dewan housing finance corporation housing finance corporation limited (originally incorporated as...
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DEWAN HOUSING FINANCE CORPORATION LIMITED(Originally Incorporated as Dewan Housing Finance & Leasing Company Ltd. on 11th April 1984 under the Companies Act, 1956.The name was subsequently changed to Dewan Housing Development Finance Ltd. on the 26th September 1984 and later toDewan Housing Finance Corporation Ltd. on 25th August 1992.)
(For Private circulation to the equity shareholders of the Company)
Registered Office : Warden House, Sir P M Road, Fort, Mumbai 400 001.Tel: (022) 2202 9900 / 2204 7092 Fax: (022) 2287 1985
Corporate Office : Madhava, Bandra Kurla Complex, Bandra (E), Mumbai 400 051Tel. (022) 2659 1222 (5 lines) Fax: (022) 2659 4865 E-mail: firstname.lastname@example.orgWeb site: www.dhfl.com
Offer for 1,43,18,063 Equity Shares of Rs.10/- each for cash at premium of Rs.25/- per share (i.e. at aprice of Rs.35/- per share) aggregating to Rs.5011.32 lacs on a rights basis to the existing equityshareholders of the Company in the ratio of 4 (Four) Equity Shares for every 10 (Ten) Equity Sharesof Rs.10/- each held as on 03/12/2004 (the Record Date).
Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds inthis issue unless they can afford to take the risk of losing their investment. Investors are advised to read the risk factorscarefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely ontheir own examination of the Issuer and the Issue including the risks involved. The securities have not been recommendedor approved by the Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or theadequacy of this document. The attention of investors is drawn to the statement of Risk Factors appearing onpage nos. (ii) to (viii) of this Letter of Offer.
ISSUERS ABSOLUTE RESPONSIBILITY
The Issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this Letter of Offer containsall information with regard to the Issuer and the Issue, which is material in context of the Issue, that the informationcontained in this Letter of Offer is true and correct in all material respects and is not misleading in any material respect,that the opinions and intentions, expressed herein are honestly held and that there are no other facts, the omission ofwhich makes this document as a whole or any of such information or the expression of any such opinions or intentionsmisleading in any material respect.
The existing equity shares of the Company are listed on The Stock Exchanges at Mumbai (BSE) (Designated StockExchange) and National Stock Exchange of India Ltd. (NSE). Applications will be made to these stock exchanges forpermission to deal in and for an official quotation in respect of the equity shares of the Company being offered in termsof this Letter of OfferThe Company has received in-principle approval from BSE and NSE for the Rights Issue vide theirletter no. DCS/SMG/NSS/04 dated 23/10/2004 and letter no. NSE/LIST/6701-6 dated 07/10/2004 respectively.
LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE
307, Regent Chambers,Nariman Point, Mumbai - 400 021Tel. : (022) 2202 5230Fax : (022) 2283 5467e-mail: email@example.comSebi Regn. No.: INM 000003606AMBI Regn No: AMBI/040
ISSUE OPENS ON : 20th December, 2004, MondayLAST DATE FOR RECEIVING REQUESTS FOR SPLIT FORMS 04th January, 2005, TuesdayISSUE CLOSES ON : 19th January, 2005, Wednesday
LETTER OF OFFER
INTIME SPECTURM REGISTRY LIMITEDC-13, Pannalal Silk Mills Compound,LBS Road, Bhandup West,Mumbai - 400 078Tel.: (022) 5555 5454Fax: (022) 5555 5353e-mail: firstname.lastname@example.orgSEBI Regn. No.: INR 00003761
INDEX TO THE CONTENTS
Title Page Nos.
- Definitions / Abbreviation i
- Risk Factors & Management Proposals Thereof ii
I IMPORTANT INFORMATION 1
II. GENERAL INFORMATION 5
III CAPITAL STRUCTURE OF THE COMPANY 9
IV PRINCIPAL TERMS OF THE ISSUE 15
V PARTICULARS OF THE ISSUE 25
VI COMPANY MANAGEMENT AND PROJECT 27
VII FINANCIAL INFORMATION 48
VIII MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION ANDRESULTS OF THE OPERATIONS AS REFLECTED IN THE FINANCIAL STATEMENTS 61
IX WORKING RESULTS 66
X RISK FACTORS 67
XI OTHER MATTERS 70
XII MATERIAL CONTRACTS AND DOCUMENTS 71
XIII DECLARATION 72
Articles : Articles of Association of Dewan Housing Finance Corporation Limited
ALM : Asset Liability Management
Board : Board of Directors of Dewan Housing Finance Corporation Limited
BSE/Designated Stock Exchange : The Stock Exchange, Mumbai
CAF : Composite Application Form
EMI : Equated Monthly Installment
FEMA : The Foreign Exchange Management Act, 1999
FERA : Foreign Exchange Regulation Act, 1973
FII : Foreign Institutional Investor
GOI : Government of India
HFC : Housing Finance Company
Letter of Offer : This Letter of Offer dated 06/12/2004
Memorandum : Memorandum of Association of Dewan Housing Finance Corporation Limited
NHB : National Housing Bank
NPA : Non Performing Assets
NRI : Non-Resident Indian.
