4.22 Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to a provision is presented in the statement of profit and loss.

Reimbursements expected in respect of expenditure required to settle a provision is recognized only when it is virtually certain that the reimbursement will be received.

4.23 Contingent liabilities and assets

The Company does not recognize a contingent liability but discloses its existence in the financial statements Contingent liability is disclosed in the case of:

• A present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation

• A present obligation arising from past events, when no reliable estimate is possible

• A possible obligation arising from past events, unless the probability of outflow of resources is remote.

• Contingent assets are not recognised. A contingent asset is disclosed, as required by Ind AS 37, where an inflow of economic benefits is probable.

4.24 “Materiality of Events / Information “

“Financial impact of events / information relating to prior years identified in the current year which are not material are accounted for in the current year and are not corrected retrospectively through restatement of comparative amounts. Events or information are considered to be material if they could, individually or collectively, influence the economic decisions of the users of the financial statements and on the basis of governing laws, rules, regulations or recommendations issued by competent authorities.”

4.25 Earnings per Share

The basic earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the year.

Diluted earnings per share is computed by dividing adjusted net profit after tax by the aggregate of weighted average number of equity shares and dilutive potential equity shares outstanding during the year. The number of equity shares and potentially dilutive equity shares are adjusted for share splits /reverse share splits and bonus shares, as appropriate

Significant accounting judgements, estimates and assumptions.

• The preparation of Standalone financial statements in conformity with Ind AS requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period.

• Management believes that the estimates used in the preparation of financial statement are prudent and reasonable. Future result could differ from these estimates. Any revision to accounting estimate is recognized prospectively in current and future period.

Judgements

In the process of applying the company's accounting policies, management has made the following judgements, which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

5.1 Business model assessment

• Classification and measurement of financial assets depends on the results of the SPPI and the business model test. The Company determines the business model at a level that reflects how Companies of financial assets are managed together to achieve a particular business objective. This assessment includes judgement reflecting all relevant evidence including how the performance of the assets is evaluated and their performance measured, the risks that affect the performance of the assets and how these are managed and how the managers of the assets are compensated. The Company monitors financial assets measured at amortised cost or fair value through other comprehensive income that are derecognised prior to their maturity to understand the reason for their disposal and whether the reasons are consistent with the objective of the business for which the asset was held. Monitoring is part of the Company's continuous assessment of whether the business model for which the remaining financial assets are held continues to be appropriate and if it is not appropriate whether there has been a change in business model and so a prospective change to the classification of those assets.

Estimates and Assumptions

• The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the company. Such changes are reflected in the assumptions when they occur

5.2 Fair value of financial instruments

The fair value of financial instruments 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 another valuation technique. When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required in establishing fair values. Judgements and estimates include considerations of liquidity and model inputs related to items such as credit risk (both own and counterparty), correlation and volatility.

5.3 Effective Interest Rate (EIR) method

The company's EIR methodology recognises interest income / expense using a rate of return that represents the best estimate of a constant rate of return over the expected behavioral life of loans given / taken and recognises the effect of potentially different interest rates at various stages and other characteristics of the product life cycle (including prepayments and penalty interest and charges).

This estimation, by nature, requires an element of judgement regarding the expected behaviour and life-cycle of the instruments, as well expected changes to India's base rate and other fee income/expense that are integral parts of the instrument.

5.4 Impairment of financial asset

The measurement of impairment losses across all categories of financial assets requires judgement, in particular, the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances.

The company's ECL calculations are outputs of complex models with a number of underlying assumptions regarding the choice of variable inputs and their interdependencies. Elements of the ECL models that are considered accounting judgements and estimates include:

- The Company's grading model, which assigns PDs to the individual grades

- The Company's criteria for assessing if there has been a significant increase in credit risk and so allowances for financial assets should be measured on a LTECL basis and the qualitative assessment

- The segmentation of financial assets when their ECL is assessed on a collective basis - Development of ECL models, including the various formulas and the choice of inputs

- Determination of associations between macroeconomic scenarios and, economic inputs, such as unemployment levels and collateral values, and the effect on PDs, EADs and LGDs

- Selection of forward-looking macroeconomic scenarios and their probability weightings, to derive the economic inputs into the ECL models

It has been the Company's policy to regularly review its models in the context of actual loss experience and adjust when necessary.

5.5 Provisions and other contingent liabilities

The Company operates in a regulatory and legal environment that, by nature, has a heightened element of litigation risk inherent to its operations. As a result, it is involved in various litigation, arbitration and regulatory investigations and proceedings in the ordinary course of the Company's business.

Given the subjectivity and uncertainty of determining the probability and amount of losses, the Company takes into account a number of factors including legal advice, the stage of the matter and historical evidence from similar incidents. Significant judgement is required to conclude on these estimates.

5.6 Revenue from contract with Customers

The Company's contracts with customers include promises to transfer services to a customer. The Company assesses the services promised in a contract and identifies performance obligation involves judgement to determine the deliverables and the ability of the customer to benefit independently from such deliverables.

The Company exercises judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time. The Company considers indicators such as how customer benefits as services are rendered or who controls the asset as it is being created or existence of enforceable right to payment for performance to date and alternate use of such product or services, transfer of significant risks and rewards to the customer, etc.

5.7 Leases

Ind AS-116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Company makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances. Company also used judgement in determining the low value assets as given under the Ind AS-116.

5.8 Income Taxes

Significant estimates are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions and in respect of expected future profitability to assess deferred tax asset.

NOTE: 10(a)(3) Impairment assessment

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

- The Company's definition and assessment of default and cure.

- How the Company defines, calculates and monitors the probability of default, exposure at default and loss given default.

- When the Company considers there has been a significant increase in credit risk of an exposure.

- The Company's policy of segmenting financial assets where ECL is assessed on a collective basis.

- The details of the ECL calculations for Stage 1, Stage 2 and Stage 3 assets.

NOTE: 10(a)(4)(i) Definition of default

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

NOTE: 10(a)(4)(ii) Probability of default

The 12-month probability of default is calculated using incremental NPA approach in respect of Stage-I loan portfolio. For Stage-II loan portfolio, it is necessary to derive the Life Time Probability of Default, the same is worked out for each loan account falling under Stage-II, by extrapolating the 12 months PD over the residual maturity of the loan. In respect of the loans falling under Stage-III, the Probability of Default is considered as 100%.

NOTE: 10(a)(4)(iii) 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.

To calculate the EAD for a Stage 1 loan, the Company assesses the possible default events within 12 months for the calculation of the 12mECL. For Stage 2 and Stage 3 financial assets, the exposure at default is considered for events over the lifetime of the instruments.

NOTE: 10(a)(4)(iv) Loss given default

The Company segments its lending products into smaller homogeneous portfolios (Government - Housing,Government -Urban Infrastructure,Non Government and Retail), based on key characteristics that are relevant to the estimation of future cash flows. The data applied is collected loss data and involves a wider set of transaction characteristics (e.g., product type) as well as borrower characteristics.

NOTE: 10(a)(4)(v) Significant increase in credit risk

The Company continuously monitors all assets subject to ECLs. In order to determine whether an instrument or a portfolio of instruments is subject to 12mECL or life time ECL, the Company assesses whether there has been a significant increase in credit risk since initial recognition. The Company considers an exposure to have significantly increased in credit risk when contractual payments are more than 30 days past due.

When estimating ECLs on a collective basis for a group of similar assets, the Company applies the same principles for assessing whether there has been a significant increase in credit risk since initial recognition.

NOTE: 10(a)(4)(vi) Grouping financial assets measured on a collective basis

As explained in Note 4.17, the Company calculates ECLs on collective or individual basis .

The Company calculates ECLs on collective basis on following asset classes:

- Government - Housing

- Government - Urban Infrastructure

- Non Government

- Retail

The Company calculates ECLs on individual basis on all Stage 3 assets of Non Government portfolio.

NOTE 34: Capital

Capital Management

For the purpose of the Company's capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the Company. The primary objectives of the Company's capital management are safety and security of share capital and maximize the shareholders' wealth.

The Company maintains an actively managed capital base to cover risks inherent in the business and is meeting the capital adequacy requirements of the regulator viz., RBI/NHB. The adequacy of the Company's capital is monitored using, among other measures, the regulations issued by RBI/NHB.

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

Capital to Risk-weighted Assets Ratio

The Company is complying with the Capital Adequacy requirements as prescribed by the Master Direction-Non-Banking Financial Company - Housing Finance Company (Reserve Bank) Directions, 2021 dated February 17, 2021. Being an NBFC-Housing Finance Company (NBFC-HFC), HUDCO is required to maintain Capital Adequacy Ratio or Capital to Risk Weighted Assets Ratio (CRAR) of 15% (with a minimum Tier I Capital of 10%), computed by dividing company's Tier-I and Tier-II capital by Risk Weighted Assets.

NOTE 36: Fair Value Measurement

36.1. Valuation principles

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.

In order to show how fair values have been derived, Financial Instruments are classified based on a hierarchy of valuation techniques.

36.2. Valuation governance

The Company's Fair Value methodology and the governance over its models include a number of controls and other procedures to ensure enough safeguards and maintain its quality and adequacy. All new product initiatives (including their valuation methodologies) are as per the approved policy of the Company. The ongoing measurement on fair value estimates is reviewed by the appropriate functional department of the Risk management and related finance functions.

36.3. Assets and liabilities by fair value hierarchy

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

36.4. Valuation techniques Mutual Fund

Mutual Funds are valued at the Net Asset Value (NAV) declared by the respective Mutual Fund in respect of each particular Scheme and is classified as Level 2

Equity Instruments

Equity Instruments, which are not actively traded on public stock exchanges but the active prices on a regular basis are available, such instruments are classified as Level 2. Other equity instruments are fair valued based on the average of the Discounted Cash Flow (DCF) method and Net Assets Value (NAV) (as provided by independent valuer). It is classified as Level 3.

