Transcript
Page 1: DEWAN HOUSING FINANCE CORPORATION … housing finance corporation limited (Originally Incorporated as “Dewan Housing Finance & Leasing Company Ltd.” on 11th April 1984 under the

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 to“Dewan 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: [email protected] 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).

GENERAL RISKS

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.

ISSUER’S 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.

LISTING

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 protected] 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: [email protected] Regn. No.: INR 00003761

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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

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DEFINITIONS/ABBREVIATIONS

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

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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.

Management Proposal

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.

Management Proposal

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.

Management Proposal

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 information andselling the information in the form of credit reports to a closed user group of Members. The users of CIBILare Banks, Financial Institutions, Non Banking Financial Companies, Housing Finance Companies and CreditCard Companies.

The establishment of CIBIL is a crucial effort made by the Government of India and the Reserve Bank ofIndia in their drive to improve the working of the financial system, specifically to contain future NPAs bytaking on good quality assets in the books of the credit grantors. The relationship between CIBIL and itsMembers is one of close interdependence. CIBIL provides a vital service to its Members enabling them tomake informed, objective and speedier credit decisions.

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DHFL is one of the members and clients of CIBIL as it believes that sharing of credit information on theborrowers among the lenders of various financial products will help in substantially bringing down the creditrisk for all market participants. DHFL has incorporated credit verification through the credit bureau as anintegral part of its sanctioning process for all its applicants. It is expected that participation of the lenders inCIBIL would increase substantially in the near future thereby increasing coverage and reducing credit risk.

Apart from this, the credit risk is mitigated in DHFL by verifying the customer’s credit record from bankstatements, credit card statements, etc. which enables the Company to verify the track record of the prospectivecustomer. DHFL’s product portfolio comprises of a variety of products that suits the requirements of thecustomers and enables the Company to target a large customer base. DHFL through its constant innovationin the product portfolio has been able to face the market risk.

5. Operations Risk

Operational risk occurs at all levels of activity in the mortgage operation. This risk is essentially defined asthe ability of the Company to originate and manage loans at a profit. The ability to originate the loansdepends on the range of products, marketing strength, branch network and technology.

Management Proposal

DHFL has a wide range of products, which caters to every segment of the market and has a network of 45branches and 120 camp locations. Most of the branches are connected to the head office and on linesanctioning of applications takes place in these branches. The most of the branches are being connectedto the head office for faster processing of loan applications. Standardization of procedures results in minimizationof errors and prevention of frauds. The profitability is being managed by strict cost control mechanism in allareas of operations.

6. Liquidity Risk

Liquidity risk can be defined as the Asset-Liability mismatch caused due to the difference in the maturitiesprofile of the Assets and Liabilities. Housing Finance Companies (HFCs) in particular are more exposed tothis kind of risk in view of the fact that the assets generated by HFCs are of an average tenor of 10-12 years.As against this, the liabilities contracted are of a tenor of 7-10 years. This is more narrowed down in thecurrent market scenario since the lenders are reluctant to take the exposures of longer tenors.

In order to maintain the liquidity ratio at desired levels, it is required to generate the short-term assets fromthe long-term debts. This apart from providing comfort on the liquidity front earns the higher spread for theCompany and helps in mitigating the interest rate risks. DHFL has already taken a step in this direction bylaunching Home Loans Plus scheme last year. The other product is Lease rental financing.

Management Proposal

In order to tackle the asset-liability mismatch, the instrument that is gaining popularity is the Securitizationof Receivables. By this, bulk of the housing loans is pooled into the mortgage pass-through securities witha matching maturity profile. DHFL has already completed its maiden securitization issue. To further monitormarket risk management systems, the Board of Directors of the Company has approved an ALM policy,which inter alia defines the Company’s risk philosophy, specifies prudent gaps and tolerance limits andreporting systems. The Asset Liability Management Committee (ALCO), which comprises of senior management,apprises the Board periodically on ALM issues.

7. Interest Rate Risk

The borrowings of the Housing Finance Companies (HFCs) are largely linked to benchmarks like the PrimeLending Rates (PLRs) and hence the debt of the Company is mainly floating in nature. This exposes theHFCs to the Interest Rate Risk. Consequently, the Interest rates need to be managed in order to mitigatethe risk.

Management Proposal

DHFL has introduced Variable Rate Housing Loans to its customers. With this, any movements in rate ofborrowings are hedged by the loans advanced at variable rates. DHFL is also entering into Interest RateSwaps (IRS) whereby the base rates are frozen with the banks by selling off PLRs or the base rates as

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applicable. Moreover, constant debt replacements are being made in order to reduce the interest rates andavail the benefits in the movements in the Interest Rates. The implementation of ALM module will also helpthe Company in identifying and bridging the gaps, if any.

8. Any Time Exit Options on the Loans

DHFL borrows funds from Commercial Banks, Capital Market, LIC, NHB, etc. Certain borrowings fromCommercial Banks have any time exit option to both the borrower (DHFL) and the lender after giving a noticeof 30 days. This poses a risk of the loans being recalled by the lender at any time, which could strain theliquidity of DHFL.

Management Proposal

The company has been in existence for the past 20 years in the same line of business. There has been noprecedent of recall of loans. The loans are under agreement for a specified period. The Company maintainsAsset Liability Management (ALM) as per the NHB guidelines. Out of the total borrowings of Rs.132651.28Lacs only 1.88% of the loans availed by DHFL have the any time exit option.

The management views this loan recall option as a tool to repay the loans in case of change of interest rates.The management in the past have repaid high cost loans under this option and replaced them with lowercost borrowings from the market/lenders.

9. The company’s income tax assessment has been completed upto the financial year ending 31/03/2001. Theincome tax department has raised additional demands of Rs.54.94 lacs against which the company haspreferred appeal with the appropriate authorities.

The subsidiary company’s income tax assessment has been completed upto the financial year ended31/03/2002. the income tax department has raised an additional demand of Rs.105.45 lacs which thecompany has preferred appeal with the appropriate authorities.

Management Proposal

Pending Appeals, the Company and its subsidiary have already paid the above dues.

10. Outstanding Litigations against the Company

There are outstanding litigations amounting to Rs.19.30 lacs pending against the Company, the details ofwhich are given below:

Sr. Court/Consumer Forum Nature of claims AmountNo. (Rs. Lacs)

1 Various Consumer Forums 36 minor claims for refund of 14.27processing fees, prepayment charges etc.

2 Labour Commissioner Disputed claim and gratuity* 2.02

3 Various Courts 12 miscellaneous matters pertaining to loan account. 3.01

(Refer to page no. 38 of this Letter of Offer)

Management Proposal

*Dispute pending before the labour Commissioner related to gratuity of one of the ex-employees of theCompany withheld/ adjusted.

Pursuant to relevant provisions of the Payment of Gratuity Act, 1972, the Company has withheld/adjustedgratuity payable to an ex-employee against the amount recoverable from him. The Company has filed itsreplies before the Asst. Labour Commissioner being the Controlling Authority under the said Act at Indoreand the matter is pending. The Company will abide by the final decision that may be given by the saidauthority in this behalf.

The above claims are not material to affect the operations and finances of the Company.

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11. Shortfall in Promise versus Performance

Shortfall in the performance vis-à-vis the promise made in the offer document by the company in respectof earlier issues are as follows:

(a) Rights Issue made in the year 2000

Particulars % Shortfall as on 31/03/2000

Total Income 1.09

Profit After Tax 0.23

(b) Rights Issue made in the year 1994

Particulars % Shortfall % Shortfall % ShortfallAs on 31/03/1995 As on 31/03/1996 As on 31/03/1997

Total Income 11.12 17.78 29.56

Profit After Tax 53.36 76.02 57.14

12. Losses incurred by other ventures of the promoters are as follows:

(Rs. In Lacs)

Particulars 2002 2003 2004

DHFL Property Services Ltd. 0.34 2.43 –

DHFL Insurance Services Ltd. – 35.62 –

13. DHFL Asset Reconstruction Co. Ltd. and Wadhawan Holdings Private Ltd., associate companies of DHFLhave not been carrying on any business since their incorporation in 24/12/2002 and 22/04/2002 respectively.

B. EXTERNAL RISK FACTORS

1. Regulatory Changes

Major changes in Government/NHB policies relating to Housing Finance Sector may have an impact on theoperations of the Company.

