Where Dreams come HOME ANNUAL REPORT 2016-17 CONTENTS AT A GLANCE 1 OUR RICH LEGACY 3 FINANCIAL HIGHLIGHTS FY 2016-17 5 CHAIRMAN’S MESSAGE 7 REVIEW BY THE MANAGING DIRECTOR & CEO 9 AWARDS & ACCOLADES 13 MARKET REACH & SERVICING 15 PRODUCT INNOVATION 17 TECHNOLOGY 19 ADVISORY SERVICES 21 CORPORATE INFORMATION 23 BOARD OF DIRECTORS 24 MANAGEMENT DISCUSSION & ANALYSIS 29 DIRECTORS’ REPORT 39 REPORT ON CORPORATE GOVERNANCE 83 BUSINESS RESPONSIBILITY REPORT 105 FINANCIAL SECTION 115 DETAILS OF THE ANNUAL GENERAL MEETING Date : 18th August, 2017 Time: 3.00 PM Venue : “M. C. Ghia Hall”, Bhogilal Hargovindas Building, 4th Floor, 18/20 Kaikhushru Dubash Marg, Behind Prince of Whales Museum, Mumbai - 400001. Where Dreams come HOME At LIC Housing Finance, we became the front-runners ensuring access to housing finance for home ownership. We are as passionate as ever to help millions of people on their path to owning their own home. We have invested in building our competencies and stay committed to delivering a superior performance every year. With a strong business foundation, an extensive distribution network, and proven industry expertise, LIC Housing is a warmly respected and trusted financial services company. The Company’s proactive investments in technology, diversified resource profile, and wide product portfolio have contributed to LIC Housing earning this reputation. Going forward, our responsiveness, resourcefulness and responsibility will help us ensure a sustainable growth trajectory. We are confident that we will uphold our place as a leading Housing Finance Company in India, over the course of time. In a country like India, where millions of people are yet to own their houses, we are gratified to serve people across the country. We make their dreams come home. AT A GLANCE Incorporated in 1989, LIC Housing Finance Limited Capital Adequacy Ratio is one of the largest Housing Finance companies in India, with the key objective of providing long- 15.64% term finance to individuals for the purchase or construction of a house or a flat for residential purposes. The Company also provides finance on Loans Portfolio an existing property for business or personal needs, and also gives loans to professionals for buying ` 1,44,534 cr. their office space and equipment. The Company also provides finance to persons engaged in the business of construction and the sale of Networth residential properties. ` 11,077cr. The Company went public in 1994 and since then its stocks are listed and actively traded on the Gross Revenue National Stock Exchange (NSE) and Bombay Stock Exchange Limited (BSE). The Company has also launched its GDR in 2004 and its GDS’s are listed on ` 14,080cr. Luxembourg Stock Exchange. Net Profit ` 1,931cr. EPS per share ` 38.26 Sanctions ` 43,575cr. Disbursement ` 41,541cr. Cumulative Disbursements ` 2.41 lakh cr. 1 LIC HOUSING FINANCE LIMITED ANNUAL REPORT 2016-17 2 LIC Housing Finance Limited possesses one of the Gross NPA industry’s most extensive marketing network in India with 240 marketing offices. In addition, there 0.43% are 21 Back Offices spread across the country to conduct the credit appraisal and administrative functions. The Company has set up Representative Promoted by the LIC of India in Offices in Dubai and Kuwait. Today, the Company has a proud group of over 21 lakh prudent home 1989 owners who have enjoyed the Company’s financial assistance. Gross NPAs in retail loans at 0.20% Today, the Company has a proud Profit making & dividend paying group of over 21 lakh prudent home since 1990 owners who have enjoyed the Company’s financial assistance. Highest credit ratings (AAA) since 2002 More than 21 lakh customers serviced till date Market capitalisation more than ` 31,069.57cr. As on 31st March, 2017 28 Years in Business 1 LIC HOUSING FINANCE LIMITED ANNUAL REPORT 2016-17 2 OUR RICH LEGACY 2004 LOAN PORTFOLIO crosses ` 10,000 crore 1989 US$ 29 Mn GDR ISSUE First HFC to do GDR INCORPORATION issue oversubscribed of LICHFL 2001 LENDING COMMENCES from first office in Delhi FIRST SUBSIDIARY 2007 LICHFL Care Homes Limited incorporated SECOND SUBSIDIARY 1999 incorporated - LICHFL CREDIT RATING (AAA) Financial Services Limited 10 YEARS completed AUTOMATED SCOREBOARD introduced in IPO appraisal of of ` 120 crore home loans DUBAI OFFICE PARTICIPATED opened, marking in the first MBS our first overseas transaction in presence India 1994 2006 MAIDEN ECB launched 2000 2002 3 LIC HOUSING FINANCE LIMITED ANNUAL REPORT 2016-17 4 2008 LOAN PORTFOLIO crosses ` 25,000 crore 2015 THIRD SUBSIDIARY incorporated - LOAN PORTFOLIO LICHFL Asset 2013 crosses ` 1,00,000 Management crore Company “BHAGYALAKSHMI” 2017 Limited launched exclusively 2011 for women AWARDED UPGRADATION India’s Leading Housing to web- Finance Company by