Interest Rate Swaps, Currency Swaps and Forward Rate Contracts

The most frequently applied Valuation techniques include Forward Pricing and Swap Models and Forward Contract 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 classified under Level 2.

Investment Property

The Company obtains independent valuations for its investment properties annually. The fair values of investment property are determined by an independent registered valuer and the valuation technique adopted are Income approach, Market Approach and Composite Approach. All resulting fair value estimates for investment property are included in Level 2 (refer 14A).

36.5. Transfer between level 1 and level 2

There have been no transfers between Level 1 and Level 2 for the year ended 31^st March, 2023 and 31^st March,2024.

36.6. Movements in Level 3 Financial Instruments measured at Fair Value

The following tables show a reconciliation of the opening and closing amounts of Level 3 financial assets and liabilities which are recorded at fair value. The Company requires significant unobservable inputs to calculate their fair value.

36.7. Key assumptions and range of inputs

(a) Net Asset Value (NAV) Method:

The Net Asset Value Method represents the value with reference to historical cost of assets owned by the company and the attached liabilities on the valuation date.

(b) Discounted Projected Cash Flow:

Discounted Projected Cash Flow valuation technique is used to calculate Impact on fair value of level 3 financial instruments measured at fair value using the following unobservable input such as Discount Rate, Recovery rates, Interest Rate and Revenue from operations to ascertain the change.

(c) To arrive at fair value of unquoted investments average of Net Asset Value (NAV) and Discounted Projected Cash flow as on 31^st March, 2024 is taken.

The range of values indicates the highest and lowest level input used in the valuation technique and, as such, only reflects the characteristics of the instruments as opposed to the level of uncertainty to their valuation.

All changes in the fair market value would be reflected in the Statement of profit and loss based on the classification FVTPL.

The table summarises the valuation techniques together with the significant unobservable inputs used to calculate the fair value of the Company's Level 3 assets and liabilities.

36.8. Quantitative analysis of Significant Unobservable inputs Interest rate volatility

Interest Rate volatility measures the expected future variability of a market price. It is generally quoted as a percentage; a higher number represents a more volatile instrument, for which larger swings in price (or interest rate) are expected. Volatility is a key input used to estimate the future prices for the underlying instrument (equity share). Interest rate volatility varies from time to time and therefore, it is not viable to make reliable and meaningful general statements about volatility levels.

Discount Rates

Discount rates are used for calculating the present value of future cash flows. In discounted cash flow models, discount rates are used as the direct reflection of the expected rate of return of the investments made by the company in the due course of the business. Hence, these rates reflect the net present value of an asset. They generally reflect the premium an investor expects to achieve over the benchmark interest rate to compensate for the higher risk driven by the uncertainty of the cash flows caused by the credit quality of the asset. They can be implied from market prices and are usually unobservable for illiquid or complex instruments.

Recovery Rates

Recovery rates reflect the estimated loss that the company will suffer given expected defaults (Non-performing Assets). The recovery rate is given as a percentage and reflects the opposite of loss severity (i.e., 100% recovery reflects 0% loss severity). In line with the operation of the Company, probability of non-performing assets to loss assets plays an important role to ascertain the recovery rates. Higher loss severity levels / lower recovery rates indicate lower expected cash flows upon the default of the instruments. Recovery rates for complex, less liquid instruments are usually unobservable and are estimated based on historical data.

Revenue from operations

Revenue is the value of all sales of goods and services recognized by a company in a period. Revenue (also referred to as Sales, Turnover, or Income) forms the beginning of a company's Income Statement and often considered the “Top Line” of a business. Growth in revenue from operation directly impacts the profitability of the company, as operation expenses are deducted from a company's revenue to arrive at its profit.

36.9. Sensitivity of Fair Value measurements to changes in unobservable market data

Sensitivity of fair value measurements to changes in unobservable market data cannot be ascertained due to potential off-sets from economic or accounting hedge relationships in place.

36.10. Fair Value of Financial Instruments not measured at Fair Value

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

36.11.1. Valuation Methodology 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. The below methodologies and assumptions relate only to the instruments in the above tables and, as such, may differ from the techniques and assumptions explained in Note 36.4.

Short-term Financial Assets and Liabilities

For financial assets and financial liabilities, that have a short-term maturity (less than twelve months), the carrying amounts, which are net of impairment, are a reasonable approximation of their fair value. Such instruments include: cash and cash equivalents, Trade receivables, balances other than cash and cash equivalents and trade payables without a specific maturity.

Loans and advances to customers

The carrying amount of fixed interest rate bearing loans and floating interest rate bearing loans are taken as fair values. Financial asset at amortised cost

The fair values of financial assets at amortised cost are the carrying amount of the financial asset.

Debt Securities

Fair value of traded bonds is market price of the bonds as on the balance sheet date or close to balance sheet date. In case of Commercial Paper which is Current Liability i.e., short term maturity (less than or equal to twelve months), the face value of outstanding commercial paper is considered as fair value.

Borrowing other than debt securities

The carrying amount of fixed interest rate bearing borrowings and floating interest rate bearing borrowings are taken as fair values, since these are reasonable approximation of their fair value

NOTE 37: RISK MANAGEMENT

37.1. Introduction and risk management structure

The Company, being a Housing Finance Company, is exposed to various types of risks like credit risk, operational risk, liquidity risk, market risk and foreign currency risk. Company is fully committed to manage these risks in an effective and proactive manner, for which HUDCO has in place a Risk Management Policy and Operating Manual in line with its objectives covering both the internal and external environment. With a view to minimize the impact of various risks to which Company is exposed to, Company has in place a Board level Committee namely 'Risk Management Committee of the Board'(RMCB) which reviews various suggestions/ recommendations/reports and action taken by three subcommittees namely:

• Assets & Liabilities Management Committee (ALCO);

• Credit Risk Management Committee (CRMC); and

• Operational Risk Management Committee (ORMC)

HUDCO has effective Assets and Liabilities Management system. ALCO reviews the risks relating to Assets and Liabilities and ensures management of mismatches through liquidity gap analysis, interest rate sensitivity analysis as per NHB guidelines. It is ensured that the ALM risks, if any, are managed within the permissible limits.

The Credit Risk Management Committee (CRMC) oversees and ensures that the institution's credit policies are complied with and the procedures are being consistently applied.

The Operational Risk Management Committee (ORMC) oversees and ensures the implementation of operational risk framework to explicitly manage each and every source of operational risk including Technology risk, Employee risk, Customer risk, Capital Asset risk and External risk.

37.2. Credit Risk

For management of credit risks in an effective manner, Company has established a strong appraisal mechanism containing comprehensive appraisal techniques/ guidelines in order to ensure timely repayments of principal & interest amount

37.2.1. Derivative Financial Instruments

Credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded on the balance sheet.

With gross-settled derivatives, the Company is also exposed to a settlement risk, being the risk that the company honours its obligation, but the counterparty fails to deliver the counter value.

37.2.2. Exposure to Credit Risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ' 91,365.05 crore and ' 79,236.97 crore as of 31^st March, 2024 and 31^st March, 2023 respectively, being the total of the carrying amount of balances with loans.

37.2.3. Analysis of risk concentration

HUDCO takes into consideration NHB/RBI norms for risk categorisation and the norms adopted for extending loan under HUDCO Niwas. Higher LTV is permissible for lower loan amounts while LTV reduces with the higher loan amounts. (Refer Note:10A)

37.4.3. Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument, denominated in currency other than functional currency, will fluctuate because of changes in foreign exchange rates.

(i) Foreign currency risk monitoring and management

Foreign Currency risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the company's functional currency i.e. INR. The company has overseas foreign currency borrowings and is exposed to foreign exchange risk primarily with respect to the USD and JPY. In order to mitigate the risks associated with foreign currency fluctuations, Company has a Foreign Currency Risk Management policy. It uses a combination of currency swaps and options to hedge its exposure to foreign currency risk. These derivative transactions are done for hedging purpose and not for trading or speculative purpose. The policy lays down the appropriate systems and controls to identify, measure and monitors, the currency risk for reporting to the Management.

(ii) Foreign currency exposure

The Company is exposed to foreign currency risk mainly on its borrowings denominated in foreign currency. The carrying amount of the Company's foreign currency denominated borrowings is as follows:

37.4.4. Equity Price Risk

Equity Price Risk is the risk that the fair value of equities decreases as a result of changes in the level of equity indices and individual stocks. At 10 per cent increase in the value of the Company's Equities at 31^st March, 2024 would have increased Equity by ? 27.24 crore. An equivalent decrease would have resulted in an equivalent but opposite impact and would cause a potential impairment, which would reduce profit before tax by approximately ? 27.24 crore.

37.4.5. Operational Risk

In order to mitigate the Operational Risk(s) associated with the operations of the organization, both internal as well as external, including Technology Risk, Employee Risk, Capital Asset Risk, External Risk, Compliance Risks viz. External Fraud, Legal Risk, etc, the Company has established a strong reporting and monitoring mechanism.

Operational Risk Management Framework covers managing each and every source of Operational Risk as a distinct risk to the institution's safety and soundness. The requisite information on the Operational Risk is obtained through quarterly reports of “Operational Risk Factors and Key Risk Indicators (KRIs)” from Regional Offices/Departments, which are further reviewed and analysed for mitigation of Operational Risk.

NOTE 38: HEDGE ACCOUNTING

The hedging instruments which meets the qualifying criteria for hedge accounting are designated as cash flow hedge. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in Other Comprehensive Income. The change in intrinsic value of hedging instruments is recognised in 'Effective Portion of Gain/(Losses) in Cash Flow Hedge'. The amounts recognised in such reserve are reclassified to the Statement of Profit or Loss when the hedged item affects profit or loss. Further, the change in fair value of the time value of a hedging instrument is recognised in 'Cost of Hedging Reserve'. The amounts recognised in such reserve are amortised to the Statement of Profit and Loss on a systematic basis.