NSE : National Stock Exchange of India Limited
OCB : Overseas Corporate Bodies
Offer/Issue : Offer for the issue of 1,43,18,063 Equity Shares of Rs.10/- each for cashat premium of Rs.25/- aggregating Rs.5011.32 lacs on a rights basis to theexisting equity shareholders of the Company in the ratio of 4 (Four) EquityShares for every 10 (Ten) Equity Shares of Rs.10/- each held as on theRecord Date (i.e. 03/12/2004)
RBI : Reserve Bank of India
SEBI : Securities and Exchange Board of India.
SARFAESI Act : Securitisation and Reconstruction of Financial Assets and Enforcement ofSecurity Interest Act
The Act : The Companies Act, 1956.
The Company / DHFL : Dewan Housing Finance Corporation Limited
Tier-I Capital : Means owned fund as reduced by Investment in shares of other HousingFinance Companies and in shares, debentures, bonds, outstanding loansand advances including hire purchase and lease finance made to anddeposits with subsidiaries and companies in the same group exceeding inaggregate 10% of owned funds.
Tier-II Capital : Includes the following :
1. Preference shares (other than those compulsorily convertible into equity)
2. Revaluation reserve at discounted rate of 55%.
3. General provisions and loss reserves to the extent these are notattributable to actual diminution in value or potential loss in any specificasset and are available to meet unexpected losses to the extent of 1and 1/4 % of risk weighted assets.
4. Hybrid debt
5. Subordinated Debt
RISK ENVISAGED BY MANAGEMENT AND MANAGEMENT PROPOSALS (MP) TOADDRESS THE RISKS
A. INTERNAL RISK FACTORS
1. Contingent Liabilities
As on March 31, 2004 the contingent liabilities of the Company were at Rs.2.30 crores comprising guaranteesprovided by the Company.
The contingent liabilities have arisen in the normal course of business of the Company.
2. Conflict of Interest
DHFL Vysya housing Finance Ltd. a subsidiary of DHFL is also engaged in the business of providing housingfinance. To this extent there is a conflict of interest between the two companies.
3. Legal/Regulatory Risk
The housing finance business involves creation and dealing with mortgages. However, in the case ofmortgages, enforcement risks exist in markets with weak Legal and Regulatory systems, along with volatileeconomic and political conditions.
This type of risk is not accepted by risk intermediaries such as mortgage insurers. Short-term unsecuredloans issued by Housing Finance Companies (HFCs) are covered by an insurance cover similar to thatprovided for bank deposits under the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme.Further, the SARFAESI Act empowers HFCs to take over the assets in case of defaults, which is a much-simplified procedure.
4. Credit Risk
The housing finance companies face credit risk because of the lack of hard data and historical performancemeasures with which to assess the real risk. This is typical of developing markets. The credit risk also ariseson account of the quality of the mortgage loan portfolio and it is extremely important to control this risk inhousing finance industry.
It is important to assess the repayment capacity of the borrower, find the collateral that the borrower can offerand insure the receivables from various uncertainties that may occur during the existence of the loan. DHFLhas a team of well-qualified and experienced professionals administering the credit function. The creditappraisal systems are in place and are followed uniformly. These measures minimize the credit risk to a greatextent. DHFL also provides Triple Insurance Cover to the borrowers to safeguard the borrowers and itselfagainst any uncertainties in future. Low level of NPAs in DHFL indicates the control over credit risk.
Further, formation of Credit Information Bureau (India) Limited (CIBIL) has also helped DHFL in reducingcredit risk due to the availability of data on the credit profile of its borrowers. CIBIL was formed by the StateBank of India (SBI), Housing Development Finance Corporation Limited (HDFC), Dun & Bradstreet InformationServices India Private Limited (D&B) and TransUnion International Inc. (TransUnion)
The idea behind CIBIL was to fulfil the need for comprehensive credit information by gathering credit relatedinformation regarding commercial and consumer borrowers, maintaining a database of this informa