Management Proposal

The policy changes may provide both opportunities and challenges for the Company. The Company has along presence in the housing finance sector and does not perceive policy changes to be a major threat. Assuch the company is not anticipating any adverse changes in Government/NHB policies.

2. Risk of Competition

This risk may arise from existing players or new entrants in the business of housing finance.

Management Proposal

The Company can leverage on its vast experience as one of the pioneers of retail housing finance in India,its strong brand name, wide distribution network and quality customer service so as to sustain its positionin the market.

3. Sensitivity to the Economy and Extraneous Factors

The Company’s performance is highly correlated to the performance of the economy and the financialmarkets. The health of the economy and the financial markets in turn depends on the domestic economicgrowth, state of the global economy and business and consumer confidence, among other factors. Any eventdisturbing the dynamic balance of these diverse factors would directly or indirectly affect the performanceof the Company including the quality and growth of its assets.

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4. Increasing Competition

The spreads in the business have declined significantly after the aggressive entry of banks in direct lending.Banks have the advantage of lower cost of funds due to access to retail deposits. As a result, they havebeen aggressively cutting the interest rates on housing loans. Apart from lower interest rates banks offerlower or no processing fees (processing fees accounts for a large portion of administration cost of HFCs),monthly or daily rest loans and lower pre-payment charges, which affect the yields of the housing financeindustry.

Management Proposal

Cost of funds is the most crucial determinant of profitability for Housing Finance Companies in the housingfinance business. After the entry of banks in this business, which have access to low cost deposits, thespread of the HFCs has come under pressure. In order to remain competitive, DHFL has consistentlyendeavoured to bring down the cost of funds and has diversified its resource base by accessing bank loans,non convertible debentures and securitization.

5. Pre-payment of Loans

Pre-payment is undertaken largely on the higher yield loans when the interest rates are on a downwardtrend, due to refinancing of the outstanding loan amount by another HFC / Bank. This erodes the portfolioof the HFCs. Pre-payment results into a lower than expected profitability for a housing finance Company.Pre-payment penalty is largely applicable on the fixed rate loans while, adjustable rate loans have zero pre-payment charge

Notes to Risk Factors

1. Networth (excluding revaluation reserves) of the Company, as on 31/03/2004 was Rs.13135.92 lacs.

2. Issue Size: Present Rights Issue comprises of 1,43,18,063 equity shares of Rs.10/- each at a premium ofRs.25/- per share aggregating to Rs.5011.32 lacs

3. The Book Value of the Company’s share (excluding Revaluation Reserve) as on March 31, 2004 is Rs.35.30(face value of Rs.10/-).

4. Cost per share of the promoters is Rs.16.39/-.

5. Transactions in the shares of the Company by promoters/their associate concerns during the past 6 monthsare as follows:

Sr. Name of shareholders No. of shares No. of shares Date of PriceNo. bought sold Transaction (Rs.)

1 Shri Kapil Wadhawan – 10,00,000 May 2004 28.00

2 Smt. Aruna Wadhawan 4,00,000 – May 2004 28.00

3 Shri Dheeraj Wadhawan 6,00,000 – May 2004 28.00

4 Shri Kapil Wadhawan 11,20,000 – July 2004 17.85*

5 Shri Rakesh Wadhawan – 11,20,000 September 2004 29.50

6 Shri Sarang Wadhawan 4,00,000 – September 2004 29.50

7 Smt. Malti Wadhawan 7,20,000 – September 2004 29.50

8 Shri Kapil Wadhawan – 6,00,000 September 2004 29.50

9 Shri Dheeraj Wadhawan – 2,00,000 September 2004 29.50

10 Smt. Aruna Wadhawan 8,00,000 – September 2004 29.50

*Old committed price under banking arrangement

� All the above transactions are in the nature of Off-Market deals.

� The above transactions other than (4) above are interse transfers among persons in the promoter group.

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6. Details of transactions with associate companies during the last three years are as follows:

A) List of Related Parties with whom transactions have taken place and their relationship:

1. Companies

i) Subsidiary Company

DHFL Vysya Housing Finance Corporation Ltd.

ii) Associate Companies

a) DHFL Insurance Services Ltd.

b) DHFL Property Services Ltd.

c) Inter Active Multi Media Technologies Pvt. Ltd.

d) DHFL Assets Reconstruction Corporation Ltd.

2. Key Management Personnel

i) Shri Kapil Wadhawan

ii) Shri Sarang Wadhawan

3. Relatives of Key Management Personnel

Shri Rakesh Kumar Wadhawan

4. Others

Rajesh Kumar Wadhawan Education Trust

B) Transactions during the year ended on 31/03/2004 with related parties.

(Rs. in lacs)

Name of Transaction Subsidiary Associate Key Relatives OthersCompany Companies Management of Key

Personnel ManagementPersonnel

Investment 1667.28 – – – –

Advance Recoverablein cash or kind – – – – –

Balance as at 1st April 03 – 30.98 – – –

Advance during the year – 37.36 – – –

Recovered during the year – 4.38 – – –

Balance as at 31st March 04 – 63.96 – – –

Income

Dividend 49.45 – – – –

Expenditure

Professional charges – 3.02 – – –

Remuneration – – 33.99 0.66 –

Directors sitting fee – – – 0.55 –

Donation – – – – 10.00

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7. The lead manger as well as the Company willl update this Letter of Offer and keep the shareholders/publicinformed of any material changes till the listing and trading commencement.

8. All legal requirements applicable till the filing of the Letter of Offer with the stock exchanges have beencomplied with.

9. Financials of issuer/subsidiaries/ group companies have been disclosed as per the SEBI (DIP) Guidelines,2000.

10. All information shall be made available by the Lead Manager and the issuer to the public and investors atlarge and no selective or additional information will be made available for a section of investors in anymanner whatsoever.

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I. IMPORTANT INFORMATION

1. This offer is made to the existing equity shareholders of the Company whose names appear on the Register ofMembers of the Company as on 03/12/2004 (the ‘Record Date’).

2. Please read this Letter of Offer and the instructions contained in the accompanying Composite Application Form(hereinafter referred to as ‘CAF’) carefully before making any investment in the issue.

3. The instructions contained in the enclosed CAF are an integral part of this Letter of Offer and must be carefullyfollowed. Applications not conforming to the instructions are liable to be rejected.

4. All enquiries/ communications and clarifications in connection with this Letter of Offer should be addressed to theRegistrar to the Issue quoting the Registered Folio Number, CAF No. and the name of the first shareholder asmentioned in the CAF at the following address:

INTIME SPECTURM REGISTRY LIMITEDC-13, Pannalal Silk Mills Compound,LBS Road, Bhandup West, Mumbai – 400 078Tel.: (022) 2592 3837 Fax: (022) 2567 2693e-mail: [email protected] Regn. No.: INR 00003761Contact Person : Mr. Nikunj Daftary

Under no circumstances should any request be sent to the Lead Manager to the Offer.

5. The Company undertakes to provide adequate Funds to the Registrars to the Offer for posting of the Refund Orders/Letters of Allotment/ Share Certificates by registered post wherever applicable.

6. Originally equity shares of the Company were listed on the Stock Exchange, Mumbai (BSE), National Stock Exchange(NSE), Ahmedabad Stock Exchange (ASE) and Delhi Stock Exchange (DSE). The equity shares of the Company weredelisted from the ASE and the DSE in terms of SEBI (Guidelines for Delisting of Securities), 2003 pursuant to approvalof shareholders at the Annual General Meeting held on 31/07/2003.

7. ELIGIBILITY

Dewan Housing Finance Corporation Limited is an existing listed Company. It is eligible to offer this Rights Issue interms of Clause 2.4(iv) of the SEBI (DIP) Guidelines, 2000.

The Company, its Promoters, Directors or any of the Company’s associates or group companies with which theDirectors of the Company are associated as Directors or Promoters have not been prohibited from accessing thecapital market under any order or direction passed by SEBI.

The promoters, their relatives, DHFL, group companies are not detained as willful defaulters by RBI/ Governmentauthorities and there are no violations of securities laws committed by them in the past or pending against them.

