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Company Information

Home » Market » Company Information

LIC Housing Finance Ltd.

Jan 25
415.70 +2.05 (+ 0.50 %)
VOLUME : 399181
Prev. Close 413.65
Open Price 415.80
Bid PRICE (QTY.) 0.00 (0)
Offer PRICE (Qty.) 0.00 (0)
Jan 25
415.75 +2.20 (+ 0.53 %)
VOLUME : 7205875
Prev. Close 413.55
Open Price 421.00
Bid PRICE (QTY.) 0.00 (0)
Offer PRICE (Qty.) 0.00 (0)
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Market Cap. ( ₹ ) 20981.36 Cr. P/BV 1.15 Book Value ( ₹ ) 361.92
52 Week High/Low ( ₹ ) 465/185 FV/ML 2/1 P/E(X) 8.73
Bookclosure 28/09/2020 TTM EPS ( ₹ ) 52.39 Div Yield (%) 1.92
You can view the entire text of Notes to accounts of the company for the latest year
Year End :2019-03 

NOTE 17.1

Negative lien on the assets of the Company (excluding the Company's current and future receivables and book-debt of whatsoever nature of the Company on which a first pari-pasu floating charge by way of hypothecation to secure the borrowings of the company outstanding as on March 31, 2015 and the unavailed sanctions of the term loans, cash credit and refinance as on March 31, 2015), with a minimum asset cover of 100%. Further the Company shall be entitled to dispose off, transact or otherwise deal, in the ordinary course of business up to 5% of the Specific Assets, including by way of a securitization transaction and as may be required under any law, regulations, guidelines or rules and immovable property acquired by company on or after September 26, 2001.

*Foreign Currency Term Loan refers to FCNR B Loan from Bank amounting to US $ 81168831.17 equivalent to INR of Rs,500 crores. ** Maturity Profile of Term Loans, Loan from Other Financial institutions and National Housing Bank (Refinance)

Note.23 (b): Rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs,2/- per share. Each shareholder is eligible for one vote per share. The Company declares and pay dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company, after distribution of all preferential amount, in proportion to their shareholdings.

Nature and Purpose of each Reserve Securities Premium Reserve

Securities premium reserve” is used to denote the Share premium received on issue of shares. The reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.

Special Reserve - I:

Special Reserve - I has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961, out of the distributable profits of the Company. The amounts of Special Reserve account represents, the reserve created in terms of the provision of Section 36(1)(viii) read together with the proviso thereof, from time to time. Special Reserve No. I relates to the amounts transferred up to the Financial Year 1996-97 (Assessment Year 1997-98) when the word was 'created' only was used in the said section and not 'created and maintained'. Admittedly, the position has changed after the amendment made in Section 36(1)(viii) by the Finance Act 1997 with effect from Assessment year 1998-99, when the mandatory requirement of 'maintaining' the special reserve created was inserted. Accordingly, it was interpreted that the Special Reserve created up to Assessment Year 1997-98 need not be 'maintained'. As a logical corollary, it is construed that up to Assessment Year 1997-98, the amounts carried to special reserve ought to be understood as amounts created by transferring to the credit of Special Reserve from time to time.

Special Reserve - II:

Special Reserve - II has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961, out of the distributable profits of the Company transferred from Financial Year 1997-98 (Assessment Year 1998-99). In the FY. 2018-19 Rs,749.99 Crore (FY 2017-18 Rs,559.99 Crore) has been transferred to Special Reserve No. II in terms of Section 36(1)(viii) of the Income tax Act, 1961.

Statutory Reserves under Section 29C (Regulatory Capital) of NHB:

Up ton financial year 1996-97: The Company being regulated by NHB has to mandatorily transfer an amount to Section 29C of NHB Act, 1987 on the similar lines as that of for Special Reserve - I which has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961 and it relates to the amounts transferred up to the Financial Year 1996-97(Assessment Year 1997-98).

After financial year 1996-97: The Company being regulated by NHB has to mandatorily transfer an amount to Section 29C of NHB Act, 1987 on the similar lines as that of for Special Reserve - II which has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961. For the year under review an amount of Rs,1,00,000.00 (FY 2017-18 Rs,1,00,000.00) has been transferred to Statutory Reserve under Section 29C the NHB Act.

General Reserve:

Under the erstwhile Companies Act 1956, general reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations. The purpose of these transfers was to ensure that if a dividend distribution in a given year is more than 10% of the paid-up capital of the Company for that year, then the total dividend distribution is less than the total distributable results for that year. Consequent to introduction of Companies Act 2013, the requirement to mandatorily transfer a specified percentage of the net profit to general reserve has been withdrawn. However, the amount previously transferred to the general reserve can be utilized only in accordance with the specific requirements of Companies Act, 2013.

However, since the Company utilizes the deduction available to Housing Finance Companies registered with National Housing Bank as provided in Section 36(1)(viii) of the Income tax Act, 1961, wherein the proviso of the Section stipulates that the amount carried to such reserve account from time to time exceeds twice the amount of the paid up share capital and general reserves of the Company, the rebate is restricted to the twice of the aggregate of paid up capital and the general reserve. Therefore, the Company transfers funds to General Reserve in order to avail the full benefit of Section 36 (1)(viii). For the year, the Company has transferred an amount of Rs,600 Crore to General Reserve.

* The Previous GAAP figures have been reclassified to conform with IND AS presentation requirements for the purposes of this note. Notes:

1. To comply with the Companies (Indian Accounting Standard) Rules, 2015 (as amended), certain account balances have been regrouped as per the format prescribed under Division III of Schedule III to the Companies Act, 2013.

2. Fair valuation of investments:

Investments in long term investments as per Previous GAAP have been measured at fair value through profit or loss as against cost less diminution of other than temporary nature.

Certain equity investments (other than investments in subsidiaries and associates) have been measured at fair value through profit or loss account (FVTPL).

The difference between the fair value and previous GAAP carrying value on transition date has been recognized as an adjustment to opening General Reserve.

IND AS requires investments to be measured at fair value or amortized cost. Under Previous GAAP, the Company accounted for long term investments in debt securities as investment measured at cost less provision for other than temporary diminution in the value of investments. Under IND AS, the Company has measured these debt investments at amortized cost category. The difference between amortized cost and the Previous GAAP carrying amount has been recognized in retained earnings.

3. Housing Loan to customers

Under Previous GAAP, the Company has created provision for impairment of housing loans to customers for incurred losses based on regulatory provisions issued by NHB. Under IND AS, impairment allowance has been determined based on Expected Credit Loss model (ECL). Due to ECL model, the Company impaired its housing loan to customer by Rs,188.41 Crore on 1st April 2017 which has been eliminated against opening General Reserve. The impact of Rs,232.60 Crore for year ended on March 31, 2018 has been recognized in the statement of profit and loss.