Hedge accounting is discontinued when the hedging instrument expires, or terminated, or exercised, or when it no longer qualifies for hedge accounting.

(i) Hedge Effectiveness and Hedge Ratio

Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument.

The Company has used hypothetical derivative method for effectiveness assessment. Under this method, the hedged risk is modelled as a derivative called the hypothetical derivative which has the same terms as the hedged item. The hypothetical derivative approach compares the change in fair value of the hedging instrument with the change in the fair value of the hypothetical derivative. Prospective hedge effectiveness testing has been performed using the sensitivity analysis approach. Under this approach, the impact of a uniform /- 5% shock on the forward curve has been performed to assess the effectiveness of the hedge.

The currency swap and option contracts are denominated in the same currency as the highly probable future foreign currency principal and interest payments, therefore the hedge ratio is 1:1.

NOTE 39: (B) Ind AS-116 Leases

a. Company as a Lessee

The Company has Lease Contracts for the Office Building, which are cancellable by the both the lessor and lessee. The Company has some Contracts, which are cancellable by the either lessor and lessee and at present, there is no estimation by the Company to continue or discontinue the same. Further amount of that leases are not material for the Company and therefore Company is not creating ROU on that asset based on the materiality as per the guidance given under the Indian Accounting Standard. Besides Company used hindsight in determining the Lease Term, where the Contract contained options to extend or terminate the lease and therefore its leases are covered under the Short-Term Leases as per the guidance under the Ind AS-116.

Amounts recognised in Statement of Profit and Loss relating to Short Term Leases is ?1.73 crore during the year 202324 and in the previous year 2022-23 is ?1.56 crore.

b. Company as a Lessor

The Company has given its Assets on the leases; details of the same are given under the “Note No-14A Investment Property”.

Lease Rental recognized as income during the year 2023-24 is ?54.76 Crore and in the Previous year 2022-23 is ' 54.18 crore.

NOTE 40: EXPLANATORY NOTES TO ACCOUNTS

1) The financial results for the Financial Year ended 31^st March, 2024 have been drawn up on the basis of Ind-AS that are applicable to the Company based on MCA Notification G. S. R. 111 (E) and G. S. R. 365 (E) dated 16^th February, 2015 and 30^th March, 2016 respectively as amended from time to time. Any guidance/ clarifications issued by NHB/RBI or other regulators are adopted/ implemented as and when they are issued/ applicable. The results have been prepared based on the Division III of Schedule III for Non-Banking Financial Companies as per Notification G.S.R. 1022 (E) issued by the Ministry of Corporate Affairs on 11^th October, 2018 and as amended vide notification GSR (E) dated 24^th March, 2021.

3) Andrews Ganj Project

(a) (i) HUDCO had initiated execution of Andrews Ganj Project (AGP) on behalf of the then Ministry of Urban

Development, (MoUD) in the year 1989-90.

(ii) As per minutes of the meeting held on 7^th September, 1995, it has been agreed to pay interest @ 17% p.a. (simple) on the expenditure incurred on AGP along with 1.5% of project cost as administrative charges.

(iii) As per Perpetual Lease Deed dated 04th July, 1997, the Company is liable to make available “Net Resources” from the development and disposal of properties of the AGP to then MoUD and accordingly the Company was crediting interest on Net Resources generated on the project upto 03^rd November, 2004. Subsequently, a separate “No Lien AGP Account” has been opened under the name of “HUDCO AGP Account”, in which the surplus lying to the credit of the then MoUD was credited and interest accrued/ earned on “No Lien AGP Account” was also credited to that account.

(iv) HUDCO contends that as per minutes of the meeting held on 07^th September, 1995 and in terms of Perpetual Lease Deed dated 04^th July, 1997, the status of the Company is “Agent of MoUD”. The contention of HUDCO is that it is working as an agent and as such total ownership rights and responsibilities of AGP are of MoHUA-GOI (erstwhile MoUD) and there is no financial liability of HUDCO in respect of AGP. This has been upheld by learned Shri GE Vahanvati, the then Solicitor General of India, vide his opinion dated 12^th April, 2005. This opinion was re-confirmed by learned Shri GE Vahanvati as Attorney General of India vide his opinion dated 19^th August, 2009. The opinion was also duly endorsed by the then Law Secretary and Law Minister of Government of India.

(v) Keeping this position in view and in accordance with HUDCO's Board decision in 459^th meeting dated 24^th August, 2009, HUDCO has been making payments / settling claims on Ministry's behalf and accounting them in “No Lien AGP Account” being separately maintained by HUDCO. As on 31^st March, 2024, this account has a deficit in the form of debit balance of ?592.74 crore, recoverable from MoHUA (erstwhile MoUD). This represents amount paid by HUDCO on behalf of the Ministry for the capital and revenue expenditures on AGP project over and above the recoveries and the accumulated interest amounting to ? 320.82 crore charged @ 10.75% p.a. (simple), on excess of expenditure over recoveries. The MoHUA (erstwhile MoUD) in a meeting held on 27^th April, 2015 have also asserted that HUDCO shall continue to implement and manage the AGP in terms of Perpetual Lease Deed and all the pending issues shall be looked into for resolution by the Ministry. The MoHUA (erstwhile MoUD) in the said meeting has also decided that HUDCO as a Lessee will bear all the liabilities including the liabilities generated out of compliance of various court orders in cases related to the project. The company vide its letter dated 30^th September, 2015, conveyed its reservation to accept the decision for bearing the liabilities of Andrews Ganj project as HUDCO is acting as an agent of MoHUA, Government of India, for AGP, in terms of perpetual lease deed conditions and other agreed terms.

(vi) The Ministry has been informed specifically of the above facts and figures on various occasions through correspondence as also in the meetings. A communication was received from Dy. L&DO vide letter dated 22^nd

March, 2016 wherein Dy. L&DO had conveyed that HUDCO may continue to implement Andrews Ganj project and manage “No Lien AGP Account” in line with the terms and conditions as stipulated in the Perpetual Lease Deed dated 04^th July, 1997. The Ministry again informed in specific vide Dy L&DO letter dated 31^st May, 2018 that HUDCO as a lessee is permitted to incur/book maintenance and legal expenditure in respect to Andrews Ganj Project from “No Lien AGP Account”. Like earlier years, in-line with the minutes of meeting dated 07^th September, 1995, the perpetual lease deed dated 04^th July, 1997, income of ? 29.01 crore on account of interest accrued on AGP Project has been credited to Statement of Profit and Loss for the period year ended 31^st March, 2024.

(vii) As decided by HUDCO Board in its 596^th meeting held on 14^th June, 2018, Ministry of Housing and Urban affairs has been requested vide letter dated 09^th July, 2018 to consider taking over the Andrews Ganj project with assets and liabilities and pay the amount incurred / to be incurred by HUDCO, towards implementing the project. It has also been conveyed that “till the project is taken over by Ministry”, HUDCO shall be continuing implementing the project as per existing arrangements and continue booking maintenance and legal expenses, interest @ 10.75% p.a. and administrative charges @1.5% in “No Lien AGP Account”. The decision on the same from the Ministry is awaited.

(viii) The company, in its aforesaid capacity as an agent of MoHUA (erstwhile MoUD), relating to AGP, is in possession of real estate properties (9 guest houses blocks and hotel site) which command much higher realizable market value sufficient to recover aforesaid amount of ? 592.74 crore, as on 31^st March, 2024.

(ix) MoHUA was requested vide letter dated 13^th January, 2021 to make arrangements towards reimbursement of the amount recoverable endorsement for settling the same from the project proceeds as and when the same are realized, which is also in line with the Lease agreement and well settled and agreed.

In reply to the same, Ministry vide letter dated 10^th March, 2021 has requested for certain additional information including the breakup details of principal amount and interest amount as contained in the “No Lien AGP Account” to process HUDCO's request.

Ministry vide letter dated 28^th June, 2021 has stated that the “HUDCO's proposal is under examination in consultation with IFD, MoHUA. Till the proposal of HUDCO vide their letter dated 13^th January, 2021 is approved, the existing arrangement may be continued as conveyed vide this office letter dated 22^nd March, 2016 and 31^st May, 2018”.

(b) (1) Litigation Status 1. Tomorrowland Technologies Exports Ltd.

The Company had allotted a hotel site including car parking space to M/s Tomorrowland Technologies Exports Ltd. i.e., TTEL (formerly known as M/s. M S Shoes East Limited). Due to default in payment of instalments by TTEL, the Company cancelled the allotment of hotel site including car parking space and forfeited the amount paid by TTEL in terms of the allotment letter.

TTEL started litigation regarding hotel site and filed suit for declaration in lower courts that cancellation of allotment letter by HUDCO, be declared as null & void. The Sr. Civil Judge passed final order dated 03^rd July, 2010 against HUDCO. HUDCO filed first appeal against the Order of Sr. Civil Judge Before Additional District Judge (ADJ) Delhi. The ADJ vide Order dated 18^th July, 2014 dismissed the first appeal of HUDCO and passed the judgment in favour of TTEL. HUDCO filed Regular Second Appeal (RSA) with Hon'ble High Court of Delhi which passed the final judgment on 03^rd July, 2016 in favour of HUDCO. TTEL challenged the High Court Order by filing SLP NO: 34338/2016 in the Supreme Court. The matter is currently in pendency before Hon'ble Supreme Court.

The allotment of 9 blocks of guest houses, restaurants, kitchens, and shops, which were allotted to TTEL, was cancelled due to default in payment of instalment by TTEL and amount of first instalment paid by TTEL was forfeited as per terms of allotment letter. TTEL filed a civil suit for permanent injunction and possession against HUDCO & Union of India. The Hon'ble High Court, vide Order dated 10^th August, 2016, directed that HUDCO & Union of India should consider the proposal given by TTEL for refund of entire amount deposited by way of 1st instalment by it with HUDCO along with interest at such rate which may be deemed appropriate by Court.