8. DECLARATION

The Board of Directors of Dewan Housing Finance Corporation Limited state that:-

i) All the complaints in respect of the Rights Issue shall be attended to by the Company expeditiously and satisfactorily.

ii) That the Company shall take all steps for completion of necessary formalities for listing and commencement oftrading at all stock exchanges where the equity shares are proposed to be listed within 7 working days offinalization of basis of allotment.

iii) That the Company shall apply in advance for the listing of equity shares.

iv) That the funds required for despatch of refund orders/ allotment letters/ certificates by registered post shall bemade available to the Registrar to the Issue by the Company.

v) That the certificates of the securities/ refund orders to the non-resident Indians shall be despatched within 42days.

vi) The Letter of Offer will be updated as and when there are any material changes in the facts.

vii) That no further issue of securities shall be made till the securities offered through this Letter of Offer are listedor till the application money is refunded on account of non-listing, undersubscription etc.

viii) All monies received against this issue shall be transferred to a separate bank account other than the bank accountreferred to in sub-section (3) of Section 73 of the Companies Act, 1956.

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ix) Details of all monies utilized out of the issue referred to in sub-item(vii) shall be disclosed under an appropriateseparate head in the Balance Sheet of the Company indicating the purpose for which such monies had beenutilised; and

x) Details of all unutilized monies out of the present issue, if any, shall be disclosed under an appropriate separatehead in the Balance Sheet of the Company indicating the form in which such unutilised monies have beeninvested.

xi) Disclosures made in this Letter of Offer are in compliance with the provisions of SEBI (DIP) Guidelines 2000.

9. DISCLAIMER CLAUSE

As required a copy of this Letter of Offer has been submitted to SEBI. It is to be distinctly understood that thesubmission of this Letter of Offer to SEBI should not, in any way, be deemed or construed that the same hasbeen cleared or approved by SEBI. SEBI does not take any responsibility either for the financial soundnessof any scheme or the project for which the issue is proposed to be made, or for the correctness of thestatements made or opinions expressed in the Letter of Offer. Lead Manager M/s. Keynote Corporate ServicesLimited, has certified that the disclosures made in the Letter of Offer are generally adequate and are inconformity with SEBI guidelines for disclosures and investor protection in force for the time being. Thisrequirement is to facilitate investors to take an informed decision for making investment in the proposed issue.

It should also be clearly understood that while the Issuer Company is primarily responsible for the correctness,adequacy and disclosure of all relevant information in the Letter of Offer, the Lead Manager is expected toexercise Due Diligence to ensure that the Company discharges its responsibility adequately in this behalf andtowards this purpose, the Lead Manager, M/s. Keynote Corporate Services Limited has furnished to SEBI a DueDiligence Certificate dated 27/09/2004 in accordance with SEBI (Merchant Bankers) Regulation 1992 whichreads as follows:

(i) We have examined various documents including those relating to litigation like commercial disputes,patent disputes, disputes with collaborators etc. and other materials in connection with the finalisation ofthe Letter of Offer pertaining to the said issue.

(ii) On the basis of such examination and the discussions with the Company, its directors and other officers,other agencies, independent verification of the statements concerning the objects of the issue, projectedprofitability, price justification and the contents of the documents mentioned in the Annexure and otherpapers furnished by the Company.

WE CONFIRM THAT:

(a) the Letter of Offer forwarded to SEBI is in conformity with the documents, materials and papersrelevant to the issue;

(b) all the legal requirements connected with the said issue, as also the guidelines, instructions, etc.issued by SEBI, the Government and another competent authority in this behalf have been dulycomplied with; and

(c) the disclosures made in the Letter of Offer are true, fair and adequate to enable the investors to makea well informed decision as to the investment in the proposed issue.

(iii) We confirm that besides ourselves, all the Intermediaries named in the Letter of Offer are registered withSEBI and that till date such registration is valid.

The filing of the Letter of Offer does not, however absolve the Company from any liabilities under section 63of the Companies Act, 1956, or from the requirement of obtaining such statutory or other clearances as maybe required for the purpose of the proposed issue. SEBI further reserves the right to take up at any point oftime, with the lead manager for any irregularities or lapses in the Letter of Offer.

The promoters / directors of DHFL viz. Shri Rakesh Kumar Wadhawan, Shri Kapil Wadhawan, Shri SarangWadhawan, Shri R.P. Khosla, Shri Waryam Singh, Shri M.S. Sundra Rajan, Shri Ram K. Gupta, Shri G .P. Kohli,Shri Ashok Kumar Gupta and Shri R.S. Hugar declare and confirm that no information/material likely to havea bearing on the decision of investors in respect of the shares offered in terms of this Letter of Offer has beensuppressed withheld and / or incorporated in the manner that would amount to mis-statement/misrepresentationand in the event of its transpiring at any point in time till allotment/refund, as the case may be, that anyinformation/material has been suppressed/withheld and/ or amounts to a mis-statement/mis-representation, thepromoters/directors undertake to refund the entire application monies to all subscribers within 7 days thereafterwithout prejudice to the provisions of Section 63 of the Companies Act.

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DISCLAIMER IN RESPECT OF JURISDICTION

This Offer is being made in India to persons resident in India (including Indian nationals resident in India who are majors,Hindu Undivided Families, companies, corporate bodies and societies registered under the applicable laws in India andauthorised to invest in shares, Indian mutual funds registered with SEBI, Indian financial institutions, commercial banks,regional rural banks, co-operative banks (subject to RBI permission), Trusts registered under the Societies Registration Act,1860, or any other Trust law and who are authorised under their constitution to hold and invest in shares) and to NRIs,OCBs and FIIs as defined under the Indian laws. This Letter of Offer does not, however, constitute an offer to sell or aninvitation to subscribe to securities issued hereby in any other jurisdiction. Any person into whose possession this Letterof Offer comes is required to inform himself about and to observe any such restrictions. Any dispute arising out of this Offerwill be subject to the jurisdiction of appropriate court(s) in India only.

No action has been or will be taken to permit a public offering in any jurisdiction where action would be required for thatpurpose, except that this Letter of Offer has been submitted to the SEBI. Accordingly, the equity shares represented therebymay not be offered or sold, directly or indirectly, and this Letter of Offer may not be distributed, in any jurisdiction, exceptin accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of Letter of Offer nor any salehereunder shall, under any circumstances, create any implication that there has been no change in the affairs of DewanHousing Finance Corporation Limited since the date hereof or that the information contained herein is correct as of anytime subsequent to this date.

DISCLAIMER CLAUSE OF THE STOCK EXCHANGE, MUMBAI (BSE)

BSE has given the permission to Dewan Housing Finance Corporation Limited vide their letter no. DCS/SMG/NSS/04 dated23/10/2004 to use their name in this Letter of Offer as one of the stock exchanges on which equity shares of DewanHousing Finance Corporation Limited being issued in terms of this Letter of Offer are proposed to be listed. BSE hasscrutinized this Letter of Offer for their limited internal purpose of deciding on the matter of granting the aforesaid permissionto Dewan Housing Finance Corporation Limited. It is to be distinctly understood that the aforesaid permission given by BSEshould not in any way be deemed or construed that the letter of Offer has been cleared or approved by BSE nor does itin any manner warrant, certify or endorse the correctness or completeness of any of the contents of this letter of Offer;nor does it warrant that Dewan Housing Finance Corporation Limited securities will be listed or will continue to be listedon the Exchange nor does it take any responsibility for the financial or other soundness of Dewan Housing FinanceCorporation Limited, its promoters, its management or any scheme or project of Dewan Housing Finance CorporationLimited.

Every person who desires to apply for or otherwise acquires any securities of this issuer may do so pursuant to anindependent inquiry or any investigation and analysis and shall not have any claim against the exchange whatsoever byreason of any loss which may be suffered by such person consequent to or in connection with such subscription/ acquisitionwhether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever.