4. Restatement of provision on standard / non-performing assets (NPA) to Expected Credit Loss (ECL)

Under Previous GAAP provision for NPA and standard asset were presented under provisions. However, under IND AS financial assets measured at amortized cost (majorly loans) are presented net of provision for expected credit losses. Consequently, the Company has restated the Previous GAAP provisions for standard assets / NPA's to ECL amounting to Rs,850.87 Crore and Rs,1,309.13 Crore as on 1st April 2017 and March 31, 2018 respectively

5. Effective Interest Rate (EIR):

Borrowings and other financial liabilities which were recognized at historical cost under previous GAAP have been recognized at amortized cost under IND AS as on transition date with the difference been adjusted to opening General Reserve.

Under Previous GAAP, transaction costs incurred on borrowings was charged to statement of profit and loss upfront while under IND AS, such costs are included in the initial recognition amount of financial liabilities and recognized as interest expenses using the effective interest method. Consequently, borrowings on date of transition have decreased by Rs,20.04 Crore and interest expense for the year ended March 31, 18 has increased by Rs,27.10 Crore.

Financial assets held on with an objective to collect contractual cash flows in the nature of principal and interest have been recognized at amortized cost on transition date as against historical cost under the previous GAAP with the difference been adjusted to the opening General Reserve.

Under Previous GAAP, transaction costs charged to customers was recognized upfront while under IND AS, such costs are included in the initial recognition amount of financial asset and recognized as interest income using the effective interest method. Consequently, loan to customers on date of transition have increased by Rs,245.76 Crore, processing fees for the year ended 31st March, 2018 has decreased by Rs,170.76 Crore and interest income for the year ended March 31, 18 has decreased by Rs,163. 40 Crore.

6 Deferred tax as per balance sheet approach:

Previous GAAP requires deferred tax accounting using the statement of profit and loss approach, which focuses on differences between taxable profits and accounting profits for the period. IND AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of IND AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under Previous GAAP

In addition, the various transitional adjustments lead to temporary differences. According to the accounting policies, the Company has to account for such differences. Deferred tax adjustments are recognized in correlation to the underlying transaction either in retained earnings or a separate component of equity

The major change in deferred tax is on account of, as required by the NHB, the Company had recognized deferred tax liability (DTL) in respect of the balance in the Special Reserve (created under section 36(1)(viii) of the Income-tax Act, 1961) amounting to Rs,1,177.37 Crore as at April 1, 2017. The Company believes that the Special Reserve will not be utilised for payment of dividend or any other purpose and accordingly it does not result in a difference in tax base. Hence, DTL on Special Reserve has been reversed to comply with IND AS 12 on Income Taxes.

7. Defined benefit obligation:

Both under Previous GAAP and IND AS, the Company recognized costs related to its post-employment defined benefit plan on an actuarial basis. Under Previous GAAP, the entire cost, including actuarial gains and losses, were charged to profit or loss. Under IND AS, re-measurements [comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets excluding amounts included in net interest on the net defined benefit liability] are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI. The employee benefit expenses is adjusted by Rs,2.62 Crore (net of income tax) and recognized in OCI for the year ended March 31, 2018.

8. Other Comprehensive Income:

Under IND AS, all items of income and expense recognized in the period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognized in profit or loss but are shown in the statement of profit and loss and “other comprehensive income” includes re-measurements of defined benefit plans. The concept of other comprehensive income did not exist under previous GAAP

9. Statement of Cash Flows

The transition from Previous GAAP to IND AS has not had a material impact on the statement of cash flows.


37.1 Capital Management

The Company maintains an actively managed capital base to cover risks inherent in the business and is meeting the capital adequacy requirements of National Housing Bank (NHB). The adequacy of the Company's capital is monitored using, among other measures, the guidelines issued by NHB.

The Company has complied in full with all its externally imposed capital requirements over the reported period.

The primary objectives of the Company's capital management policy are to ensure that the Company complies with externally imposed capital requirements and maintains strong credit ratings and healthy capital ratios in order to support its business and to maximize shareholders value.

The Company's objective, when managing Capital, is to safeguard the ability of the Company to continue as a going concern. The Company's capital management strategy is to effectively determine, raise and deploy capital so as to maximize the shareholder's value. The capital of the Company comprises of Equity Share Capital and a mix of debt securities, borrowings (other than debt securities), deposits and subordinated liabilities. No changes have been made to the objectives, policies and processes from the previous years. However, they are under constant review by the Board.

The Management of the Company monitors the Regulatory capital by over viewing Capital Gearing Ratio, Debt Equity Ratio and makes use of the same for framing the business strategies.

37.3 Fair Value Measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e., an exit price), regardless of whether that price is directly observable or estimated using a valuation technique.

The Company evaluates the significance of financial instruments and material accuracy of the valuations incorporated in the financial statements as they involve a high degree of judgment and estimation uncertainty in determining the carrying values of financial assets and liabilities at the balance sheet date. Fair value of financial instruments is determined using valuation techniques and estimates which, to the extent possible, use market observable inputs, but in some cases use nonmarket observable inputs. Changes in the observability of significant valuation inputs can materially affect the fair values of financial instruments. In determining the valuation of financial instruments, the Company makes judgments’ on the amounts reserved to cater for model and valuation risks, which cover both Level 2 and Level 3 instruments, and the significant valuation judgments’ in respect of Level 3 instruments.

Fair Value Hierarchy

In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as explained below.

Assets and liabilities carried at fair value or for which fair values are disclosed have been classified into three levels according to the observability of the significant inputs used to determine the fair values. Changes in the observability of significant valuation inputs during the reporting period may result in a transfer of assets and liabilities within the fair value hierarchy. The Company recognises transfers between levels of the fair value hierarchy when there is a significant change in either its principal market or the level of observability of the inputs to the valuation techniques as at the end of the reporting period.

Level 1: Fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets or liabilities

Level 2: Fair value measurements are those with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all significant inputs are observable

Level 3: Fair value measurements are those where at least one input which could have a significant effect on the instrument's valuation is not based on observable market data

The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:

There were no transfers between Level 1, Level 2 and Level 3 during the year

Valuation Techniques Equity instruments

The equity instruments that are actively traded on public stock exchanges are valued at readily available active prices on a regular basis. Such instruments are classified as Level 1.

Units held in funds having quoted market price are fair valued at Level 1. Others which are measured based on their net asset value (NAV) as on reporting date, taking into account redemption and/or other restrictions. Such instruments are generally Level 3.

Equity instruments in non-listed entities included investment in private equity funds are initially recognized at transaction price and re-measured (to the extent information is available) and valued on a case-by-case basis and classified as Level 3. In respect of Goods and Service Tax Network, valuation has been considered on indicative buyback price.