In view of Hon'ble High Court of Delhi order dated 10^th August, 2016, the Board in its 568^th meeting held on 23^rd August, 2016 resolved to approve the proposal to refund first instalment forfeited by HUDCO excluding earnest money & the interest for delayed payment paid thereof by TTEL for guest house blocks after adjusting the commercial losses caused to HUDCO and other expenses incurred by HUDCO since 1997-98 from the date of completion of project subject to necessary approval / NOC of MoUD, Govt. of India.

The Hon'ble High Court passed a decree dated 13^th January, 2017 for payment of 1^st installment of ?35.75 crore to TTEL along-with interest @ 6% p.a., w.e.f. 30^th January, 1995 till date of payment and directed HUDCO to refund the interest paid by TTEL (?0.99 crore) on the delayed period of payment of 1^st installment (from 30^th November, 1994 till 30^th January, 1995). If the entire amount is not paid on or before 31^st December, 2017, the rate of interest would then stand enhanced to 11% p.a. However, the decree was made in-executable till 30th June, 2017.

TTEL filed Review Petition in the month of May, 2017, before Hon'ble High Court of Delhi for review of the Decree dated 13^th January, 2017, praying inter-alia for refund of EMD, grant of interest @ 16.48% p.a. on quarterly rests. Subsequently, Review Petition filed by TTEL was disposed off by the High Court on 12^th December, 2017. Thereafter, TTEL has filed Special Leave Petition (SLP No 10752/53 of 2018) in Hon'ble Supreme Court against the Decree dated 13^th January, 2017 and Hon'ble High Court Order dated 12^th December, 2017. The Company filed application for recalling the Hon'ble High Court Order dated 13^th January, 2017, in view of the Review Petition filed by TTEL and directions of Govt. of India. The matter was listed on 28^th August, 2018, after hearing all parties, Hon'ble High Court dismissed the “Recall Application” of HUDCO. HUDCO filed SLP in Supreme Court challenging the High Court Order dated 28^th August, 2018 and 13^th January, 2017. Vide Order dated 18^th September,2018, the Hon'ble Supreme Court has dismissed the SLP as withdrawn, with liberty to HUDCO to file all legal objections regarding the executability of the decree in the executing Court.

Further, TTEL also filed first Execution Petition in Delhi High Court and later on, the same was also withdrawn by TTEL on 23^rd December, 2017. Thereafter, TTEL has filed Revised Execution Petition, making Govt. of India also a party and claiming rate of interest @ 11% p.a. as per the decree dated 13^th January, 2017.The matter was listed on 3^rd May, 2018, wherein the Hon'ble High Court first directed for attachment of HUDCO Property i.e. HUDCO Bhawan, IHC, Lodhi Road, New Delhi. However, after hearing the submission of HUDCO vide the same order, Hon'ble High Court kept the attachment order of HUDCO Property in abeyance till the next date and also directed that HUDCO will not sell the property at Andrews Ganj, Delhi. Further, the learned Justice V.N. Khare, former Chief Justice of India, has opined that, “HUDCO's consent to perform the terms of the Order dated 13^th January, 2017 was conditional on UOI's support and in the event any liability is indeed ascribed to HUDCO, the same should then be recoverable from the UOI”.

In view of the Supreme Court's Order dated 18^th September, 2018, HUDCO filed objection in the Execution Petition, pending in Delhi High Court. The matter was listed on 29^th October, 2018. After hearing the submission of HUDCO's Counsel, the Hon'ble Court dismissed the objections. HUDCO filed two appeals in Delhi High Court as under:

(a.) Regular first Appeal (RFA 79/2018) against the final order/ decree 13^th January, 2017 and order dated 28^th August, 2018 (Dismissal of Recall application by High Court). Notices have been issued.

(b.) Execution First Appeal (EFA No 19/2018) against the order dated 29^th October, 2018, wherein objections of HUDCO in execution petition were dismissed. The matter was listed on 27^th November, 2018. After hearing the matter, the Hon'ble Court stayed the execution proceeding pending in Delhi High Court till the next date. The matter was listed again on the application of the M/s TTEL for vacation of stay on 08^th July, 2020 before Division Bench, Delhi High Court, after hearing the matter, the Hon'ble Court directed that Execution First Appeal (EFA) 19/2018) shall be adjourned sine die and will be listed after the final disposal of the Regular First appeal (RFA 79/2018). The parties are at liberty to move the application for revival of EFA after final disposal of RFA 79/2018. Till the further order, the stay on the Execution proceedings shall be continued. Both the cases are pending. TTEL filed SLP in Supreme Court, against the High Court Order dated 27^th November, 2018, wherein High Court stayed the execution proceedings. However, the same has been withdrawn by TTEL on 14^th January, 2019.

TTEL has filed Special Leave Petition (SLP No 10752/53 of 2018) in Supreme Court against Decree dated 13^th January, 2017 and Hon'ble High Court Order dated 12^th December, 2017. The SLP filed by TTEL is currently pending in Hon'ble Supreme Court. Further, in the SLP No 10752/53 of 2018, the Union of India has filed an affidavit denying its liability on this account. The said affidavit, was placed before the Board of Directors of HUDCO and as per the decision, the company has also filed a reply/ affidavit to the affidavit of Union of India denying its liabilities on account of the same bases on perpetual Lease Deed 04^th July, 1997 and Record Note of discussion dated 07^th September, 1995.

The order dated 09/04/2024 in Hotel site case SLP NO. 34338/2016 impressed upon counsels of HUDCO and UoI to coordinate and resolve rival submissions and clear as to whether the dispute can be amicably resolved in terms of the observation made by this Court on 31.01.2017, accordingly after due discussions and deliberations at highest levels, HUDCO and UoI filed supplementary affidavits requesting the matter to be considered on merits, and the matter is currently pending before the Hon'ble Supreme Court of India.

Hence, in view of the facts and circumstances stated above, the Company does not expect any liability on this account and any expenditure related thereof. In case of any liability by virtue of any court order or otherwise, the same shall be in the account of “No Lien AGP Account” of MoUD, based on the facts and documents and the legal opinions obtained by HUDCO.

(2) M/s. Ansal Properties and Industries Ltd. (APIL)

The arbitrator has passed an award in favour of M/s. Ansal Properties and Industries Ltd. (APIL) amounting to ?8.84 crore along with interest @ 18% p.a. on 28^th July, 2005 in respect of the property leased to APIL at AGP. The Arbitrator has also allowed the counter claim of HUDCO amounting to approximately ?0.85 crore along with interest @ 18% p.a. on account of maintenance charges w.e.f. 1^st January, 2001 up-to 31^st July, 2005. HUDCO has challenged the award before the Hon'ble High Court of Delhi and, as per the directions of the court, has deposited a sum of ?7.99 crore in the court out of “No Lien AGP Account”.

APIL has invoked arbitration for refund of ground rent paid by it from November, 1995 to October, 1999 and the arbitrator has pronounced the award on 21^stJuly, 2006 holding therein that APIL is not liable to pay the ground rent up to October, 1999 i.e. till the shopping arcade was constructed and became operational in October, 1999. The amount of ?3.93 crore deposited earlier by APIL has been directed to be adjusted towards the future ground rent payment dues w.e.f. November,1999 along-with Interest @ 7% p.a. for delayed payment. HUDCO has filed petition challenging the award before the Hon'ble High Court of Delhi. The Hon'ble High Court on 10^th May, 2012 has set aside the arbitration award dated 21^st July, 2006. APIL filed an appeal against the above-mentioned order before Division Bench of Hon'ble High Court, Delhi. Division Bench vide its order dated 24^th January, 2013, allowed APIL appeal and upheld the Arbitrators award. HUDCO filed SLP on 10^th May, 2013 before Hon'ble Supreme Court against this order which is currently pending.

On the last day of hearing, i.e., 5^th January,2023, APIL's counsel has informed the court that vide Order dated 16^th November 2022, APIL has been declared insolvent by NCLT and therefore, now the APIL is under Moratorium. Hence as per the law, all the proceedings pending against APIL are automatically stayed by virtue of law. Further, HUDCO has filed its total claims due against APIL before the Resolution Professional appointed for the above purpose.

4) HUDCO had received loans and grants from Kreditanstalt fur Wiederaufbau (KfW) or the Bank of Reconstruction Germany under “Indo German Cooperation Programme on Human Settlements” in 6 different tranches, primarily for financing of Housing Stock pertaining to economically weaker sections of society in India. In respect of tranche I to III, there were no balances however, in respect of tranche IV to VI, though these schemes were closed, there were balances in respect of these loans/grants amounting to Rs 107.42 crores .The financing agreements in respect of these schemes were valid for a period of 15 years and the amounts were not refundable as the agreement period had already elapsed and HUDCO had fulfilled all the conditions stipulated in the agreements, and thus the liability had got extinguished , the matter for final settlement was taken up with KfW , and the agency stated that it had no objection to the derecognition of the amounts lying against Tranche 1V to V1 in HUDCO books, thus, the amount of Rs. 107.42 Crore (Rs 9.87 crores as interest on loans out of tranche-KfW-VI and Rs 97.55 crores as repayment of loans out of tranche KfW-V-VI) have been routed through profit and loss account with consequential positive impact on reserves and surplus of the company as on 31-03-2024.

5) HUDCO had allotted 6435 sq. mtr. of built-up space in 1993 at HUDCO Vishala, Bhikaji Cama Place, New Delhi to EPFO on Long Term Sub-lease basis. The sub-lease in favour of EPFO is yet to be executed and ?0.35 crore is recoverable from EPFO.