DISCLAIMER CLAUSE OF THE NATIONAL STOCK EXCHANGE OF INDIA LIMITED (NSE)

NSE has given the permission to Dewan Housing Finance Corporation Limited vide their letter no. NSE/LIST/6701-6 dated07/10/2004 to use their name in this Letter of Offer as one of the stock exchanges on which the equity shares of DewanHousing Finance Corporation Limited being issued in terms of this Letter of Offer are proposed to be listed. NSE hasscrutinized this Letter of Offer for their limited internal purpose of deciding on the matter of granting the aforesaid permissionto Dewan Housing Finance Corporation Limited. It is to be distinctly understood that the aforesaid permission given by NSEshould not in any way be deemed or construed that the letter of Offer has been cleared or approved by NSE nor doesit in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this letter of offer;nor does it warrant that Dewan Housing Finance Corporation Limited securities will be listed or will continue to be listedon the Exchange nor does it take any responsibility for the financial or other soundness of Dewan Housing FinanceCorporation Limited, its promoters, its management or any scheme or project of Dewan Housing Finance CorporationLimited.

Every person who desires to apply for or otherwise acquires any securities of this issuer may do so pursuant to anindependent inquiry or any investigation and analysis and shall not have any claim against the exchange whatsoever byreason of any loss which may be suffered by such person consequent to or in connection with such subscription/ acquisitionwhether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever.

MINIMUM SUBSCRIPTION

If the Company does not receive the minimum subscription of 90% of the issue the entire subscription will be refunded tothe applicants within forty-two days from the date of closure of the issue. If there is a delay in the refund of subscription

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by more than 8 days after the Company becomes liable to refund the subscription amount (i.e. forty two days after theclosure of the issue), the Company will pay interest for the delayed period, at prescribed rates in sub-section (2) and (2A)of Section 73 of the Companies Act, 1956.

APPLICATION IN FICTITIOUS NAMES

Attention of the applicants is specifically drawn to the provisions of Sub-Section (1) of Section 68A of the Companies Act,1956 which is reproduced below:

“Any person who-

(a) makes in a fictitious name an application to a Company for acquiring, or subscribing for, any shares therein,or

(b) otherwise induces a Company to allot or register any transfer of shares therein to him, or any other personin a fictitious name, shall be punishable with imprisonment for a term which may extend to five years.”

FILING

A copy of this Letter of Offer has been filed with SEBI, The Stock Exchange, Mumbai (BSE) (Designated Stock Exchange)and the National Stock Exchange of India Limited (NSE).

The Company has received ‘in-principle’ approval for issue of the new shares from the BSE and NSE vide their letters dated23/10/2004 and 07/10/2004, respectively.

STATUTORY DECLARATIONS

- Subscription received against the issue will be kept in specific bank accounts and the Company would not have accessto such funds unless it has received minimum subscription of 90% of application money towards this issue and thepermission of the Designated Stock Exchange at Mumbai, i.e. BSE is obtained to use the amount of subscription. TheCompany will obtain the permission of The Stock Exchange, Mumbai (Designated Stock Exchange) by producingsufficient documentary evidence of subscription to the extent of 90% or more on the closure of issue to utilize the fundscollected as per the present rules.

- The present rights issue to the existing shareholders of the Company has been approved by the shareholders at theAnnual General Meeting of the members held on 24/07/2004.

CAUTION STATEMENT / COMPANY DISCLAIMER

The Issuer Company accepts no responsibility for statements made otherwise than in this Letter of Offer or in the advertisementor in any other material issued by or at the instance of the Company and the Lead Manager and any one placing relianceon any other source of information would be doing so at his/her/their own risks.

Dear Shareholder(s)

The Board of Directors of the Company (hereinafter referred to as “The Board”) pursuant to a resolution passed at theAnnual General Meeting held on 24/07/2004 have decided to offer 1,43,18,063 equity shares of Rs.10/- each for cash atpremium of Rs.25/- per share aggregating to Rs.5011.32 lacs to the existing equity shareholders of the Company on rightsbasis in the ratio of 4 (Four) equity shares for every 10 (Ten) equity shares (i.e. 4:10) held as on 03/12/2004 (hereinafterreferred to as “Record Date”).

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II. GENERAL INFORMATION

Name of the Company : DEWAN HOUSING FINANCE CORPORATION LIMITED

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 4865E-mail: [email protected] Website: www.dhfl.com

LICENCES AND OTHER APPROVALS

1. The Company has received an approval to operate as Housing Finance Company vide letter No. DFC(Bom)4829/BM(MH)HF(D)-815-86 dated 02/04/1986 from Ministry of Finance, Government of India.

2. The Company has received an approval vide letter No. NHB (B)/2024/90 dated 30/05/1990 from National HousingBank to operate as a housing finance institution and being eligible for refinance from NHB

3. The Company has received Certificate of Registration bearing the Registration No. 01.0014.01 dated 31/07/2001 fromNational Housing Bank to carry on the business of housing finance institution.

The Company has received all the necessary permissions and approvals from the Government and various non-Governmentagencies for conducting business. No further approvals from any Government Authority are required by the Company toundertake the activities save and except those approvals which may be required to be taken in the normal course ofbusiness from time to time. It must be understood that in granting the above approvals the Government of India and NHBdo not undertake any responsibility for the financial soundness of the undertaking or for the correctness of any of thestatements made or opinions expressed in this regard.

LISTING

The existing equity shares of the Company are listed on The Stock Exchange at Mumbai (BSE) and National StockExchange (NSE). Applications will be made to these stock exchanges for permission to deal in and for an official quotationin respect of the equity shares of the Company being offered in terms of this Letter of Offer.

The Company has received ‘in-principle’ approval for issue of the new shares from BSE and NSE vide their letters dated23/10/2004 and 07/10/2004, respectively.

CORPORATE GOVERNANCE

The provisions of “Corporate Governance” as introduced vide Clause 49 (as amended till date) of the Listing Agreemententered into are applicable to the Company. The Company has complied with all the requirements of the said CorporateGovernance clause.

Details of committees formed under the provisions of corporate governance are given under the head “Corporate GovernanceCommittees”.

DATES RELATING TO THE ISSUE

Issue Opens On 20th December, 2004, Monday

Last Date For Receiving Requests For Split Forms 04th January, 2005, Tuesday

Issue Closes On 19th January, 2005, Wednesday

ISSUE MANAGEMENT TEAM

LEAD MANAGER TO THE ISSUEKeynote Corporate Services Ltd.307, Regent Chambers,Nariman Point, Mumbai - 400 021Tel: (022) 22025230, Fax: (022) 22835467E-mail: [email protected] Regn No: INM 000003606

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REGISTRARS TO THE ISSUE

INTIME SPECTURM REGISTRY LIMITEDC-13, Pannalal Silk Mills Compound,LBS Road, Bhandup West, Mumbai – 400 078.Tel.: (022) 5555 5454 Fax: (022) 5555 5353e-mail: [email protected] Regn. No.: INR 00003761

AUDITORS TO THE COMPANY

M/s B M Chaturvedi & Co.32, Jolly Maker Chamber II,Nariman Point, Mumbai - 400 021.Tel: (022) 2285 4274Fax: (022) 2283 6075

COMPLIANCE OFFICER & COMPANY SECRETARY

MR KIRAN THACKERCompany Secretary,Dewan Housing Finance Corporation Ltd.Madhava, Bandra Kurla Complex,Bandra East, Mumbai - 400 051.Tel: (022) 2659 1222 (5lines)Fax: (022) 2659 4865

The investors may contact the aforesaid compliance officer in case of any pre-issue/post-issue related problems.

BANKERS TO THE COMPANY

UNION BANK OF INDIAUBI Bhavan, 1st Floor,229, Vidhan Bhavan Marg,Nariman Point,Mumbai 400 021.Tel: 22024742Fax: 2285 5037

ALLAHABAD BANK37, Mumbai Samachar Marg,Fort, Mumbai - 400 023.Tel : 2266 2018Fax : 2264 1142

ANDHRA BANKNanavati Mahalaya,18, Homi Modi street,Fort, Mumbai - 400 023.Tel : 2202 5956Fax: 22044535

BANK OF BARODAP.D.Hinduja Marg,728, Akashdeep,Khar (West),Mumbai - 400 052.Tel: 2649 9959Fax: 2605 3244

BANK OF INDIAGohil House, Lady Jamshedji Road,Mumbai 400 016.Tel : 2446 1517

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BANK OF MAHARASHTRA19/21, Ambalal Doshi Marg,Bombay Mutual Chambers,Mumbai - 400 023.Tel :2269 4160Fax: 2264 4109

BHARAT OVERSEAS BANK LTDBharat Chambers, Kalagoda,Fort, Mumbai - 400 001.Tel: 22844319Fax: 2283 4387

CANARA BANKDalamal Tower, “B” Wing,Nariman PointMumbai - 400 021.Tel: 2284 6723Fax: 2284 4963

DENA BANK9th Floor, Makers Towers E,Cuffe Parade,Mumbai - 400 005.Tel: 2218 8497Fax: 2218 1612

DEVELOPMENT CREDIT BANK LTDUnit 8, 16 Raja Bahadur Mansion,Ambalal Doshi Marg,Fort, Mumbai - 400001.