Interest rate derivatives

Interest rate derivatives include interest rate swaps. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations by estimating future cash flows and discounting them with the appropriate yield curves incorporating funding costs relevant for the position. These contracts are generally Level 2 unless adjustments to yield curves or credit spreads are based on significant non-observable inputs, in which case, they are Level 3.

Valuation adjustments and other inputs and considerations

A one percentage point change in the unobservable inputs used in fair valuation of Level 3 financial assets does not have a significant impact in its value.

No valuation adjustments have been made to the prices/yields provided for valuation.

Financial Instruments not measured using Fair Value, i.e. measured using Amortized Cost

The following table is a comparison, by class, of the carrying amounts and fair values of the company's financial instrument that are not carried at fair value in the financial statements. This table does not include the fair value of non-financial assets and non-financial liabilities.

Valuation methodologies of financial instruments not measured at fair value

Below are the methodologies and assumptions used to determine fair values for the above financial instruments which are not recorded and measured at fair value in the company's financial statements. These fair values were calculated for disclosure purposes only.

Government debt securities

Government debt securities are financial instruments issued by sovereign governments and include long term bonds with fixed rate interest payments. These instruments are generally highly liquid and traded in active markets resulting in a Level 1 classification. When active market prices are not available, the Company uses discounted cash flow models with observable market inputs of similar instruments and bond prices to estimate future index levels and extrapolating yields outside the range of active market trading, in which instances the Company classifies those securities as Level 2. The Company does not have Level 3 government securities where valuation inputs would be unobservable.

Other Financial Assets and Liabilities

With respect to Bank Balances and Cash and Cash Equivalents, Other Financial Assets, Trade Payables and Other Financial Liabilities, the carrying value approximates the fair value.

37.4 Financial Risk Management Introduction

The Company has operations in India, Kuwait & Dubai. Whilst risk is inherent in the Company's activities, it is managed through an integrated risk management framework, including ongoing identification, measurement and monitoring, subject to risk limits and other controls. This process of risk management is critical to the Company's continuing profitability and each individual within the Company is accountable for the risk exposures relating to his or her responsibilities. The Company is exposed to credit risk, liquidity risk and market risk. It is also subject to various operating, regulatory and competition risks.

Risk Management Framework

The Company has a formal risk assessment program to proactively identify the risks and ensure all possible strategies to control & mitigate in pursuit of achieving the Company's objective. Every department is responsible for identification of their risks and putting it in their Risk Registers. The consolidated Risk Register is analyzed at a Committee Level.

At present, the risks faced by the Company are broadly categorized as below:-

- Credit Risk

- Liquidity Risk

- Market Risk

- Interest Rate Risk

- Operational Risk

A. Compliance Risk

B. Legal Risk

- Regulatory Risk

- Competition Risk Committees

In order to bring the collective knowledge in decision making, the Company has undertaken a Committee approach to deal with the major risks arising in the organization. Committees, their formation and the roles are provided below.

Top Level Committee

Risk Management Committee of Board (RMCB)

Company has a Risk Management Committee of Board in place which consists of Independent Directors and the MD & CEO of the Company.

The role of the Committee is as follows-:

- Review of Risk Management Policy

- Review of the current status on the risk limits in the Risk Management Policy and Report to the Board

- Review the matters on Risk Management

- Review and monitor the risks to which the Company is exposed

- Review the Anti-Fraud Policy

Internal Committee

Risk Management Committee and Operational Risk Group (RMC & ORG)

Company has an internal Risk Management Committee and Operational Risk Group whose major function include review of Risk Registers submitted on a monthly basis by all departments. It comprises of HODs of Risk Management, Finance, Project Finance, Credit Monitoring, IT, and as nominated by MD & CEO of the Company. A list of functions performed by RMC & ORG is given below -:

- Review of Risk Management Policy

- Review of monthly Risk Register submitted by various depts.

- Review of the current status on the outer limits prescribed in the Risk Policy and submitting the report to RMCB & Board

- Assessment of risks in the Company and suggesting control/mitigation measures thereof The Company has exposure to following risks arising from the financial instruments:

37.4.1 Liquidity Risk

Liquidity risk is defined as the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk arises because of the possibility that the Company might be unable to meet its payment obligations when they fall due as a result of mismatches in the timing of the cash flows under both normal and stress circumstances. Such scenarios could occur when funding needed for illiquid asset positions is not available to the Company on acceptable terms. To limit this risk, management has arranged for diversified funding sources in addition to its core deposit base and adopted a policy of managing assets with liquidity in mind and monitoring future cash flows and liquidity on a daily basis. The Company has developed internal control processes and contingency plans for managing liquidity risk.

Housing Finance being our core business, maintaining the liquidity for meeting the growth perspective in the business as also to honor our committed repayments is the fundamental objective of the Asset Liability Management (ALM) framework.

Investment being our ancillary activity is derived of this ALM requirement and it is imperative to constantly monitor the liquidity of our investments to achieve our core objective.

Internal Control Process & Liquidity Management

Being in the business of Housing Loans, funds are required to be raised by the Company ahead of loan disbursements so that there is no liquidity crunch. Funds are required to be raised not only for the incremental housing loan assets but also for meeting the committed/due repayments of the earlier borrowings and/or Interest payments on the borrowings. Funds therefore are raised with a reasonable cushion over and above the committed repayments, committed disbursements and unutilized sanctions in pipeline and the expected business targets.

The Company ensures that funds are available from various investor pools and banks. Liquid funds are available in the form of Non-Convertible Debentures and other Market Instruments, Bank Loans, Refinance from NHB and Foreign Currency Loans. In case of Public Deposits accepted by the Company, a prescribed percentage (as defined by NHB from time to time) is to be invested in approved securities in terms of Liquid Asset Requirement (u/s. 29B of NHB Act, 1987). On the assets side, the Company has loan products broadly classified under individual retail loans and project finance loans with varying repayment structures depending upon the nature of product.

The liquidity is managed at the Corporate Office of the Company with Back Offices providing their liquidity requirements. The surplus funds available with the Back Offices are pooled and funds from the market are arranged for the Back Offices having a deficit of funds. Only surplus funds arrived at after deducting the committed/confirmed outflows (including projected disbursements of loans) from the available resources - both from internal accretions as well as borrowed funds, would be considered as Surplus available for Investment in approved instruments on day-to-day basis. The Company can place surplus funds in Fixed Deposits with selected Scheduled / Commercial / Foreign Banks and / or Financial Institutions within overall exposure limit fixed for each Bank / FI from time to time by the Board. Considering the market risk and the mark-to-market requirements of the debt mutual funds, currently Company is making Investments only in liquid Mutual Fund schemes. Exposure limits for each Investment instrument would be approved by the Board and reviewed from time to time as per the requirements.