based Loan Dun & Bradstreet Application & Management System AWARDED Housing Finance LOAN PORTFOLIO Company of the year crosses ` 50,000 by Outlook Money crore QIP of US$ 135 Mn LOAN PORTFOLIO oversubscribed crosses ` 1,25,000 6 times crore RECEIVES AWARD AWARDED for best HFC from Best Home Loan Best HFC in CNBC - TV18 provider Outlook Outlook Money - Money Awards NDTV LOAN PORTFOLIO 2015 RECEIVES AWARD crosses ` 90,000 “Best in home crore Finance” from Construction Housing Finance Company of the Industry HFC AWARD Year (Real Estate 2009 Receives Best HFC Awards) 2016 Award from ABP News Power Brands 2012 Glam 2015-2016 2014 2016 3 LIC HOUSING FINANCE LIMITED ANNUAL REPORT 2016-17 4 FINANCIAL HIGHLIGHTS FY2016-17 Loan Portfolio (` Cr) Income (` Cr) 17% CAGR 16% CAGR 77,812 91,341 108,361 125,173 144,534 7,659 9,335 10,799 12,485 14,080 FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17 Profit After Tax (` Cr) EPS (` 2 paid-up) 17% CAGR 1,023 1,317 1,380 1,661 1,931 20.28 26.1 27.47 32.91 38.26 FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17 Net Profits ` 1931 crore, up by 16% Total Loan portfolio up by 15% to ` 144,534 crore Individual Loan Portfolio up by 14% to ` 139,024 crore NIMs 2.70% as against 2.52% Total Gross NPAs 0.43% 5 LIC HOUSING FINANCE LIMITED ANNUAL REPORT 2016-17 6 Gross & Net NPAs Return on Average Equity Gross Net 0.61% 0.35% 0.67% 0.39% 0.46% 0.22% 0.45% 0.22% 0.43% 0.14% 16.82% 18.80% 18.07% 19.57% 19.10% FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17 Profit per Employee (` Lakh) Return on Average Loan Assets 70.76 87.00 87.29 96.23 105.34 1.45% 1.56% 1.39% 1.44% 1.43% FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17 Net NPAs 0.14% Gross NPAs in individual loan portfolio 0.20% Dividend for the year 310% as against 275% Cost to NII 16.52% as against 15.59% 5 LIC HOUSING FINANCE LIMITED ANNUAL REPORT 2016-17 6 CHAIRMAN’S MESSAGE V. K. SHARMA Chairman 7 LIC HOUSING FINANCE LIMITED ANNUAL REPORT 2016-17 8 India is passing through significant positive shifts in terms of income levels, aspirations, living standards and credit awareness. Interestingly, as this side of the sector is strengthening, the government is reinforcing its focus to bridge the gap that still exists in the housing sector. The government is playing a key role in the development of affordable housing sector in India. Under its watchful eyes, the housing sector has been seeing a healthy growth, with transparency and orderliness. To address the wide unmet housing need of millions of Indians, we offer a disciplined distribution model, product innovation, and operating flexibility. At LIC Housing Finance, we bring to this fast growing sector our deep knowledge and a service mindset directed at enriching the customer experience. Given the positive push by the government, housing finance is being perceived as the most lucrative sector in the current times, which is elevating the competition within the sector. At LIC Housing Finance, we believe that there is scope for everyone to differentiate and only the most adaptive companies will flourish. With this thought, we plan to leverage our extensive reach in the country to connect with the customer. Digitisation will be used to plug the gaps to enhance customer experience and increase operational efficiency. We will continue to focus on due diligence in line with our policy of ‘zero tolerance for non performing assets’. The impact of this policy has been rightly reflected in the improving asset quality trends of the Company. Our stability in asset quality can be largely attributed to the conservative LTVs, focus on retail home loans, catering predominantly to a salaried class customer base with sufficient collateralised lending. At LIC Housing Finance, we remain committed to the needs of housing. Our future priorities persist towards expanding our network and visibility to maintain our market leadership position, creating consumer friendly products to target new customer, ensuring access to low-cost and diversified sources of funds, fortifying our operating processes and risk management systems and strengthening our balance sheet to ensure financial flexibility. It was an honour to take charge as the Chairman of LIC Housing Finance Limited from my illustrious predecessors whose contribution in the success of the Company is inspirational. During the year Mr S.K Roy and Ms Sunita Sharma have exited the Board of Directors. These directors have contributed to the success of the Company. Mr Vinay Shah has assumed charge as the MD and CEO of the “We are establishing Company and has rich experience in the BFSI segment. ourselves as a trustworthy, Lastly, I would like to express my gratitude to our Board of Directors for their and preferred housing support and guidance.