INDIAN OVERSEAS BANKMaker Bhavan II,New Marine Lines,Mumbai - 400 020.Tel: 2201 2528Fax: 2203 5571

ORIENTAL BANK OF COMMERCEIndustrial Finance Branch,18th Floor, Maker Tower E,Cuffe Parade, Mumbai - 400 005.Tel: 2215 4656Fax: 2215 3533

PUNJAB NATIONAL BANKMaker Tower E, Ground FloorCuffe Parade, Mumbai - 400 005.Tel: 2218 8458Fax: 2218 0403

PUNJAB & SIND BANKJ.K.Somani Bldg,British Hotel Lane,Fort, Mumbai - 400 023.Tel: 2265 1737Fax: 2265 1752

STATE BANK OF HYDERABADGanesh Mahal Complex,K.S.Rao Road, Hampankatta,Mangalore - 575 001.Tel: (0824) 427 300

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SYNDICATE BANKSyndicate Bank Bldg,26/A, Homji Street.Fort, Mumbai - 400 001.Tel: 2261 4626Fax: 2263 4328

THE CATHOLIC SYRIAN BANK LTD53, East & West Building,Mumbai Samachar Marg,Fort, Mumbai - 400 023.Tel: 2266 0116Fax: 2263 2120

THE JAMMU & KASHMIR BANK LTDHomi Modi Cross Lane II,Fort Chamber, Block B,Fort Mumbai - 400 023.Tel: 2265 3136Fax: 5634 1832

THE SOUTH INDIAN BANK LTD266, Linking Road,Bandra (West), Mumbai - 400 050.Tel: 2645 1997Fax: 642 3850

UCO BANKIndustry House,Churchgate, Mumbai - 400 020.Tel: 2202 6280Fax:2202 5181

BANKERS TO THE ISSUE

Union Bank of IndiaMerchant Banking Division239, Union Bank Bhawan,Nariman Point,Mumbai - 400021.Tel No. : 022 2289 4647

UTI Bank Ltd.Maker Towers ‘F’, 13th Floor,Cuffe Parade, Colaba,Mumbai - 400005.Tel : 022 2218 9106Fax : 022 2218 6944

Canara BankCapital Market Services BranchVarma Chambers, No. 11,Homji Street, Fort,Mumbai - 400001.Tel No. : 022 2269 2973Fax : 022 2266 4140

CREDIT RATING/DEBENTURE TRUSTEE

This being an Issue of Equity Shares, no Credit Rating or appointment of Debenture Trustee is required.

UNDERWRITING

The present issue is not underwritten.

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III. CAPITAL STRUCTURE OF THE COMPANY

(Rs. in Lacs)

No. of shares NominalValue

A. Authorised Capital*

- 6,50,00,000 Equity Shares of Rs.10/- each 6,500.00

- 1,00,00,000 Preference Shares of Rs.10/- each 1,000.00

B. Issued Capital

- 3,64,95,425 Equity Shares of Rs.10/- each 3,649.54

- 50,00,000 9% Cumulative Redeemable Preference Shares of Rs.10/- each 500.00

C. Subscribed and Paid-up Capital

- 3,57,95,156 Equity Shares of Rs.10/- each 3,579.52

Add: Shares forfeited (Amount originally paid up) 0.29

- 50,00,000 Preference Shares of Rs.10/- each 500.00

D. Present Rights Issue

1,43,18,063 equity shares of Rs.10/- for a cash premium of Rs.25/- per share 1,431.81

E. Post Issue Capital

- 5,01,13,219 equity shares of Rs.10/- each 5011.32

- 50,00,000 Preference Shares of Rs.10/- each 500.00

F. Share Premium Account

Before the Offer 2,329.28

After the Offer 5,908.80

* At the Annual General Meeting held on 24/07/2004, the Authorised Share Capital was re-classified from 5.00 croresEquity Shares of Rs.10/- each and 2.50 crores Preference Shares of Rs.10/- each to 6.50 crores Equity Shares ofRs.10/- each and 1.00 crore Preference Shares of Rs.10/- each and as a result the Preference Shares are reducedfrom 2.50 crores Preference Shares to 1.00 crores Preference Shares of Rs.10/- each.

Notes to Capital Structure:

1) Details of present Equity Share Capital are as follows:

Sr. Date of Face Issue No. of Reasons for allotment Consideration % to PostNo allotment Value Price shares (Bonus, swap etc.) Issue

(Rs) (Rs) Capital

1 04.04.1984 10 10 700 Subscription to the MOA Cash 0.001

2 11.02.1985 10 10 2,421,400* Public Issue at par. Cash 4.83

3 21.08.1989 10 10 550,000 Issued to Union Bank of India Cash 1.10on private placement basis.This includes 50000 sharesre-issued out of 77900 sharesforfeited.

4 01.02.1992 10 10 18,600 Re-issue of 18600 out of Cash 0.0477900 shares forfeited topromoters / friends andrelatives.

5 29.04.1992 10 10 6,042,425 Rights Issue at par to the Cash 12.06members & Employees of theCompany in the ratio of 2:1.

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Sr. Date of Face Issue No. of Reasons for allotment Consideration % to PostNo allotment Value Price shares (Bonus, swap etc.) Issue

(Rs.) (Rs.) Capital

6 22.07.1994 10 15 4,000,000 Private Placement to the Cash 7.98promoters at premium atRs.5/- per share vide EGMresolution dated 11/03/1994

7 22.07.1994 10 25 6,000,000 Private Placement to Bodies Cash 11.97Corporate at premium ofRs.15/- per share vide EGMResolution dated 11/03/1994

8 22.09.1994 10 15 9,033,125 Rights Issue at premium of Cash 18.03Rs.5/- per share to themembers in the ratio of 1:1

9 19.08.2000 10 20 7,728,906 Rights Issue at premium of Cash 15.42Rs.10/- in the ratio of 3:10

TOTAL 3,57,95,156 71.43

* Excludes 77,900 equity shares that have been forfeited.

Promoters’ Contribution and Lock-in

The present issue being a rights issue, provisions of promoters’ contribution and lock-in are not applicable.

2. Present Rights Issue :

Type of Instrument Ratio Face Value (Rs.) No. of shares Issue Price (Rs.) Consideration

Equity Shares 4:10 10/- 1,43,18,063 35/- Cash

3. Existing shareholding pattern of the Company is given below:-

Category No. of Percentage ofShares held Present Capital (%)

A. Promoters Holding

Indian Promoters 1,74,05,086 48.62

Sub Total 1,74,05,086 48.62

B. Non-Promoters Holding

1 Institutional Investors – –

a. Mutual Funds and UTI 49,20,027 13.74

b. Banking, Financial Institution /Insurance Companies

- Union Bank of India 29,79,204 8.32

- Others 1,20,450 0.34

c. FIIs 100 0.00

Sub Total 80,19,781 22.40

2 Others

a. Private Corporate Bodies 62,64,719 17.50

b. Indian Public 40,49,808 11.31

c. NRIs / OCBs 12,617 0.04

d. Clearing Members and Office Bearers 43,145 0.12

Sub Total 1,03,70,289 28.97

Grand Total 3,57,95,156 100.00

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4. The shareholding pattern of the promoter group is as detailed below:

Particulars Present Post Rights

No. of Equity % of No. of Equity % ofShares of Present Shares of post issue

Rs.10/- each Capital Rs.10/- each capital

a) Promoters/Directors 91,88,325 25.67 1,28,63,655 25.67

b) Immediate relative of promoters(Spouse, parent, child, brother, sister) 82,16,761 22.95 1,15,03,465 22.95

c) Company in which 10% or more of – – – –the share capital is held by thepromoter his immediate relative firmor HUF in which the promoter or hisimmediate relative is a member

d) Company in which the Company – – – –mentioned in (c) above holds 10%or more of the share capital

e) HUF in which aggregate share of – – – –the promoter and his immediaterelatives is equal or morethan 10% of the total

Total 1,74,05,086 48.62 2,43,67,120 48.62

The promoters/directors/associates intend to subscribe to their entitlement in this rights issue in full. In case ofundersubscription promoters/directors/associates have undertaken vide their letter dated 03/12/2004 to subscribe tounsubscribed portion in full. Presuming no subscription is received from other shareholders the promoters’ shareholdingshall increase to 63.30% of the post rights issue equity capital of the Company.