ALCO Committee Roles & Responsibilities

The Asset Liability Management (ALM) Committee presents the Structural and Dynamic Liquidity Report to the Risk Management Committee on a quarterly basis and meetings are held every month. The ALM Committee formulates the ALM Policy which is reviewed at least once a year. If any change is required, then, the revised policy along with desired change and rationale for the same shall be put up to the Risk Management Committee or any Other Committee constituted by the Board. Consequent to the recommendation of the Risk Management Committee, the reviewed policy would be put up to the Board for its approval.


ALCO Committee is headed by the MD & CEO of the Company. Other members of the Committee comprise HODs of Departments Finance, Credit Appraisal, Project Finance, Taxation, Accounts, Marketing, IT, Risk Management, Credit Monitoring and as nominated by MD & CEO of the Company.

Changes from previous period

There are no significant changes in the Financial Policies.

Liquidity Ratios

1) The overall structural liquidity (as defined by NHB) negative gap (cumulative gap) has not exceeded 30% of the payables or the liabilities.

2) The structural liquidity (as defined by NHB) negative gap up to one year has not exceeded 15% of the cumulative cash outflows up to one year.

3) The structural liquidity (as defined by NHB) negative gap up to 14 days as also over 14 days and up to one month has not exceeded 15% of the cash outflows during those respective durations.

criteria for determining the quantum of loan. The Company has adopted a policy of dealing with creditworthy counter parties and obtaining sufficient collateral as a means of mitigating the risk of financial loss from defaults. The exposure is continuously monitored.

The carrying amount of loans as at March 31, 2019 is Rs,1,94,652.22 Crore (F.Y. 2017-18 Rs,1,67,471.45 Crore; as at April 1, 2017 Rs,1,45,567.58 Crore) which best represent the maximum exposure to credit risk, the related Expected credit loss amount to Rs,1,659.48 Crore (FY 2017-18 Rs,1,309.13 Crore, as at April 1, 2017 Rs,850.87 Crore). The Company has right to sell or pledge the collateral in case borrower defaults. The carrying amount of loans as at March 31, 2019 includes Rs,5.87 Crore towards Loans to Staff and Loans against Public Deposit (FY 2017-18 Rs,4.87 Crore; as at April 1, 2017 Rs,4.27 Crore) Credit Mitigation measures

Independent internal legal and technical evaluation team in the Company makes credit decisions more robust and in line to manage collateral risk. The in-house Credit team conducts a credit check and verification procedure on each customer, ensuring consistent quality standards to minimize future losses. To review the adherence to laid down policies and quality of appraisal, Company's independent internal audit team conducts a regular review of files on a sample basis. A dedicated collection and recovery team manages lifecycle of transactions and monitors the portfolio quality

Credit Norms: - Certain credit norms and policies are being followed by the Company to manage credit risk, including a standard credit appraisal policy based on customer credit worthiness. These criteria change between loan products and typically include factors such as profile of applicant, income and certain stability factors such as the employment and dependency detail, other financial obligations of the applicant, Loan to value and the loan-to-cost ratio. Standardized credit approval process including a comprehensive credit risk assessment is in place which encompasses analysis of relevant quantitative and qualitative information to ascertain the credit worthiness of the borrower

The Credit Policy defines parameters such as Borrower's ability to pay, Reputation of Employer, Nature of employment/ Self-employed, Qualification of Applicants, Stability of Residence, Family size and dependence on Applicants income, Insufficient sales proceeds to pay the dues in case of Project Loans due to project slowdown etc. to ensure consistency of credit quality.

Retail lending:

For retail lending, credit risk management is achieved by considering various factors like:

- Assessment of borrower's capability to pay - a detailed assessment of borrower's capability to pay is conducted. The approach of assessment is laid down in the credit policy of the Company. Various factors considered for assessment are credit information report, analysis of bank account statement and valuation of property

- Security cover - Analysing the value of the property which is offered as security for the loan is essential for the overall underwriting of the loan. It is essential that it is valued before the disbursement of loan to arrive at a clear idea about its cost, valuation, marketability and loan to property ratio.

- Additional Security - Additional Security can be by way of pledge of acceptable Additional Collaterals such as LIC Policies or other Securities like NSCs, FDs, Kisan Vikas Patra, etc. is considered. This is taken depending on nature of loan proposal and amount of risk involved.

- Geographical region - The Company monitors loan performance in a particular region to assess if there is any stress due to natural calamities etc. impacting the performance of the loan in a particular geographic region.

Project lending:

For project lending, credit risk management is achieved by considering various factors like:

- Promoter's strength - a detailed assessment of borrower's capability to pay is conducted. Various factors considered for promoter's assessment are the financial capability, past track record of repayment, management and performance perspective.

- Credit information report - It is very essential to check the Creditworthiness of an Applicant & the Credit History of Borrower for Consumer or Commercial Loans. The Company uses this Report for taking a Decision on Credit Sanction by getting details of the Credit History of a Borrower. For Project Loans, reports from independent institutions are referred so as to get the marketability report of the project and its neighborhood analysis.

- Security cover - Analysing the value of the property which is offered as security for the loan is essential for the overall underwriting of the loan. With respect to project loans case the main security taken is underlying land and structure there on. Technical appraisals are conducted to establish the life, soundness, marketability and value of the house property financed.

- Additional Security - Additional Security is taken depending on nature of loan proposal and amount of risk involved. In some cases, the hypothecation of receivables from the loan is taken. The Negative lien is marked on the flats in the project to the extent of 1.5 times or more as per merits of the case. At all times the security cover of at least 1.5 times is maintained. Personal Guarantee of promoter directors / corporate guarantee of Company is also obtained as Security. In some cases, the Additional Collateral in the form of Fixed Deposits are also accepted. In case of Higher Risk, Debt Service Recovery Account is also maintained.

The Charge on the security / Additional Collateral security is also registered in Central Registry / ROC. AS per the recent guidelines by Government of India the process of registering the charge with Information Utility under IBC (Indian Bankruptcy Code) is started.

- Geographical region - The Company monitors loan performance in a particular region to assess if there is any stress due to natural calamities etc. impacting the performance of the loan in a particular geographic region.

The Company manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and for geographical and industry concentrations, and by monitoring exposures in relation to such limits.

Derivative financial instruments:

Interest rate swaps -

The exposure of LICHFL to Derivatives contracts is in the nature of interest Rate Swaps and currency swaps to manage risk associated with interest rate movement and fluctuation in currency exchange rate.

Derivative policy of the Company specifies the exposure norms with respect to single counterparty and the total underlying amount at the time of entering into the new derivative contract.