6) (a) The Company has a procedure for seeking confirmation of outstanding balances at each quarter end from all the borrowers except cases under litigation. In case of receipt of balance confirmation from the agency for any Quarter of the year, the same is treated as confirmed during the year. Confirmation of balances covering approximately 97.74% received up to 10^th May 2024 (Previous Year:99.16% received upto 11^th May 2023) in value of the total project loan outstanding (excluding Litigation cases) have been received from the borrowers.

(b) The Company has impairment provision on Project loans including staff loans (as per ECL approach) of ? 2222.70 crore as on 31^st March 2024 and ?2,431.06 crore as on 31^st March, 2023 as per Ind-AS requirement.

(c) As per RBI notification no. RBI/2019-20/170 Circular DOR (NBFC). CC.PD.No.109/ 22.10.106/2019-20 dated 13^th March, 2020 on implementation of Indian Accounting Standards, Housing Finance Companies are required to create an Impairment Reserve for any shortfall in impairment allowances under Ind-AS 109 and IRACP norms (including provision on standard assets). The impairment allowance under Ind-AS 109 made by the company is lower than the total provision required under IRACP as at 31^st March, 2024 and accordingly, impairment reserve of ?173.44 crore has been created.

In the event of excess payment, the same is adjusted towards principal.

However, in respect of default cases, repayments are first adjusted towards liquidation of the oldest default by following above order and after appropriation of default, the balance, if any, is adjusted as per the normal practice as above pertaining to subsequent period.

8) During the FY 2023-24, the company has implemented restructuring plan in case of Pipavav Defence and Offshore Engineering Co. Ltd. with principal outstanding ? 84.03 crore, as per NCLT order. As per the order part of the outstanding loan was converted into a debt of ? 34.40 crore (current Outstanding), with an upfront payment of ? 3.05 crores and balance principal amount of Rs. 46.58 crores have been written off with the reversal of the corresponding ECL allowance thereof. As per NHB norms, the same will kept as NPA under watch period for one year.

9) HUDCO had earned dividend income of 5.89 Crore (Previous Year: ? 0.06 Crore) during the Financial Year 2023-2024.

10) The company has elected to continue with the carrying value of all its property, plant and equipment and intangible assets and use that carrying value as the deemed cost of the property, plant and equipment and intangible assets as on 01^st April 2017.

11) The Company had made Long Term Investments at a total cost of ? 67.91 Crore (Previous Year: ? 99.86 Crore) which represents Trade Investment in Equity Shares, Investments in Associates. As per the applicable Ind AS, Investments as on 31^st March, 2024 are being shown at fair value through profit or loss of ? 272.75 crore (Previous Year: ? 261.69 Crore).

12) HUDCO had invested as equity of ? 22.85 Crore in Cochin International Airport Ltd (CIAL). CIAL came out with Rights Issue in March 2023. HUDCO Board in its 652^nd Board meeting held on 24^th March, 2023 approved for applying in Rights entitlement for 31,42,207 shares and for additional 7,85,552 shares in the event of non-subscription of rights issue by Other Existing Shareholders, with Issue Price of ? 50/- per share (including Premium of ? 40/- per share) for a total value of ? 19.64 Crore. CIAL Board approved allotment of Rights Issue in 5^th May 2023, accordingly HUDCO was allotted 36,09,547/- shares (Rights Entitlement of 31,42,207 shares and additional 4,67,340 shares) amounting to ? 18.05 crores. HUDCO has got refund of ? 1.59 crores on 10^th May 2023 towards the balance amount thus the total shareholding of HUDCO has gone up from 1,25,68,829 no. of shares to 1,61,78,376 no. of shares and accordingly investment in CIAL was enhanced from ?22.85 Crores to ?40.89 Crore during Financial year 2023-24.

13) The President of India, being the promoter through MoHUA, Government of India has further divested 6.81% (13,62,52,479 equity shares of face value of ? 10) of its holding in HUDCO during Financial Year 2023-2024 through Offer for Sale (OFS). After this disinvestment, the shareholding of President of India in HUDCO has been reduced from 81.81% to 75.00%. The present shareholding in HUDCO -President of India through MoHUA & MoRD is 54.27% & 20.73% respectively and Public Shareholding-25%.

14) Loans granted by the company directly to individuals and bulk loans under HUDCO Niwas Scheme are secured fully/ partly by:

(i) Equitable Mortgage of the property and /or

(ii) Undertaking to create security through execution of Tripartite Agreement between the Company, borrower, and the Developing Authority / Developer;

(iii) Hypothecation of Distribution Assets of the borrower Company.

(iv) Negative Lien on the assets of the borrower Company. Assets of the Company include the book debts and future receivable.

(v) Government Guarantee, first charge on the assets of the housing finance company or First Pari-Passu charge on the outstanding loans or Exclusive Charge/ First Pari-Passu charge on the present and future receivables/ Book Debts, Escrow mechanism, postdated cheques or ECS or RTGS, First Pari-Passu charge on immovable property/ Undertakings, Demand promissory note and irrevocable Power of Attorney in favour of HUDCO to recover the money from individual borrowers.

In addition to (i) and (ii) above, the assignment of Life Insurance Policies, pledge of National Saving Certificates, Fixed Deposits, etc. are also obtained.

15) An amount of ?1.78 Crore has been received during current FY 2023-2024 from Company's maintained PF Trust as against the amount of ?31.10 Crore recouped by the Company in FY 2022-2023 to the Trust as “Investment Loss” and the same is disclosed in “Note 28-Other Income”.

16) The Company has adopted Ind AS-19 'Employee Benefits'. Defined employee benefit schemes which are as follows:

(1) The Company has a separate trust to manage Provident Fund Scheme and provides interest guarantee as per Employees' Provident Fund Scheme, 1952. The Company pays fixed contribution of Provident Fund at a predetermined rate to the trust, which invests the funds in permitted securities. The trust is required to pay a minimum notified rate of interest on contribution to the members of the trust and the provident fund scheme additionally requires the company to guarantee the payment of interest at rates notified by the Central Government from time to time under the Employees' Provident Fund Scheme, 1952 and recognizes such deficiency as an expense in the year it is determined.

In view of the interest rate guarantee by the Company, the plan although being a defined contribution plan is being treated as defined benefit plan for the purpose of disclosure as per Ind AS 19, since as per Section 17 of the Employees Provident Funds (EPF) Act, 1952, the company has to guarantee the interest rate as announced by the EPFO from time to time. Accordingly, the actuarial valuer has done valuation to the extent of interest rate guarantee and details of the same have been disclosed as given below.

o The fair value of the plan assets of the Provident Fund and the accumulated members' corpus is ?450.34 crore and ?436.36 crore respectively (Previous year ?415.90 crore and ?411.57 crore respectively). The fair value of the assets of the provident fund as at 31^st March, 2024 is higher than the obligation under the defined contribution plan. Provision of (-) ?13.98 crore (Previous year (-) ?4.33 crore) is outstanding based on actuarial valuation.

o The total employee benefit expense for the valuation period is ? 9.58 crore. The amount for Other Comprehensive Income is (-) ? 8.58 crore.

The actuarial assumptions include discount rate of 7.10% (Previous year 7.27%) and an average expected future period of 6.02 years (Previous year 6.38 years). The Company recognized ? 11.42 crore (Previous year ?11.09 crore) for Provident Fund contributions in the Statement of Profit and Loss. The contributions payable to this plan by the Company are at rates specified in the rules of the schemes.

(2) The Company has a defined benefit gratuity plan. Every employee is entitled to gratuity as per the provisions of the payment of Gratuity Act, 1972. The scheme is managed by a separate trust through LIC Policy and the premium paid by the Trust is funded by the Company.

(3) The summarized position of various defined benefit schemes recognized in the Statement of Profit & Loss, Balance Sheet and the funded status are as under:

# The scheme of Gratuity is managed by a separate trust through LIC Policy and the premium paid by the Trust is funded by the Company. Further, the schemes of Leave Encashment and Post-Retirement medical benefits are unfunded.

Note:-

a) The Company expects to contribute ?0.46 crore (Previous year ? 1.62 crore) to the Gratuity Fund in the next financial year. The weighted average duration of the defined benefit obligation as at 31st March, 2024 is 5.91 years (Previous year 6.20 years).

b) The Company expects to contribute ? 11.77crore (Previous year ? 8.30 crore) to the Medical Benefit Fund in the next financial year. The weighted average duration of the defined benefit obligation as at 31st March, 2024 is 20.78 years (Previous year 21.21 years).

18) The Govt. of India through its Notification dated 9^th August, 2019 had made Reserve Bank of India (RBI) as the regulator for HFCs and the supervision part continued to remain with NHB.

RBI has issued notification dated 22^nd October, 2020, on regulatory framework for HFCs, by which the definition of HFCs has undergone a change. HFCs which are unable to fulfil the criteria shall be treated as NBFC - Investment and Credit Companies (NBFC-ICC).

Since, HUDCO does not fulfil the criteria of HFC as per the new definition, RBI was requested vide letter dated 16^th December, 2020 for special dispensation to HUDCO for granting exemption and treat HUDCO as HFC.

RBI in its reply letter dated 10^th February, 2021 informed its inability to accede to HUDCO's request for exemption and accordingly suggested to submit a Board approved plan to fulfil the principal business criteria for HFC or to convert into a NBFC-ICC.

RBI was requested vide letter dated 8^th March, 2021 to grant six months' time for transition to NBFC and to retain the status of HFC and to continue operations with the special dispensations/ relaxations given earlier with regard to credit concentration norms/ exposure norms permitted by NHB/ RBI.

In response to HUDCO's request, RBI vide letter dated 26^th March, 2021 and 27^th September, 2021 granted time till 31^st December, 2021 to submit Board approved plan for conversion to NBFC. RBI further advised that the exemptions from concentration/exposure norms granted previously by NHB/RBI would continue to apply at present subject to the conditions specified while granting such exemptions.