The allotment to the promoters/directors, even if they subscribe to unsubscribed portion as undertaken, will not resultin public shareholding falling below the permissible minimum level. Thus the provisions of clause 17 of SEBI (Delistingof Securities) Guidelines 2003 are not applicable.

The Promoters/Directors of DHFL have brought in funds by way of share application money to the extent of Rs.2436.71 lacs. The share application money brought in by the Promoters/Directors will be adjusted against the shareapplication money due from them towards their subscription in the rights issue component. Details of share applicationmoney received are as follows :

Sr. Name No. of shares Proposed Rights Amount paidNo. held Issue (Rs. in lacs)

1 Shri Rakesh Kumar Wadhawan 3641960 1456784 509.87

2 Shri Kapil Wadhawan 4235242 1694097 592.93

3 Shri Sarang Wadhawan 1311123 524449 183.56

4 Shri Dheeraj Wadhawan 3476607 1390643 486.73

5 Smt. Damyanti Rani Wadhawan 1671978 668791 234.08

6 Smt. Aruna Wadhawan 1762669 705068 246.77

7 Smt. Malti Wadhawan 1305507 522203 182.77

Total 17405086 6962035 2436.71

5. The Company has not issued any warrant, option, convertible loan, debenture or any other securities convertible ata later date into equity, which would entitle the holders to acquire further equity shares of the Company.

6. Equity shares of the Company are being traded in compulsory dematerialised mode. The market lot of the equityshares is 1 (one).

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7. Details of transactions by the promoters / their associate concerns during last 6 months are as follows:

Sr. Name of shareholders No. of shares No. of shares Date of Price Nature ofNo. bought sold Transaction (Rs.) Transaction

1 Shri Kapil Wadhawan – 10,00,000 May 2004 28.00 Off-Market Deal

2 Smt. Aruna Wadhawan 4,00,000 – May 2004 28.00 Off-Market Deal

3 Shri Dheeraj Wadhawan 6,00,000 – May 2004 28.00 Off-Market Deal

4 Shri Kapil Wadhawan 11,20,000 – July 2004 17.85* Off-Market Deal

5 Shri Rakesh Wadhawan – 11,20,000 September 2004 29.50 Off-Market Deal

6 Shri Sarang Wadhawan 4,00,000 – September 2004 29.50 Off-Market Deal

7 Smt. Malti Wadhawan 7,20,000 – September 2004 29.50 Off-Market Deal

8 Shri Kapil Wadhawan – 6,00,000 September 2004 29.50 Off-Market Deal

9 Shri Dheeraj Wadhawan – 2,00,000 September 2004 29.50 Off-Market Deal

10 Smt. Aruna Wadhawan 8,00,000 – September 2004 29.50 Off-Market Deal

*Old committed price under banking arrangement.

The above transactions other than (4) above are inter-se promoter transfers.

Other than the above there are no transactions in the securities of the Company during preceding 6 months which werefinanced/undertaken directly or indirectly by the promoters, their relatives, their group companies or associates or bythe above entities directly or indirectly through other persons.

8. The ten largest shareholders two years prior to the date of filing of this Letter of Offer with Stock Exchanges are asfollows :

Sr. Name of the Shareholders Number of Percentage ofNo. Equity Shares shareholding (%)

1. Unit Trust of India 4,950,977 13.83

2. Rakesh Kumar Wadhawan 4,761,960 13.30

3. Kapil Wadhawan 4,715,242 13.17

4. Union Bank of India 3,268,970 9.13

5. Dheeraj Wadhawan 3,076,607 8.60

6. Damyanti Rani Wadhawan 1,671,978 4.67

7. Sapphire Land P Ltd 1,300,000 3.63

8. Sunshine Communication P Ltd 1,290,660 3.61

9. Oriental Bank of Commerce 1,240,000 3.46

10. Libra Realtors P Ltd 1,200,000 3.35

Total 2,74,76,394 76.75

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9. The ten largest shareholders as on 10 days prior to the date of filing of the Letter of Offer with Stock Exchanges areas follows :

Sr. Name of the Shareholders Number of Percentage ofNo. Equity Shares shareholding (%)

1. Kapil Wadhawan 42,35,242 11.83

2. Rakesh Kumar Wadhawan 36,41,960 10.17

3. Dheeraj Wadhawan 34,76,607 9.71

4. Union Bank of India 32,63,970 9.12

5. Administrator of the specified undertakingof The India Unit Scheme – 1964 25,00,000 6.98

6. Administrator of the specified undertakingof The India Unit Trust of India MIP2000 (II) 24,50,977 6.85

7. Aruna Wadhawan 17,62,669 4.92

8. Damyanti Rani Wadhawan 16,71,978 4.67

9. Sarang Wadhawan 13,11,123 3.66

10. Malti Wadhawan 13,05,507 3.65

Total 2,56,20,033 71.57

10. The ten largest shareholders as on the date of filing of the Letter of Offer with Stock Exchanges are as follows :

Sr. Name of the Shareholders Number of Percentage ofNo. Equity Shares shareholding (%)

1. Kapil Wadhawan 42,35,242 11.83

2. Rakesh Kumar Wadhawan 36,41,960 10.17

3. Dheeraj Wadhawan 34,76,607 9.71

4. Union Bank of India 29,79,204 8.32

5. Administrator of the specified undertaking ofThe India Unit Scheme – 1964 24,75,000 6.91

6. Administrator of the specified undertaking ofThe India Unit Trust of India MIP2000 (II) 24,25,527 6.78

7. Aruna Wadhawan 17,62,669 4.92

8. Damyanti Rani Wadhawan 16,71,978 4.67

9. Sarang Wadhawan 13,11,123 3.66

10. Malti Wadhawan 13,05,507 3.65

Total 2,52,84,817 70.64

11. The Company/Promoters/Directors/Lead Merchant Bankers have not entered into buyback or similar arrangements forpurchase of securities issued by the Company.

12. The entire price of Rs.35/- per share is payable on application. Since the shares allotted will be fully paid –up at thetime of allotment, the forefeiture clause will not be applicable to the equity shares being allotted in terms of this Letterof Offer.

13. On applying the rights ratio the rights entitlement may contain certain fractional entitlements, in such a case, thefractional entitlement shall be rounded off to the next higher integer. The additional shares required to accommodatesuch rounding off will be adjusted out of the entitlement of one of the promoters.

14. The total number of shareholders as on the date of filing the Letter of Offer with the stock exchange is 11190.

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15. At any given time there shall be only one denomination for the shares of the Company and the disclosures andaccounting norms specified by SEBI from time to time will be complied with.

16. The Company shall not make any further issue of capital whether by way of issue of bonus shares, preferentialallotment, rights issue or public issue or in any other manner during the period commencing from the submission ofthe Letter of Offer to SEBI for the Rights Issue till the securities referred in the Letter of Offer have been listed orapplication money refunded on account of failure of the issue.

17. The Company does not propose to alter the capital structure by way of split or consolidation of the denomination ofthe shares or the issue of shares on a preferential basis or issue of bonus or rights or further public issue of sharesor any other securities within a period of six months from the date of opening of the present issue.

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IV. PRINCIPAL TERMS OF PRESENT ISSUE

AUTHORITY FOR THE PRESENT ISSUE

The Board of Directors of the Company (hereinafter referred to as “The Board”) in pursuance to a special resolution passedat the Annual General Meeting held on 24/07/2004 have decided to offer 1,43,18,063 equity shares of Rs.10/- each for cashat premium of Rs.25/- per share aggregating to Rs.5011.32 lacs to the existing equity shareholders of the Company onrights basis in the ratio of 4 (Four) Equity Shares for every 10 (Ten) Equity Shares (i.e. 4:10) held as on 03/12/2004(hereinafter referred to as “Record Date”).