The Asset Liability Management Committee (ALCO) of the Company oversees efficient management of risk associated with derivative transactions. Company identifies, measures, monitors the exposure associated with derivative transaction. For effective mitigation of risk it has an internal mechanism to conduct regular review of the outstanding contracts which is reported to the ALCO & Risk Management Committee of the Board which in turn reports to the Audit Committee and to the Board of Directors.

The gain realized on early termination of swap is to be amortized over the balance tenor of the swap or underlying liability whichever is less. Loss if any on early termination is to be charged to revenue in the same year. The carry difference, between coupon rate liability and the swap contract rate is to be accounted quarterly on accrual basis Collateral and other credit enhancements

With respect to loans case the main security taken is underlying land and structure there on. Apart from the main security additional collaterals are also sought depending upon merits of the case. In some cases the hypothecation of receivables from the loan is also taken.

The Company after exploring all the possible measures, initiates action under SARFAESI against the mortgaged properties as a last resort to recover. Company follows the due procedure as laid down in the SARFAESI Act 2002 and accordingly takes the possession of the properties for its logical conclusion.

As the procedure involved under SARFAESI is to be followed in a time-bound manner, different loan accounts will be at various stages of SARFAESI proceedings.

Loan Portfolio includes loans amounting to Rs,309.63 Crore ( FY 2017-18 Rs,264.29 Crore; As at 01.04.2017 Rs,233.07 Crore) against which the company has taken possession of the properties under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and held such properties for disposal. The value of assets possessed against the loan is Rs,295.77 Crore (F.Y. 2017-18 Rs,263.56 Crore; As at 01.04.2017 Rs,251.86 Crore), being lower of the fair value of the asset possessed and the outstanding as at March 31, 2019. Impairment Assessment

The references below show where the Company's impairment assessment and measurement approach is set out in this report. It should be read in conjunction with the Summary of significant accounting policies.

The Company applies General approach to provide for credit losses prescribed by IND AS 109, which provides to recognized 12-months expected credit losses where credit risk has not increased significantly since initial recognition and to recognized lifetime expected credit losses for financial instruments for which there have been significant increase in credit risk since initial recognition considering all reasonable and supportable information, including that of forward looking.

Definition of Default

The Company considers a financial instrument defaulted and therefore Stage 3 (credit-impaired) for ECL calculations in all cases when the borrower becomes 90 days past due on its contractual payments.

The three stages reflect the general pattern of credit deterioration of a financial instrument. The differences in accounting between stages relate to the recognition of expected credit losses and the calculation and presentation of interest revenue.

Stage wise Categorization of Loan Assets

The company categorizes loan assets into stages based on the Days Past Due status:

- Stage 1: [0-30 days Past Due] It represents exposures where there has not been a significant increase in credit risk since initial recognition and that were not credit impaired upon origination. The Company uses the same criteria mentioned in the standard and assume that when the days past due exceeds '30 days', the risk of default has increased significantly. Therefore, for those loans for which the days past due is less than 30 days, the Company recognizes as a collective provision the portion of the lifetime ECL associated with the probability of default events occurring within the next 12 months.

- Stage 2: [31-90 days Past Due] The Company collectively assesses ECL on exposures where there has been a significant increase in credit risk since initial recognition but are not credit impaired. For these exposures, the Company recognizes as a collective provision, a lifetime ECL (i.e. reflecting the remaining lifetime of the financial asset)

- Stage 3: [More than 90 days Past Due] The Company identifies, both collectively and individually, ECL on those exposures that are assessed as credit impaired based on whether one or more events, that have a detrimental impact on the estimated future cash flows of that asset have occurred. The Company use the same criteria mentioned in the standard and assume that when the days past due exceeds '90 days', the default has occurred.

Retail Loans:

Depending on the nature of the financial instruments and the credit risk information available for particular groups of financial instruments, an entity may not be able to identify significant changes in credit risk for individual financial instruments before the financial instrument becomes past due. In case of retail loans, the financial instruments are backed by sufficient margin of underlying security which absorbs the associated risks. Hence, the Company has performed the assessment of significant increases in credit risk on a collective basis for retail loans by considering information that is indicative of significant increases in credit risk on groups of financial instruments.

For the purpose of determining significant increases in credit risk and recognizing loss allowance on a collective basis, the Company has grouped financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increase in credit risk identified on a timely basis.

Project Loans:

Project loans are far less in number and more in terms of value per loan. The loans are also credit rated internally. However the Company does not have any history of the loan transitioning from one rating to the other over a fairly long period of time to arrive at a reliable transition matrix. The Company has used transition matrix compiled and published by a premier rating agency in India for arriving default rate. ECL Model and Assumptions considered in the ECL model

The Company has used Markov chain model for estimating the probability of default on retail loans. In a Markov chain model for loans receivable an account moves through different delinquency states each quarter. For example, an account in the “Regular” state this quarter will continue to be in the “Regular” state next month if a payment is made by the due date and will be in the “90 days past due” state if no payment is received during that quarter. Another valuable feature is that the Markov chain model maintains the progression and timing of events in the path from “Regular” to “Defaulted”. For example, an account in the “Regular” state doesn't suddenly become “Defaulted”. Instead, an account must progress monthly from the “Regular” state to the “90 days past due” state to the “180 days past due” state and so on until foreclosure activities are completed and the collateral assets are sold to pay the outstanding debt.

The transition matrix in the Markov chain represents the period-by-period movement of receivables between delinquency classifications or states. The transition evaluates loan quality or loan collection practice. The matrix elements are commonly referred to as “roll-rates” since they denote the probability that an account will move from one state to another in one period. The transition matrix is referred to as the “delinquency movement matrix”.

The loan portfolio for the past several quarters are analysed to arrive at the transition matrix. Each loan is traced to find out how the loan has performed over the last several quarters. The days past due is grouped into 6 buckets namely Regular [0 days past due], 1 to 90 days past due, 91 to 180 days past due, 181 to 270 days past due, 271 to 365 days past due and above 365 days past due. In a subsequent quarter, the loan may continue to remain in the same bucket or move into the next bucket or previous bucket depending upon the repayments made by the customer. The bucket intervals are 90 days and the data points considered are also quarterly. The occurrences of every loan over the past several quarters are considered to arrive at the total transitions happening from different buckets in the previous quarter to different buckets in the current quarter. The Company has considered the quarterly loan performance data starting from the quarter ending 30th June 2013 onwards to compute the transition matrix. The total number of such transition occurrences are converted as a percentage to arrive at the transition matrix.

The Company has used transition matrix compiled and published by a premier rating agency in India for arriving default rate for Project loans since the Company do not have any history of the loan transitioning from one rating to the other over a fairly long period of time to arrive at a reliable transition matrix. Accordingly, the transition matrix is computed using matrix multiplication.

