-03 Total Income 4145 4000 3655 Net Profit after Tax 810 1106 986 Equity Capital 881 881 881 Reserves (excluding revaluation reserves) 7533 7071 6468 Net Assets Value (Rs.) 95.51 90.24 83.37 Earning per share (Rs.) 9.20 12.56 11.20
17. Himachal Consultancy Organisation Limited Date of Incorporation: 10th February 1977 Nature of Business: Technical Consultancy and Training. Rs in Lacs Financial details 2003-04 2002-03 2001-02 Total Income 83.12 70.37 52.74 Net Profit after Tax 1.41 1.29 1.35 Equity Capital 15.00 15.00 15.00 Reserves (excluding revaluation reserves) 12.96 13.31 13.24
18. Foremost Factors Limited Date of Incorporation: 14th December 1995 Nature of Business: Factoring of Domestic and Export receivables. Rs in Lacs Financial details 2004-05 2003-04 2002-03 Total Income 434 553 466 Net Profit after Tax 119 142 93 Equity Capital 2000 2000 2000 Reserves (excluding revaluation reserves) 336 329 186 Earning per share (Rs.) 0.59 0.71 0.47
19. Rajasthan Consultancy Organisation Limited Date of Incorporation: 16th March 1978 Nature of Business: Technical Consultancy, Training. Rs in Lacs Financial details 2004-05 2003-04 2002-03 Total Income 10.77 9.47 12.07 Net Profit after Tax (6.02) (1 1 .53) (11.21) Equity Capital 20.00 20.00 20.00 Reserves (excluding revaluation reserves) 4.00 4.00 4.00 Net Assets Value (Rs.) Negative Negative Negative EPS (Rs.) - - -
89 20. Tourism Finance Corporation of India Limited Date of Incorporation: 27th January 1989 Nature of Business: Financing of tourism related projects Rs in Lacs Financial details 2004-05 2003-04 2002-03 Total Income 8115 9125 11661 Net Profit after Tax 1422 1271 971 Equity Capital 6742 6742 6742 Reserves (excluding revaluation reserves) 105 9903 9243 Earning per share (Rs.) 2.11 1.89 1.44 Net Assets Value (Rs) 25.22 24.68 23.69
The Highest and lowest market price of the equity shares on the BSE during the past six months is given below:
Month Highest (Rs.) Lowest (Rs.)
July 2005 24.40 17.60 August 2005 24.30 20.00 September 2005 24.50 18.10 October 2005 19.75 14.70 November 2005 19.40 16.00 December 2005 18.45 16.50 January 2006 20.70 16.85
Shareholding Pattern of the Company:
Promoter's Holding No. of Share Held % Holding Promoters Indian Promoters 29464879 43.7 Sub Total 29464879 43.7 Non Promoter's Holding Institutional Investors Mutual Funds and UTI 121000 0.18 Banks,Financial Institutions,Insurance Companies 3650785 5.42 Sub Total 3771785 5.59 Others Private Corporate Bodies 7219325 10.71 Indian Public 25467437 37.77 NRIs/OCBs 1449574 2.15 Any Other Trust & Foundation 46100 0.07 Sub Total 34182436 50.7 Grand Total 67419100
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The details of litigations involving the ventures promoted by Promoters are mentioned under the heading "Outstanding Litigations".
* NOTE: THE INFORMATION RELATING TO THE COMPANIES PROMOTED BY THE PROMOTERS GENERALLY AND IN PARTICULAR CONCERNING FINANCIAL DETAILS AND OTHER INFORMATION IS BASED ON THE INFORMATION RECEIVED BY THE COMPANY FROM THE PROMOTERS AND WHICH INFORMATION HAS NOT BEEN INDEPENDENTLY VERIFIED. EXCEPT AS PROVIDED HEREIN THE COMPANY HAS NOT RECEIVED ANY UPDATED INFORMATION IN RESPECT TO FINANCIAL DETAILS AND OTHER INFORMATION WITH REGARDS TO THE OPERATIONS OF THE COMPANIES PROMOTED BY THE PROMOTERS.
DISASSOCIATION WITH CERTAIN COMPANIES
Companies listed below have been acted as the Promoters of the Company. However the said companies have since sold their share holding and do not have any significant influence on the Company.