BASIS OF OFFER

1,43,18,063 Equity shares of Rs.10 each for cash at a premium of Rs. 25/- per share are being offered on a rights basisin the ratio of 4 (Four) Equity Shares for every 10 (Ten) Equity Shares of Rs.10 each, to those equity share holders whosenames appear on the Register of Members of the Company at the close of business hours on 03/12/2004 being the recorddate fixed by the Company in consultation with the Stock Exchange, Mumbai (the designated stock exchange).

FRACTIONAL ENTITLEMENT

On applying the rights ratio the rights entitlement may contain certain fractional entitlements, in such a case, the fractionalentitlement shall be rounded off to the next higher integer. The additional shares required to accommodate such roundingoff will be adjusted out of the entitlement of one of the promoters.

ODD LOTS

The Company has not made any arrangements for the disposal of odd lot shares arising out of the issue. For all odd lotshares arising out of the issue the Company will issue certificates in the denomination of 1-5-10-50 shares.

ISSUE OF SHARE CERTIFICATE

In case of physical certificates, the Company would issue one certificate for the equity shares allotted to one person(“Consolidated Certificate”). In respect of consolidated certificate, the Company will only upon receipt of a request from theequity share holder split such consolidated certificate into smaller denomination within 3 days from the date of receipt ofapplication. No fee would be charged by the Company for splitting the consolidated certificate.

RIGHTS ENTITLEMENT

As your name appears in the Register of Members of the Company on the Record Date, you are entitled to this RightsOffer on the basis mentioned above. The number of equity shares to which you are entitled as a Shareholder of theCompany is shown in Part A of the CAF.

OFFER TO NON RESIDENT/FIIs SHAREHOLDERS

Presently 12717 equity shares aggregating to 0.04% of the present issued capital are held by NRIs/FIIs on repatriationbasis. As per the notification no. FEMA/20/2000-RB dated 03/05/2000 issued by RBI general permission is granted to FIIs/NRIs to invest in Indian companies subject to certain conditions. In the case of FIIs, the total holding of each FII/SEBIapproved sub account shall not exceed 10% of the total paid up capital of the issuer company and the total holdings ofall FIIs/sub-accounts of FIIs put together shall not exceed 24% of the paid-up capital. In the case of NRIs under PIS it isto be ensured that the paid-up value of shares purchased by an NRI under Portfolio Investment Scheme (PIS) route shouldnot exceed 5% of the paid up capital. The aggregate paid-up value of shares purchased by all NRIs should not exceed10% of the paid-up capital of the company. The company is required to file the declaration in prescribed form to theconcerned Regional Office of RBI within 30 days of allotment of equity shares to FIIs/NRIs on repatriation basis.

NOMINATION

In terms of Section 109 A of the Companies Act 1956 nomination facility is available. The applicant may nominate anyperson by filling the relevant details in the CAF at the space provided for the purpose.

TERMS OF OFFER

The equity shares now offered are subject to the terms of this Letter of Offer, CAF, Memorandum and Articles of Associationof the Company (hereinafter referred to as “The Articles’), the Guidelines issued from time to time by the Government ofIndia and Securities and Exchange Board of India, the relevant provisions of the Act as amended from time to time andsuch terms and conditions as may be incorporated in the share certificates or any deed or document executed by theCompany regarding the Rights Issue.

ACCEPTANCE OF OFFER

You may accept and apply for the equity shares hereby offered to you wholly or in Part by filling part A of the enclosedcomposite application form (CAF) and submit the same alongwith the application money to the bankers to the issue asmentioned on the reverse of the CAF before the close of business hours on 19/01/2005. The board or committee ofdirectors of the Company will have the power to extend the last date of receipt and acceptance of CAF for such period

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as it may deem fit but in no case will the offer for subscribing to the issue be kept open for more than 60 days. If for anyreason whatsoever, the CAF together with the amount payable is not received by the bankers to the issue as mentionedon the reverse of the CAF on or before the close of business hours on 19/01/2005, or such extended date as may bedetermined by the board or duly authorized committee of directors of the Company, the offer contained in the letter of offershall be deemed to have lapsed.

Applicants in centers not covered by the branches of collecting banks can send their CAF together with the cheques drawnon a local branch at Mumbai/Demand Draft payable at Mumbai to the Registrars to the Issue, Intime Spectrum RegistryLimited, at C-13, Pannalal Silk Mills Compound, L.B.S. Road, Bhandup (West), Mumbai - 400 078. The Company will notbe liable for any postal delays and any application received by mail after closure of the issue date is liable to be returnedto the applicants. The date of mailing by the applicant will not be the criteria for acceptance.

TERMS OF PAYMENT

The entire amount of Rs.35/- per share is payable on application by all shareholders/applicants.

APPLICATION FOR ADDITIONAL EQUITY SHARES

You are also eligible to apply for additional equity shares over and above the number of equity shares offered to youprovided you have applied for all the shares offered to you without renouncing them in full or in part. However, theadditional equity shares cannot be renounced in full or in part, in favour of any other person(s).

If you desire to apply for additional equity shares, you may fill in the number of additional equity shares in Part A of theCAF. The allotment of additional equity shares will be at the sole discretion of the Board on an equitable basis withreference to the number of Equity Shares held by you on the Record Date in consultation with The Designated StockExchange. In the case of requests for additional equity shares by Non Residents, the allotment will be subject to theapproval of Reserve Bank of India.

RENUNCIATION

You may renounce all or any of the equity shares, you are entitled to in favour of any individual, limited Companies, orstatutory corporations / institutions. However renunciation in favour of more than three persons as joint holders, trust orsociety (unless the same is registered under the Societies Registration Act, 1860 or any other applicable trust laws andis authorised under its constitution to hold shares in a Company), minors (unless acting through natural or legal guardians),Partnership Firms, or their nominees, or any of them will not be accepted.

Any renunciation from Resident(s) to Non- Resident(s) is subject to the renouncer(s)/ renouncee(s) obtaining requisiteapproval(s) of the Reserve Bank of India (RBI) and the said permission must be attached to the CAF.

PROCEDURE FOR RENUNCIATION

(i) To Renounce in WHOLE

If you wish to renounce this offer in whole, please complete PART ‘B’ of the CAF enclosed with the Letter of Offer forthe number of equity shares renounced and deliver the CAF duly signed to the person(s) in whose favour the equityshares are so renounced. All joint holders must sign as per specimen signatures recorded with the Company at theplace provided for the purpose and in the same order.

The person(s), in whose favour the offer has been renounced (renouncees) should complete and sign PART C of theCAF. In case of joint renouncees, all joint renouncees must sign.

(ii) To Renounce in PART

If you wish to either accept this offer in part and renounce the balance of this offer the CAF must first be split intothe requisite number of forms, by applying to the Registrar to the Issue. Please indicate your requirement of split formsin the space provided for this purpose in PART D of the CAF and return the entire CAF to the Registrar to the Issueso as to reach them latest by the close of business hours on or before the last date for receiving requests for splitforms, i.e. 04/01/2005.

If you wish to apply for equity shares jointly with any person(s) who is/are not already joint holder(s) with you, thenit would amount to renunciation and the procedure of renunciation as mentioned above shall have to be followed. Evena change in the sequence of the name of joint holders shall amount to renunciation and the procedure as stated aboveshall have to be followed.

Further, this right of renunciation is subject to the express condition that the Board shall be entitled in its absolute andunqualified discretion to reject any such request for allotment of equity shares from renouncee(s) without assigning anyreason thereof save where the equity shares have been renounced in favour of a person who is already a memberof the Company.

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Please note that:

a) Part A of the CAF must not be used by any person(s) other than those in whose favour this offer has been made. Ifused, this will render the application invalid.

b) Only the person to whom this Letter of Offer has been addressed and NOT the renouncees shall be entitled to splitforms. Forms once split cannot be resplit.

REQUEST FOR SPILT FORMS:

� Request for Split Forms should be addressed to the Registrar to the Issue so as to reach them on or before the lastdate for receiving of request for split forms by filling in PART D of the CAF.

� Requests for Split Forms will be entertained only once.