Probability of Default

Stage 1 - [No significant increase in credit risk]: Based on Markov model, the quarterly normalized transition matrix is converted into a 12-month transition matrix for determining the probability of default for those loan accounts on which the risk has not increased significantly from the time the loan is originated. The Company use the same criteria mentioned in the standard and assume that when the days past due exceeds '30 days', the risk of default has increased significantly. Therefore, for those loans for which the days past due is less than 30 days, one-year default probability is considered.

Stage 2 - [Significant increase in credit risk]: The credit risk is presumed to have increased significantly for loans that are more than 30 days past due and less than 90 days past due. For such loans, lifetime default probability should be considered. Based on the maturity date of the loan, the probability of default is arrived at to determine the quantum of the loan that is likely to move into the buckets '90 days past due' and greater. The quarterly transition matrix is used to find out the transition matrix applicable for the loan considering the maturity date of such loan.

Stage 3 - [Defaulted loans]: As per the standard there is a rebuttable presumption that default does not occur later than when a financial asset is 90 days past due unless an entity has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate. The Company assumed that the default has occurred when a loan moves into '90 days past due' bucket.

Exposure at default

The exposure at default (EAD) represents the gross carrying amount of the financial instruments subject to the impairment calculation, addressing both the client's ability to increase its exposure while approaching default and potential early repayments too.

The probability of default (PD) of a loan which is less than 30 days past due [Stage 1] is represented by the one-year transition matrix. This PD is used to measure the quantum of the loan that is likely to move into the buckets 90 days past due and above over the next 12 months. The PD of a loan which is 30 days past due and less than 90 days past due [Stage 2] is represented by the transition matrix of the corresponding maturity period of the loan. This PD is used to measure the quantum of the loan that is likely to move into the buckets 90 days past due and above over the remaining life of the loan. The probability of default (PD) of a loan which is 90 days past due [Stage 3] is 100% as the loan has already defaulted. This PD is used to measure the quantum of the loan that is defaulted as on the valuation date over the remaining life of the loan.

Loss given default

Value of collateral property: The loans are secured by the adequate property. The property value for those loans which are over 90 days past due are regularly updated. The present value of such collateral property should be considered while calculating the Expected Credit Loss. The Company initiate the recovery process of Non Performing Accounts within the statutory time limit as per SARFAESI and other applicable laws and accordingly the realizable period has been considered for computing the Present Value of Collateral.

Forward looking information

The Company has considered the rate of inflation as a relevant macro-economic data having a significant impact on the performance of loans based on the historical observation of several quarters in the past. The correlation co-efficient between the inflation rate and the Loans outstanding the 'Not yet due' bucket is negative meaning that the two variables move in opposite directions. When the inflation rate goes up the Not yet due bucket seems to come down meaning that the loans become more irregular.

Considering this fact, and also considering that the inflation seems to be on the decline, the Company has assumed three scenarios as follows with the respective weights.

Scenario 1: ECL computed without any change in any of the buckets. This scenario is given a weight of 30%.

Scenario 2: For each and every loan all the buckets > 90 days are bumped up by 2% and the ECL is computed as mentioned in the previous sections to arrive at the ECL. This scenario is given a weight of 50%.

Scenario 3: For each and every loan all the buckets > 90 days are bumped down by 6% and the ECL is computed as mentioned in the previous sections to arrive at the ECL. This scenario is given a weight of 20%

Expected credit loss is then computed based on all the three scenarios. ECL is adjusted with the appropriate weights assigned for each scenario and the weighted average ECL is arrived at as the ECL for the quarter

Write off policy

The Company has over the period has established a well-defined Credit Monitoring Mechanism for follow up of the default / delinquent accounts.

A multi-faceted approach is adopted in Credit Monitoring activities which involves participation of In-House employees as well as outsourced agencies. Each loan account is analysed based on the causative factors of becoming default and appropriate follow-up activity is undertaken. In spite of adopting an appropriate follow-up activity, some accounts continue to be delinquent. Sufficient time, as per Law, is given to the Borrowers to regularize their repayments and if still the accounts continue to be under the Non-Performing bracket, legal recourse is adopted.

However, there could be accounts wherein no recovery would be forthcoming despite the best efforts put in by the Company. Such accounts are critically examined on case to case basis and if there is no merit of recovery, such accounts are recommended for write-off to/through internal committees as per the policy approved by the Board. Write-off is a derecognition of a loan the Company has no reasonable expectations of recovering the contractual inflows.

The movement within the tables is a combination of quarterly movements over the year. The credit impairment charge in the Profit & Loss statement comprises of the amount in Total column.

Transfers - transfers between stages are deemed to occur at the beginning of a quarter based on prior quarters closing balances

Net re-measurement from stage changes - the re-measurement of credit impairment provisions arising from a change in stage is reported within the stage that the assets are transferred to.

Net changes in exposures - comprises new disbursements written less repayments in the year Modified Loans

Where the contractual terms of a financial instrument have been modified, and this does not result in the instrument being derecognized, a modification gain or loss is recognized in the Profit and Loss statement representing the difference between the original cash flows and the modified cash flows, discounted at the effective interest rate. If the modification is credit-related or where the Company has granted concessions that it would not ordinarily consider, then it will be considered credit-impaired. Modifications that are not credit related will be subject to an assessment of whether the asset's credit risk has increased significantly since origination by comparing the remaining lifetime probability of default (PD) based on the modified terms to that on the original contractual terms.

37.4.3 Market Risk

Market risk is the risk of losses in positions taken by the company which arises from movements in market prices. Any item in the balance sheet which needs re-pricing at frequent intervals and whose pricing is decided by the market forces will be a component of market risk. There are number of items in the Company's balance sheet which exposes it to market risk like Housing loans at floating rate, loans to developers at floating rate, Non-Convertible Debentures (NCDs) with options, bank loans with option, Foreign Currency Bank Loans, Coupon Swaps, etc. The Company is generally exposed to Interest Rate Risk.

37.4.4 Interest Rate Risk

Interest Rate Risk refers to the risk associated with the adverse movement in the interest rates. Adverse movement would imply rising interest rates on liabilities and falling interest yields on the assets. This is the biggest risk which the company faces. It arises because of maturity and re-pricing mismatches of assets and liabilities.

In order to mitigate the impact of this risk, the Company should track the composition and pricing of assets and liabilities on a continuous basis. For the same purpose, the Company has constituted the ALCO Committee which should actively monitor the ALM position and guide appropriately.

The exposure of the Company's borrowing to interest rate changes at the end of the reporting period are

The impact of 10 bps change in interest rates on liabilities on the Profit after tax for the year ended March 31, 2019 is Rs,46.73 Crore (F.Y. 2017-18 Rs,31.03 Crore).