The proposal for transition of HUDCO from its present status of HFC to NBFC - IFC was approved in principle by the HUDCO Board in its meeting held on 28^th December, 2021. Thereafter, HUDCO obtained approval from Ministry of Housing and Urban Affairs for the conversion before submission of application form to RBI.

RBI was requested vide letter dated 28^th December, 2021 to grant three months' time for submission of application to RBI and to retain the status of HFC. RBI vide letter dated 31^st December, 2021 granted time till 31^st March, 2022 for conversion from HFC to NBFC-IFC.

HUDCO had submitted application to RBI on 29^th March, 2022 for conversion of Certificate of Registration (CoR) from NBFC- Housing Finance Company (HFC) to NBFC-Infrastructure Finance Company (IFC). In reference thereof, RBI vide letter dated 22^nd December, 2022 expressed its inability to accede to HUDCO's request for conversion of the Certificate of Registration (CoR) to an NBFC-IFC stating that HUDCO is not meeting the criterion specified for NBFC-IFC at Para 3 (xvi)(a) of the Master Direction-Non-Banking Financial Company Systemically Important Non-Deposit Taking Company and Deposit Taking Company (Reserve Bank) Directions, 2016.

After detailed deliberation and ensuring compliance with the RBI Master Directions for NBFCs, HUDCO resubmitted the application with necessary documents to RBI for conversion of certificate as NBFC-IFC on 22^nd February, 2023. RBI vide letter dated 25^th October, 2023 expressed its inability to consider HUDCO's request stating that HUDCO is not meeting the criterion specified for NBFC- IFC at Para 3 (xvi)(a) of the Master Direction-Non-Banking Financial Company Systemically Important Non-Deposit Taking Company and Deposit Taking Company (Reserve Bank) Directions, 2016 i.e. minimum criteria of 75% of its total assets deployed in infrastructure Loans.

Consequent to that, HUDCO's senior management team convened a meeting with RBI officials for consideration of the matter of registration of HUDCO as NBFC-IFC. During the meeting a comprehensive presentation was delivered to address RBI's concerns & queries. Additionally, a detailed roadmap outlining the attainment of infrastructure portfolio by March 2026 was shared with RBI to expedite the conversion process.

Based on the submissions made by the Company, RBI has decided to process our request for conversion of CoR on merit. In this regard, the Company has been advised to submit the application for conversion of CoR along with all latest documents, a statutory auditor certificate indicating position of infrastructure portfolio as on 31^st March, 2024 and revised roadmap to achieve the Principal Business Criteria (PBC).

As advised by RBI, the Company has submitted the application form along with necessary documents including revised roadmap to RBI on 9^th May, 2024 for registration of HUDCO as NBFC-IFC.

In view of above, the management reckons to receive approval from RBI in FY 2024-25. Till such time HUDCO continues to retain the status of HFC.

19) RBI has issued Master Directions for NBFC-HFC vide their Notification dated 17^th February, 2021. RBI's credit concentration norms state that a Housing Finance Company's lending exposure to any single borrower or investment in the shares of another company should not exceed 15% of its owned funds and lending exposure to any single group of borrowers or investment in the shares of single group of companies should not exceed 25% of its owned funds. As per the said circular, Investment of a Housing Finance Company (HFC) in the shares of another HFC shall not exceed 15% of the Equity Capital of the investee company.

HUDCO had invested ?2.50 crore, out of total paid up capital of Rs. 10 crores, in the equity shares of IBHL in the year 1990-1991 and 1991-1992, resulting in investment to the extent of 25% of the equity. The investment was made before regulatory guidelines were issued. No further investment was done nor any disinvestment has been made, HUDCO vide letter dated 16^th June 2023 requested RBI to grant relaxation from concentration norms in respect of investment in IBHL. RBI vide letter dated 10^th October 2023 stated that CoR granted by NHB to IBHL has been cancelled vide order dated 21^st September 2023. Accordingly, investment limit is no longer applicable in respect of IBHL. Accordingly, investment limit prescribed in para 20.1.3 of Master Direction-NBFC-HFC 2021 is no longer applicable to HUDCO's investment in IBHL, thereby non-adherence to compliance in this regard cease to exist. Thus, Company is complying with National Housing Bank's credit concentration norms

NHB/RBI, from time to time, has given certain relaxations from credit concentration norms considering the role envisaged for HUDCO. However, vide its letter No. NHB(ND)/ DRS/ SUP/ 3911/2018 dated 2^nd April, 2018, NHB capped the credit concentration (Exposure) limit for Government/Public agencies as follows:

a. The individual exposure limit of HUDCO to Government/Public Agencies (inclusive of the exposure limit of upto 30% for infrastructure/ non-housing related activities) shall be capped at 50% of its NOF.

b. The exposure limit of HUDCO for State Government (under group exposure) shall be capped at 150% of its NOF in respect of State of Telangana and 100% of NOF for all other States. HUDCO is required to take suitable steps to bring down the group exposure in respect of State of Telangana also to 100% within a maximum period of 3 years The conditions relating to compliance by the concerned State with the FRBM limits shall continue to be ensured by HUDCO.

The Board of Directors of HUDCO in its 594^th meeting held on 19^th April, 2018 considered above and directed that “NHB be again requested to expeditiously review its decision communicated vide its letter dated 2^nd April, 2018 and permit HUDCO to continue on the already approved pattern of credit concentration norms communicated by NHB vide its letters from time to time”.

NHB vide its letter no. NHB(ND)/DRS/SUP/7085/2018 dated 13th July, 2018 conveyed its decision to allow HUDCO to continue its disbursals as per the schedule in relation to the existing sanctions made upto 31st May, 2018. However, HUDCO shall be required to take suitable steps to bring down the exposure to Government/Public Agencies and State Governments (under group exposure) in the above cases also to 50% and 100% respectively latest by March, 2023.

The exposure limits of upto 50% for Government/Public Agencies (inclusive of the exposure limit of upto 30% for infrastructure/non-housing related activities) and upto 100% for State Governments (under group exposure) will continue to be applicable in all other cases. The condition relating to compliance by the concerned State with the FRBM limits shall continue.

HUDCO vide letter dated 6^th March, 2019 requested NHB seeking relaxation in the individual/ group exposure norms. Further, HUDCO also sought exemption from exposure norms for funding of PMAY (U) programme through Extra Budgetary Resources (EBRs).

NHB vide its letter no. NHB(ND)/DRS/SUP/879/2019 dated 8^th March, 2019 granted relaxation in credit concentration norms (under individual borrower exposure to Government /public agency) to HUDCO to extend loan upto ?20,000 crore to BMTPC under the PMAY-U subject to the condition that demand under Credit Linked Subsidiary Scheme (CLSS) is met on priority while utilizing funds lent to BMTPC.

NHB vide its letter no. NHB(ND)/DRS/SUP/880/2019 dated 8^th March, 2019 granted relaxation to HUDCO in respect of credit concentration (exposure) norms upto 140%, 175% and 120% of the NOF in respect of the State of Andhra Pradesh, Telangana and Uttar Pradesh respectively (under group exposure) and upto 55% (under individual exposure) each in case of APTIDCO and HMWSSB subject to the following conditions:

(i) HUDCO shall continue to ensure that the extended exposures (beyond 50% and 100% respectively) are

guaranteed by the State Government(s) and HUDCO will cease to extend further exposure to these states if FRBM limits are breached.

(ii) HUDCO shall also be required to bring down its exposure to 50% in respect of individual exposure and 100% in respect of group exposure latest by 31^st March, 2023, in accordance with the roadmap for graded reduction in exposure approved by Board of Directors.

(iii) The position should be reviewed by the Board of HUDCO on a six-monthly basis to ensure strict adherence to the Board approved exposure reduction plan.

(iv) In the event of HUDCO failing to comply with the above exposure reduction plan, HUDCO will be required to assign risk weight of 100% on the excess exposure in addition to any regulatory penalty as may be applied by the NHB.

The exposure limit of up-to 50% for Govt./Public agencies (inclusive of the exposure limit of up-to 30% for infrastructure/ Non housing related activities) and up-to 100% for State Govt. (under group exposure) will continue to be applicable in all other cases.

RBI has vide its letter no 1736/3.10.136/2019-20 dated 5^th March, 2020 granted relaxation of credit concentration norms for exposure to Telangana State Housing Corporation Limited (TSHCL) upto 75% of Net Owned Fund of HUDCO subject to following conditions:

(i) The additional exposure is backed by explicit guarantee from State Government.

(ii) The exposure to TSHCL will be brought down to 50% of NOF by 31^st March, 2023 as prescribed by NHB (ND)/ DRS/SUP/880/2019 letter dated 8^th March, 2019. A detailed action plan to this effect may be forwarded to NHB.

(iii) Other conditions as prescribed by NHB vide their above-mentioned letter dated 8^th March, 2019 are adhered to.

RBI vide their letter dated 26^th March, 2021 has permitted that the exemptions from concentration/exposure norms granted previously by NHB/RBI would continue to apply at present subject to the conditions specified while granting such exemptions. However, a review shall be undertaken at the time of conversion to NBFC.

As discussed above HUDCO was given the time limit to bring down exposure upto 50% in respect of individual exposure and upto 100% for State Governments (under group exposure) by March 2023. In compliance with the same HUDCO has brought down the exposure to 50% in respect of individual exposure and upto 100% for State Governments (under group exposure) as on March 31^st, 2023 in respect of all states.

RBI has issued Circular No. RBI/DOR.CRE.REC.70/21.01.003/2023-24/112 dated January 15, 2024 on Credit/ investment Concentration Norms- Credit Risk Transfer. As per the Circular, the following shall be offset/kept outside the purview of the computation of exposure:

Cash Margin/caution money/security deposit held as collateral on behalf of the borrower against the advances for which right to setoff is available;

a. Central Government guaranteed claims which attract 0 per cent risk weight for capital computation;

b. State Government guaranteed claims which attract 20 per cent risk weight for capital computation.