37.4.5 Operations Risk

Operational risk is “the risk of a change in value caused by the fact that actual losses, incurred for inadequate or failed internal processes, people and systems, or from external events (including legal risk), differ from the expected losses”. It can be subdivided into the following categories:

A. Compliance risk is defined as the risk of legal sanctions, material financial loss, or loss to reputation the Company may suffer as a result of its failure to comply with laws, its own regulations, code of conduct, and standards of best/good practice.

In case of LIC HFL, the Company is regulated by NHB, registered with SEBI and has listed agreements with stock exchanges, i.e. BSE & NSE, making it imperative that the Company follows all the applicable laws. In order to deal with the same, the Company has a designated Compliance Officer whose role would entail complying with the statutory requirements of the Company

B. Legal risk is the cost of litigation due to cases arising out of lack of legal due diligence. Litigation can also arise out of failure or frauds in project delivery.

For LIC HFL, the main business is of lending money for/against mortgage loans and is therefore exposed to legal risk. For handling the same, there is robust legal systems for title verification and legal appraisal of related documents. Company has standards of customer delivery and the operational mechanism to adhere to such standards aimed at minimum instances of customers' grievances.

37.4.6 Regulatory Risk

Regulatory risk is the risk that a change in laws and regulations will materially impact the company. Changes in law or regulations made by the government or a regulatory body can increase the costs of operating our business, and/or change the competitive landscape.

In case of LIC HFL, the regulatory risk can arise due to change in prudential rules/norms by the regulators viz; NHB, SEBI, RBI etc. In order to mitigate the effects of same, the Company is aware of the Business and Regulatory environment and anticipate the likely regulatory changes that may come in the short and medium term so that it is able to quickly change its systems and practices to realign itself with the changed regulatory framework.

37.4.7 Competition Risk

Competition Risk is the risk to the market share and profitability arising due to competition. It is present across all the businesses and across all the economic cycle with the intensity of competition risk varying due to several factors, like, barriers to entry, industry growth potential, degree of competition, etc.

The Company is in Housing Finance business which is going through growth phase due to many reasons including increasing youth population, growing economy, increased urbanization, Government incentives, acceptability of credit in society and rise in nuclear families. Due to all these reasons, the Housing Finance industry has seen a higher growth rate than overall economy and several other industries since past several years. This has attracted lot of Companies in the market with the result being increased pressure on the existing Companies to maintain/grow market share and profitability. In order to mitigate the risk arising due to competition, the Company not only tries to address the customer needs with state of art infrastructure including IT interface but also introduces practices which can attract customers to the Company as well as retain the existing ones. The Company has a market Intelligence system to gather information related to competitors in terms of their product offerings, pricing and other schemes and is in a position to respond to such competition. The entire Marketing force and support teams are continuously aware of challenges of competition through awareness programs, trainings, etc. and the deserving ones are adequately rewarded. The Company has so far been able to increase its market share across time by growing at a faster rate than the industry.


The Company is engaged in the business of providing finance for purchase, construction, repairs, renovation of house/ buildings. As such, there are no separate reportable segments, as per the Indian Accounting Standard (IND AS) 108 on 'Segment Reporting'. Segment reporting is done in the consolidated financial statements as prescribed by IND AS 108.


a) Estimated amounts of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs,0.40 Crore (F.Y. 2017-18 Rs,18.40 Crore; As at 01.04.2017 Rs. 0.55 Crore).

b) Other Commitments: Uncalled liability of Rs,1.14 Crore (F.Y. Rs,1.47 Crore; As at 01.04.2017 Rs. 3.16 Crore) in respect of commitment made for contribution to LICHFL Urban Development Fund by subscription of 50,000 units (F.Y. 2017-18 50,000 units; As at 01.04.2017 50,000 units) of Rs,10,000/- face value each, paid up value being Rs,3,857.34 (F.Y. 2017-18 Rs,7360.32/-; As at 01.04.2017 Rs. 7287.40/-) each.

The Company had committed for an upfront investment of Rs,37.50 Crore subject to a maximum of 10% of aggregate Capital Commitment but not exceeding Rs,100.00 Crore in LICHFL Infrastructure Fund managed by one of the Subsidiary of the Company, namely LICHFL Asset Management Company Limited. The outstanding investment in LICHFL Infrastructure Fund as on 31st March, 2019 is Rs,1.54 Crore.


a) Claims against the Company not acknowledged as debts Rs,0.91 Crore (F.Y. 2017-18 Rs,0.64 Crore; As at 01.04.2017 Rs. 0.51 Crore).

b) On completion of income tax assessment, the Company had received a demand of Rs,3.48 Crore - (including interest of Rs,0.20 Crore) for AY 2003-04, Rs,22.17 Crore (including interest of Rs,7.22 Crore) for AY. 2004-05 against which the Company received refund of Rs,2.20 Crore , Rs,35.72 Crore (including interest of Rs,6.68 Crore) against which Rs,19.51 Crore was paid under protest for AY 2005-06, Rs,23.85 Crore (including interest of Rs,1.38 Crore against which the Company received refund of Rs,1.37 Crore for AY. 2006-07 and Rs,15.03 Crore (including interest of Rs,6.34 Crore ) for AY 2007-08. The said amounts are disputed and the Company has preferred an appeal against the same. The amounts for the respective years have been paid to the credit of the Central Govt. under protest.


a. Provision includes:

i. Provision for untapped corporate undertaking given for securitization of loans. The outflows in respect of untapped corporate undertaking would arise in the event of a shortfall, if any, in the cash flows of the pool of the securitized receivables, and

ii. Provision for doubtful advances and provision for probable loss on account of bank reconciliation differences.

42. Fixed Deposits with Banks includes earmarked deposits created in favour of trustees for depositors towards maintaining Statutory Liquid Ratio amounting to Rs,177.25 Crore (F.Y. 2017-18 Rs,172.99 Crore; As at 01.04.2017 Rs,253.00 Crore). The Company has beneficial interest on the income earned from these deposits.

43. Temporary Book Overdraft of Rs,6,909.46 Crore (F.Y. 2017-18 Rs,5,064.24 Crore; As at 01.04.2017 Rs,5,739.76 Crore) represents cheques issued towards disbursements to borrowers for Rs,6,894.71 Crore (F.Y. 2017-18 Rs,5,048.24 Crore As at 01.04.2017 Rs,5,728.27 Crore ) and cheques issued for payment of expenses of Rs,14.75 Crore (F.Y. 2017-18 Rs,16.00 Crore, As at 01.04.2017 Rs,11.48 Crore), but not encashed as at March 31, 2019.

47. The Company had requested its suppliers to confirm the status as to whether they are covered under the Micro, Small and Medium Enterprises Development Act, 2006. The disclosure relating to unpaid amount as at the year-end together with interest paid / payable as required under the said Act have been given to the extent such parties could be identified on the basis of the information available with the company regarding the status of suppliers under MSMED Act, 2006. No interest has been paid/payable by the Company during the current year to the parties covered under the Micro, Small and Medium Enterprises Development Act, 2006.