Currently HUDCO is computing exposure and complying with credit concentration norms as per RBI Circular No. RBI/ DOR.CRE.REC.70/21.01.003/2023-24/112 dated January 15, 2024 on Credit/investment Concentration Norms- Credit Risk Transfer.

sending a physical copy of the same, duly signed by all the bondholders to the Company, along with requisite documents enumerated in “Form No. IEPF-5”. No claims shall lie against the Company in respect of the amounts, so transferred to the IEPF Authority. Dividend on equity shares and Principal & interest on Debentures/Bonds/PDS aggregating to ?18.68 (Previous Year ? 14.90 Crore) were due and unclaimed as on 31^st March, 2024. During the year 2023-24, an amount of ? 0.88 Crore (previous year ? 1.88 Crore) has been transferred to IEPF after completion of statutory period of seven years.

22) The Company is in the continuous process of obtaining confirmation from its suppliers regarding their status under the “Micro, Small and Medium Enterprises Development Act, 2006”. The company has outstanding due Rs. 0.17 Crore of MSME as on 31.03.2024 (previous year Rs.0.20 Crore).

23) The Company is engaged in the business of providing loans/finance for Housing/ Infrastructure projects and all other activities of the Company revolve around the main business within India. Accordingly, the company does not have separate reportable segments in terms of Indian Accounting Standard (Ind AS-108) on “Operating Segments”.

24) (i) The company has tested Impairment on assets in detail as per Ind-As 36 and as a result of assessment/testing, there is no Impairment of Assets during the Financial Year 2023-24.

(ii) Vide gazette notification no. 26/2019 dated 20^th March, 2019, the Company was notified for the purposes of Section 194A(3)(iii)(f) of the Income Tax Act, 1961 for non-deduction of Tax at source.

25) The Company has discontinued acceptance/renewal of Public Deposits under its Public Deposit Scheme from 01^st July, 2019. However, redemption of deposits already taken shall be made on due dates.

26) The company, while raising resources, is incurring expenses of recurring nature such as debenture trusteeship fees, listing fees to stock exchanges, custodian charges to depositories, R&T Charges etc., which are not amortized over life of resource raised. The aforesaid expenses are charged to Statement of Profit and Loss under the Head “Fees and Commission Expense”

27) HUDCO had invested an amount of ?50 Crore in “IIFCL Mutual Fund Infrastructure Debt Fund Series-1” in FY 201314, which constitute 16.67% of total holding of the fund. IIFCL Mutual Fund has prematurely closed/winded up the aforesaid scheme due to inability to comply with SEBI guidelines, high cost involved and low returns of around 4% since inception vis a vis market condition and remitted an amount ?75.72 Crore in the month of Sept. 2023 based on realized investments. Further “IIFCL Mutual Fund Infrastructure Debt Fund Series-1” in meeting dated 15.03.2023 had decided

29) During the year ended 31^st March 2024, the Company has raised funds through issue of listed non-convertible debt security on private placement basis. The issue proceeds of non-convertible debt securities issued during the period, have been fully utilized for the purpose(s)/ objects stated in the offer documents/ Information memorandum and there has been no deviation / variation in the use of proceeds of non-convertible debt securities from the objects stated in the offer documents/ Information memorandum. Further, there has been no default in repayment of debt securities, borrowings and other liabilities and the Company has met all its debt servicing obligations, both towards principal and interest, during the period in a timely manner

30) The Company makes full provision on doubtful debtors/ receivables which are outstanding for more than three years.

31) The Company has taken various office premises on cancellable operating lease basis with an option to renew the lease by mutual consent on mutually agreeable terms. The aggregate lease rentals payable is charged as “Office Rent under Note No. 32- Other Expenses” of the Statement of Profit & Loss. Further, there is no financial lease as Company's leasing arrangement does not transfer substantially all risks & rewards incidental to the ownership of an asset.

32) During the year under review, a provision for bad and doubtful debts under section 36(1)(viia), of Income Tax Act 1961 equivalent to 5% of the taxable income (after allowing deduction u/s 36(1)(viii)), totaling to ? 120 crore has been created.

33) (a) The company has declared an interim dividend of ?300.29 crore @ ?1.50 per Share of ?10/- each, to its shareholders, during the FY 2023-24 after approval of Board of Directors in its meeting held on 20^th March 2024. The same has been paid to shareholders within prescribed timelines.

37) Exit from Associate Companies:

(a) Signa Infrastructure India Ltd. (SIIL)

The company has decided to exit Signa Infrastructure India Ltd.-SIIL with Marg Construction Ltd. In pursuance of the Board's approval, the valuer was appointed by the Associate Company i.e., SIIL and indicated the value of the shares (?10 each) at ?76.22 per share. HUDCO has made an offer to the Associate Partner to purchase HUDCO shares in SIIL. The company has not responded to HUDCO offer. The Board of HUDCO was updated of the latest status and HUDCO Board in its meeting held on 19^th December, 2019 decided that steps be taken for termination of joint venture agreement with M/s. Marg construction Ltd. (Promoter of Signa Infrastructure India Ltd) & withdrawal of HUDCO Nominee Director. In pursuance of Board Decision, HUDCO Nominee Director had submitted his resignation to the Company. In subsequent discussion held with Parent Co.-Marg Limited, HUDCO has requested for submission of concrete proposal for exit of HUDCO. Reply is awaited from Parent Co.-Marg Limited.

(b) Pragati Social Infrastructure & Development Ltd.

HUDCO has decided to exit from Pragati Social Infrastructure & Development Ltd.-PSIDL. PSIDL is not providing any financial information for the purpose of valuation of shares because of court injunction. HUDCO has filed a Petition u/s 397 & 398 of the Companies Act 1956 before National Company Law Tribunal (NCLT) for oppression and mismanagement of operations, against Pragati Social Infrastructure & Development Limited (PSIDL) and others which is pending for final hearing.

(c) Shristi Urban Infrastructure Development Ltd.

The company had decided to exit from Shristi Urban Infrastructure Development Ltd.-SUIDL with Shristi Infrastructure Development Corporation Ltd. In this regard, the underlying assets i.e., SARGA Udaipur Hotels and Resorts Pvt. Ltd. (Being subsidiary of Shristi Urban Infrastructure Development Ltd.-SUIDL) has voluntarily approached NCLT for Insolvency Proceedings which is underway, resulting in non-availability of authentic data for valuation of Associate Company.

38) Valuation of Investment

The Company had invested? 2.50 crore in the shares of the Indbank Housing Ltd. (IBHL) more than 30 years back. Considering the fact that IBHL has highly negative Net Worth and meagre volume of trading in the share of the company, even though market price of the share as on 31^st March, 2024 is ?46.61 per share (previous year ?25.22 per share), HUDCO continues to reflect the investment of ?2.50 crore in IBHL at diminished value of ?1 only as on 31^st March, 2024. Besides RBI vide letter dated 10^th October 2023 has informed that CoR granted by NHB to IBHL has been cancelled vide order dated 21^st September 2023 hence no longer a HFC.

39) Related parties Disclosure:

(a) Associates

(1) Shristi Urban Infrastructure Development Ltd.

(2) Pragati Social Infrastructure & Development Ltd.

recognizes the expenditure after utilization of funds. During the year, CSR assistance of ? 60.90 crore was approved for different ongoing proposals and expenditure on these shall be booked based on utilization certificate and taking into account the physical progress achieved by the implementing agencies. During the financial year, an expenditure of ? 27.23 crore including admin expenses was incurred on different proposals (including contribution of ? 15.00 crore to 'PMCARES Fund') approved during FY 2023-24 and the balance amount of ? 18.34 crore (including amount of ? 6.41 crore disbursed to implementing agencies pending utilization) was transferred to the 'Unspent CSR account' opened with a scheduled bank and shall be utilized in accordance with CSR Amendment Rules 2021 under companies act, as in a few proposals implementing agencies are in process of completion of formalities for execution of works e.g finalization of tender etc. and in other proposals the same is to be utilized on achievement of required physical progress.

d) In compliance with the Ministry of Corporate Affairs, Government of India notification dated 22^nd January, 2021, HUDCO has transferred an amount of ? 18.30 crore being the unspent CSR budget amount for the financial year 2022-23 to 'PMCARES FUND' a fund specified in Schedule VII of the Companies Act, 2013 on 30.09.2023, as already mentioned in the annual report of CSR activities for financial year 2022-23.

e) As on 31.03.2023, the total amount available under Unspent CSR Account opened in April 2021 was ?15.56 crore (including amount of ? 1.81 crore disbursed to implementing agencies pending utilization). During the year, a refund of ? 0.28 crore and interest of ? 0.04 crore was also received in to account from implementing agencies. During the year, an expenditure of ? 13.49 crore was incurred from the account, including contribution of ? 9.50 crore to 'PMCARES Fund' by reallocation of assistance approved earlier for other projects due to closure/ curtailment and interest & refund received) and the balance amount available in Unspent CSR account pertains to 2 proposals, which are sub-judice. In addition to this, from the account ? 1.93 crore was also transferred to 'PMCARES FUND' and ? 0.03 crore to 'Swachh Bharat Kosh' respectively, being the unspent CSR funds due to closure/curtailment in the ongoing proposals.

f) As on 31.03.2023, the total amount available under Unspent CSR Account opened in April 2023 was 26.68 crore. During the current year, from the account an expenditure of ? 6.12 crore was incurred and an amount of ? 0.0088 crore was also transferred to 'Swachh Bharat Kosh', being the unspent CSR funds due to curtailment in the ongoing proposal and the amount available in the account is ?20.55 core (including amount of ? 5.49 crore disbursed to implementing agencies pending utilization) as on 31.03.2024.