In accordance with the Indian Accounting Standard on (IND AS-19) - “Employee Benefits” the following disclosures have been made:

Provident Fund and Pension Fund Liability

The Company has recognized Rs,15.23 Crore (Previous Year Rs,13.56 Crore) in the Statement of Profit and Loss towards contribution to Provident fund in respect of company employees. In respect of LIC employees on deputation who have opted for pension, Rs,0.43 Crore (Previous Year Rs,0.44 Crore) have been contributed towards LIC of India (Employees) Pension Rules, 1995.

The sensitivity analysis have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

The sensitivity analysis presented above may not be representative of the actual change in the projected benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the projected benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same method as applied in calculating the projected benefit obligation as recognized in the balance sheet.

There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.

Gratuity Contribution is paid to LIC of India under Gratuity Scheme of LIC.

Actuarial Gains/Losses are recognized in the period of occurrence under Other Comprehensive Income (OCI). All above reported figures of OCI are gross of taxation.

Maturity Analysis of Benefit payments is undiscounted cash flows considering future salary, attrition and death in respective year for members as mentioned above.

The Company has a defined benefit gratuity plan in India (funded). The company's defined benefit gratuity plan is a final salary plan for employees, which requires contributions to be made to a separately administered fund.

The fund is managed by a trust which is governed by the Board of Trustees. The Board of Trustees are responsible for the administration of the plan assets and for the definition of the investment strategy.

Gratuity is a defined benefit plan and company is exposed to the Following Risks:

Interest Risk: A fall in the discount rate which is linked to the Government Security. Rate will increase the present value of the requiring higher provision. A fall in the discount rate generally increases the mark to market value of the assets depending on the duration of asset.

Salary Risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of members. As such, an increase in the salary of the members more than assumed level will increase the plan's liability.

Investment Risk: The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan asset is below this rate, it will create a plan deficit. Currently, for the plan in India, it has a relatively balanced mix of investments in government securities, and other debt instruments.

Asset Liability Matching Risk: The plan faces the ALM risk as to the matching cash flow. Since the plan is invested in lines of Rule l0l of Income Tax Rules, 1962, this generally reduces ALM risk.

Mortality risk: Since the benefits under the plan is not payable for life time and payable till retirement age only, plan does not have any longevity risk.

Concentration Risk: Plan is having a concentration risk as all the assets are invested with the insurance company and a default will wipe out all the assets. Although probability of this is very less as insurance companies have to follow regulatory guidelines.

A separate trust fund is created to manage the Gratuity plan and the contributions towards the trust fund is done as guided by rule 103 of Income Tax Rules, 1962.

The Company's best estimate of contributions expected to be paid to the plan during the annual period beginning after March 31, 2019 is Rs,11.47 Crore (Previous Year Rs,9.77 Crore).

The estimates of future salary increases, considered in actuarial valuation, include inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market. The above information is certified by the actuary and relied upon by the Auditors.

-Exclusive of Amount Rs,0.08 Crore (previous year Rs,0.06 Crore) towards additional provision made for LIC employees.

Sick Leave

The Company has recognized Rs,1.24 Crore (Previous year Rs,0.62 Crore) in the Statement of Profit and Loss towards sick leave in respect of company employees.


a. Related Party Policy:

Related Party Policy is uploaded on the website of the Company and annexed to the Director Report.

b. Names of related parties:

(i) Enterprise having significant influence

Life Insurance Corporation of India

(ii) Enterprise over which Control exists

LICHFL Care Homes Limited LICHFL Financial Services Limited LICHFL Asset Management Company Limited LICHFL Trustee Company Private Limited

(iii) Enterprise over which significant influence exists

LIC Mutual Fund Asset Management Limited LIC Mutual Fund Trustee Private Limited

(iv) Key Management Personnel

Ms. Sunita Sharma, MD and Chief Executive Officer (From April 1, 2017 to April 11, 2017)

Mr. Vinay Sah, MD and Chief Executive Officer (From April 12, 2017)

Mr. Nitin K Jage, Company Secretary Mr. P Narayanan, Chief Financial Officer

*As the Provision for Performance Linked Incentive (PLI) and Leave Encashment is accrued for the company as a whole and not decidec individually, hence not included. However payment made during the Financial Year 2018-19 has been included.

**The amount includes Performance Linked Incentive (PLI) paid to Ms. Sunita Sharma ,Ex MD & CEO during the Financial Year 2017-18 and salary paid to Mr. Vinay Sah, MD & CEO for Financial Year 2017-18.

***Gratuity payable by the Company to the Company Secretary is Rs,0.20 Crore as a post employment Benefit. For the MD & CEO and CFO, an amount of 5% of Basic Salary plus DA is contributed as a post employment benefit to LIC.

#Includes premium of Rs,25.36 Crore paid on 22.02.2019 due to increase in Gratuity limit to Rs,0.20 Crore.


The Company has taken various offices and residential premises on cancellable operating lease basis for periods which range from 11 to 180 months with an option to renew the lease by mutual consent on mutually agreeable terms. Lease payments recognized in the Statement of Profit and Loss for such premises are Rs,35.19 Crore (Previous year Rs,29.54 Crore).

Details of CSR expenditure during the Financial Year

a) Gross amount required to be spent by the company during the year is Rs,57.49 Crore (Previous Year Rs,50.80 Crore).

b) Amount spent during the year:

Figures in bracket are in respect of the Previous Year

a) Details of related party transactions as per Indian Accounting Standard (IND AS-24), “Related Party Disclosures” - Nil

b) No provision has been made for CSR expenditure by the company as on March 31, 2019 (Previous Year Nil).


Special Reserve has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961, out of the distributable profits of the Company. Special Reserve No. I relates to the amounts transferred up to the Financial Year 199697, whereas Special Reserve No. II relates to the amounts transferred thereafter. In the current financial year Rs,749.99 Crore (FY 2017-18 Rs,559.99 Crore; As at 01.04.2017 Rs,569.99 Crore) has been transferred to Special Reserve No. II in terms of Section 36(1)(viii) of the Income tax Act, 1961 and an amount of Rs,0.01 Crore (FY 2017-18 Rs,0.01 Crore; As at 01.04.2017 Rs,0.01 Crore ) to Statutory Reserve under Section 29C the NHB Act.

As per National Housing Bank's (NHB) circular vide circular NHB(ND)/DRS/Pol. 62/2014 dated 27th May, 2014, the Company has adjusted the opening balance of reserves for creation of Deferred Tax Liability (DTL) on the Special Reserve as at 1st April, 2014 created under Section 36(1)(viii) of the Income tax Act, 1961.