42) Research & Development (R&D)

The Company had formulated a Research & Development (R&D) policy in line with the guidelines issued by the Department of Public Enterprises vide Office Memorandum No. 3(9)/ 2010-DPE (MoU) dated 20.09.2011. However, vide Office Memorandum No. M-05/0012/2014-DPE(MoU) dated 17^th July, 2019, DPE informed that the guidelines prescribed vide above Office Memorandum dated 20.09.2011 have become redundant and stood withdrawn. The Board of Directors of HUDCO in its meeting held on 19.02.2020 noted the above development and has also approved to continue with HUDCO's own R&D policy formulated in 2012. The Board of Directors also approved to discontinue with earmarking 0.5% of PAT until the accumulated non-lapsable R&D funds are fully utilized. During the FY 2023-24, an amount of ?0.10 crore was spent on R&D. Accordingly an amount of ? 9.20 crore as on 31^st March 2024 (Previous Year: ? 9.30 crore) was available with HUDCO as non-lapsable R&D funds.

43) The Company has not advanced or lent or invested any funds which are material either individually or in the aggregate (either from borrowed funds or share premium or any other sources or kind of funds) to or in any other person(s) or entity(ies), including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

The Company has not received any fund which are material either individually or in the aggregate from any person(s) or entity(ies), including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

44. Additional Disclosure requirement as per NHB/RBI Directions a) Capital to Risk Assets Ratio (CRAR)

iii) Disclosures on Risk Exposure in Derivatives

A. Qualitative Disclosure

The Company has Risk Management Policy duly approved by the Board. The Policy covers the currency risk (including interest rate risk) of the Company. This policy provides the guiding parameters within which the Company can take decisions for managing the Currency Risk that it is exposed to on account of foreign currency loans. The purpose of the policy is to provide a framework to the company for management of its foreign currency risk.

B. Risk Management Structure:

(a) The Company enters into derivatives viz. Principal only Swaps, Currency and Interest Rate Swaps/Option Contracts/ Forward rate contract for hedging the interest/ exchange rate risk in foreign currency liabilities. An Asset Liability Management Committee (ALCO) is currently functioning under the chairmanship of Director Finance with Head of Resources, Head of Operations, Head of Loan accounts, Head of General Accounts, Head of Economic Cell, Head of Risk Management as Member Secretary, or any other officer nominated as by ALCO Chairman as its member ALCO monitors effectiveness of existing and new hedging instruments/ strategies being used/ to be used for management of the Currency risk and also for taking stock of the market movements. The decisions of the ALCO are reviewed by the Risk Management Committee (RMC) for managing the risks. The decisions taken by the RMC are subsequently reported to the Board of Directors.

(b) These derivative transactions are done for hedging purpose and not for trading or speculative purpose.

(c) Reference may be drawn to Sub Point No. 4.6 of para 6 of Notes forming part of accounts under Significant Accounting Policies for relevant accounting policy on Transactions in Foreign Currency.

Notes:

1. Significant counterparty/ Significant instrument/ product is defined as single counterparty/ single instrument/ product or group of connected or affiliated counterparties accounting in aggregate for more than 1% of the total liabilities.

2. “Public Deposits” are as defined in the Master Directions - Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016.

3. Total Liabilities has been computed as sum of all financial and non-financial liabilities (extracted from the limited reviewed Standalone Financial Statements prepared as per IND-AS for the period ended March 31, 2024) and does not include equities and Reserve & Surplus.

4. “Public Funds” are as defined in Master Directions- Non-Banking Financial Company -Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016, which states that “Public funds” includes funds raised either directly or indirectly through public deposits, inter-corporate deposits, bank finance and all funds received from outside sources such as funds raised by issue of Commercial Papers, debentures etc. but excludes funds raised by issue of instruments compulsorily convertible into equity shares within a period not exceeding 5 years from the date of issue.

5. The information stated in this disclosure is based on audited Standalone Financial Statements (prepared as per IND-AS) for the period ended March 31, 2024.

46) Disclosure on Liquidity Coverage Ratio Qualitative Disclosure:

Institutional set-up for the Liquidity Risk Management: HUDCO has implemented an integrated risk management approach through which it reviews and assesses significant risks on a regular basis to ensure that there is a robust system of risk controls and mitigation in place. HUDCO has a well-structured robust Risk Management Policy and Operating Manual in line with its objectives to address the various risks.

In compliance with the SEBI (LODR) Regulations, 2015, HUDCO has in place a Board level Committee under the nomenclature 'Risk Management Committee' (RMC) headed by an Independent Government Nominee Director, which reviews various decisions/ recommendations of the three sub-committees namely:

• Assets & Liabilities Management Committee (ALCO);

• Credit Risk Management Committee (CRMC); and

• Operational Risk Management Committee (ORMC)

The Risk Management Committee (RMC), which is a committee of the Board, is responsible for evaluating and monitoring the integrated risk management system of the Company including liquidity risk. The ALCO is responsible for ensuring adherence to the liquidity risk tolerance/limits set out in the board approved Asset Liability Management (ALM) policy. The role of the ALCO with respect to liquidity risk includes, inter alia, decision on desired maturity profile for assets & liabilities, responsibilities and controls for managing liquidity risk, and overseeing the liquidity position of the company.

Management regularly reviews the position of cash and cash equivalents by aligning the same with the projected maturity of financial assets and financial liabilities, economic environment, liquidity position in the financial market, anticipated pipeline of future borrowing & future liabilities and threshold of minimum liquidity defined in the ALM policy with additional liquidity buffers as management overlay

The Liquidity Coverage Ratio (LCR) is a global minimum standard to measure the Company's liquidity position. The Reserve Bank of India (RBI), vide its Master Direction - Non-Banking Financial Company - Housing Finance Company (Reserve Bank) Directions, 2021, dated February 17, 2021, introduced the LCR requirement for all non-deposit-taking HFCs with an asset size of Rs. 10,000 crore and above and all deposit taking HFCs irrespective of their asset size as per the following timeline:

Currently the company is required to maintain minimum LCR of 70% w.e.f. December 01, 2023.

Further, the afore mentioned Master Direction states that the guidelines on Liquidity Risk Management Framework prescribed for NBFCs by the RBI vide its Master Direction - Reserve Bank of India (Non-Banking Financial Company - Scale Based Regulation) Directions, 2023, dated October 19, 2023 shall apply mutatis mutandis to Housing Finance Companies (HFCs).

As per the said guidelines, the Company shall maintain an adequate level of unencumbered High Quality Liquid Assets (HQLA) that can be converted into cash to meet its liquidity needs for a 30 calendar-day time horizon under a significantly severe liquidity stress scenario. “HQLA” means liquid assets that can be readily sold or immediately converted into cash at little or no loss of value or used as collateral to obtain funds in a range of stress scenarios. “Unencumbered” means free of legal, regulatory, contractual or other restrictions on the ability of the NBFC to liquidate, sell, transfer or assign the asset. Assets to be included in the computation of HQLAs are those that the NBFC is holding on the first day of the stress period. Such assets shall be valued at an amount not greater than their current market value for the purpose of computing the LCR. Depending upon the nature of assets, they have been assigned different haircuts, which are to be applied while calculating the HQLA for the purpose of calculation of LCR.

In order to determine HQLA, the company invest requisite amount in Government securities owing to the fact that it bears 0% haircut.

Liquidity Coverage Ratio (LCR) is represented by the following ratio:

Stock of High-Quality Liquid Assets (HQLAs)

Total Net Cash Outflows over the next 30 calendar days

In order to determine Net Cash Outflows, the Company considers total expected cash outflow minus total expected cash inflows for the subsequent 30 calendar days by assigning a predefined stress percentage to the overall cash inflows and cash outflows. Total expected cash outflows (stressed outflows) are calculated by multiplying the outstanding balances of various categories or types of liabilities and off-balance sheet commitments by 115% (15% being the rate at which they are expected to run off further or be drawn down). Total expected cash inflows (stressed inflows) are calculated by multiplying the outstanding balances of various categories of contractual receivables by 75% (25% being the rate at which they are expected to under-flow). However, total cash inflows will be subjected to an aggregate cap of 75% of total expected cash outflows.

In other words:

Total Net Cash Outflows over the next 30 days = Stressed Outflows - Lower of (Stressed Inflows or 75% of Stressed Outflows).

The Company computes the LCR and reports the same to the Asset Liability Management Committee (ALCO) every month for review and approval.

III. There was no delay in the registration or satisfaction of any charges with Registrar of Companies during the year ended March 31, 2024 and March 31, 2023.

IV. The company does not have any investment in any subsidiary company. Therefore, there is no requirement to comply with the number of layers prescribed under clause (87) of section 2 of Companies Act, 2013 read with Companies (Restriction on number of Layers) Rules, 2017.

V. The Company has not traded or invested in Crypto currency or Virtual Currency during the year ended March 31, 2024 and March 31, 2023

VI. There are no undisclosed incomes that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961.

VII. Analytical Ratios

a. Capital to Risk-weighted Assets Ratio: -Refer note no. 34

b. Liquidity Coverage Ratio: - Refer note no.46

51) (a) Figures of the previous period have been regrouped/ rearranged/ re-casted wherever considered necessary to make

them comparable with figures for current year.

(b) Figures in rupees have been rounded off to crore upto two decimals except where specifically indicated.

For and on behalf of the Board

Sd/- Sd/- Sd/- Sd/-

Vik_as G_oy_al D. Guhan M. Nagaraj Sanjay Kulshrestha

Comp_any S_ecretary Director Finance & Chief Financial Director Corporate Planning Chairman & Managing FCS 6671 Officer DIN 05184848 Director

DIN 06757569 DIN 06428038

As per our separate report of even date attached For A P R A & Associates LLP Chartered Accountants FRN- 011078N/N500064

Sd/-

Ashok Gupta

Place: New Delhi Partner

Date: 24^th May, 2024 M. No.- 085683)