HOW TO APPLY

You may apply for the equity shares offered wholly or in part by filling in the enclosed CAF and submitting the same alongwith the application money to the Bankers to the Issue or its designated branches on or before the closure of thesubscription list. The CAF should be complete in all respects, as explained in the INSTRUCTIONS indicated in the CAF.The CAF should not be detached under any circumstances, otherwise the application(s) will be rejected forthwith.

All applications should be made only on the printed CAF provided by the Company or on blank paper in case of non receiptof CAF.

You may exercise any one of the following options with regard to the equity shares offered to you, using the enclosed CAF :

Sr. Options available Action RequiredNo

1. Accept whole or part of the equity shares offered Fill in and sign Part A indicating in Block III of Part Ato you without renouncing the balance the number of equity shares accepted. If you accept all

the equity share offered in Block II of Part A you mayapply for additional equity shares. Indicate in Block IV theadditional equity shares applied for.

2. Renounce all the equity shares offered to you to one Fill in and sign Part B indicating the number of equityperson (joint renouncees are deemed as one person) shares renounced in Block VII and handover thewithout your applying for any of the equity shares ENTIRE FORM to the renouncee. The renouncee/offered to you. joint renouncee(s) must fill in and sign Part C of CAF.

3. Accept a part of your entitlement and renounce the Fill in and sign Part D for the Split Form and send thebalance or part of it to one or more Renouncee(s). ENTIRE CAF to the Registrar to the Issue.

OR On receipt of Split Forms :

4. Renounce your entitlement or part of it to one or a. For the equity shares you are accepting, fill in andmore persons (joint renouncees are deemed as sign Part A.one person). b. For the equity shares you are renouncing fill in

and sign Part B indicating the number of equityshares renounced in Block VII. Each of therenouncees should fill in and sign Part C.

Note: If application is made jointly with any other person(s) who is/are not already joint holders or change in the sequenceof names of joint holders, it will amount to renunciation and the procedure mentioned in (2) above will have to be followed.

APPLICATION ON PLAIN PAPER

Shareholder who has neither received the original CAF(s) nor is in a position to obtain the duplicate CAF(s) may makean application to subscribe to the Rights Issue on plain paper, along with an Account Payee Cheque / Demand Draftpayable at Mumbai to be drawn in favour of “Dewan Housing Finance Corporation Ltd. - Rights Issue” and marked “A/cPayee” and send the same by Registered Post directly to the Registrar to the Issue so as to reach them on or before theclosure of the Issue. The envelope should be superscribed “DHFL-Rights”.

The application on plain paper, duly signed by the applicants including joint holders, in the same order as per specimenrecorded with the Company should contain the following particulars:

1. Name of the shareholder including joint-holders

2. Address of sole / first holder

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3. Folio No./DP ID Number and Client ID Number

4. Number of shares held as on 03/12/2004 (Record Date)

5. Certificate numbers and Distinctive numbers, if held in physical form

6. Number of shares to which entitled

7. Number of shares applied for, out of entitlement

8. Number of additional shares applied for, if any

9. Total number of shares applied for

10. Amount payable on application

11. Particulars of Cheque/Draft enclosed

12. Savings/Current Account Number and Name and Address of the Bank

13. PAN/GIR number and Income tax Circle/Ward/District of the sole/all the joint applicants where the application is forshares of a value of Rs.50,000/- or more

14. In case of Non-Resident shareholders, NRE/FCNR/NRO Account No., name and address of the bank and branch.

15. Signature of shareholders in the same order as appearing in the records of the Company.

Please note that those who are making the application on plain paper shall not be entitled to renounce their rights andshould not utilise the CAF for any purpose including renunciation even if it is received subsequently. If the applicant violatesany of these requirements, he/she shall face the risk of rejection of both the applications. The Company shall refund suchapplication amount to the applicant without any interest thereon.

MODE OF PAYMENT

For Resident Applicants

Payment(s) must be made by cheque/demand draft and drawn on any bank (including a co-operative bank) which issituated at and is a member or a sub-member of the Bankers’ Clearing House located at the centre where the CAF issubmitted. A separate cheque/draft must accompany each CAF. Only one mode of payment should be used. Money orders,postal orders and outstation cheques will not be accepted and applications accompanied by any such instruments will berejected.

Shareholders/Applicants residing at places other than those mentioned in the CAF and applicants who wish to send theirapplications but not having collection centres should send their application by Registered Post, ONLY to the Registrar tothe Issue, Intime Spectrum Registry Limited, enclosing a demand draft drawn on a clearing Bank and payable at MumbaiONLY net of bank charges and postal charges, before the closure of the issue.

Such cheque/drafts should be payable to “(Name of The Bank)-A/c – DEWAN HOUSING FINANCE CORPORATION LTD.- RIGHTS ISSUE”. All cheques/ drafts must be crossed ‘A/c Payee only’. No receipt will be issued for the applicationmoney received. However, the Collection Centre receiving the application will acknowledge receipt of the application bystamping and returning the acknowledgement slip at the bottom of each CAF. The Company is not responsible for anypostal delay/ loss in transit on this account.

Application will not be accepted by the Lead Manager or by the Company.

QUOTING OF PAN/GIR NO. IN THE APPLICATION FORMS

Where an application is for allotment of securities in response to a rights issue, for a total value of Rs. 50,000/- or more,i.e. the total number of securities applied for multiplied by the issue price, is Rs. 50,000/- or more the applicant or in thecase of applications in joint names, each of the applicants, should mention his/her permanent account number (PAN)allotted under the Income-Tax Act, 1961 or where the same has not been allotted, the GIR number and the Income-TaxCircle/Ward/District. In case neither the permanent account number nor the GIR number has been allotted, the fact of non-allotment should be mentioned in the application forms. Application forms without this information will be consideredincomplete and are liable to be rejected.

For Non-Resident Applicants/ FIIs

Payments by Non-Resident Shareholders will be accepted by Indian Rupee Drafts purchased abroad or cheques/draftsdrawn on Non-Resident External Account (NRE Account) or Foreign Currency Non-Resident Account (FCNR Account)maintained anywhere in India but payable at Mumbai or by Telegraphic Transfer in favour of the collecting Bankers by theconcerned shareholders.

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However, in case shares are held on a non-repatriable basis, payment may also be made by cheque /draft drawn on Non-Resident Ordinary Account (NRO A/c.) maintained anywhere in India but payable at Mumbai. Such cheques/drafts shouldbe drawn in favour of “ DEWAN HOUSING FINANCE CORPORATION LTD - RIGHTS ISSUE - NRI” payable at Mumbai,India and shall be crossed A/c. Payee Only. Banker’s Certificate regarding source of payment must be submitted with theCAFs wherever necessary.

The CAF alongwith cheques/drafts should be deposited with any of the branches of the Bankers to the Issue nominatedfor this purpose. The certificate of inward remittance, if any, must be sent only to the Registrar to the Issue, Intime SpectrumRegistry Limited, quoting the details of folio no. and the name and address of the branch of the Bankers to the Issue whereCAF has been deposited before the closure of the issue.

NOTE ON CASH PAYMENT (SECTION 269 SS)

Having regard to the provisions of Section 269 (SS) of the Income Tax Act, 1961, subscriptions against applications forsecurities should not be effected in cash and must be effected only by ‘Account Payee’ cheques or ‘Account Payee’ bankdrafts, if the amount payable is Rs. 20,000/- or more. In case payment is effected in contravention of this provision, theapplication is liable to be rejected.

LAST DATE FOR SUBMISSION OF CAF

The last date for receipt of CAF by the Bankers to the Issue together with the amount payable on application is 19/01/2005.If the relevant CAF together with amount payable thereunder is not received by the Bankers/Registrar to the Issue on orbefore the close of banking hours on the aforesaid last date the offer contained in this Letter of Offer shall be deemed tohave been declined and the Board shall be at liberty to dispose of the equity shares hereby offered as provided under“Basis of Allotment”.

INCOMPLETE APPLICATION

CAFs which are not complete or are not accompanied with the application money amount payable are liable to be rejected.

MINIMUM SUBSCRIPTION

The minimum subscription which must be raised by this issue of equity shares is 90% of the total issue of Rs.5011.32 lacsbeing the aggregate issue size of 1,43,18,063 equity shares of Rs.10/- each for cash at a price of Rs.35/- per share offeredin terms of this Letter of Offer. The Board of Directors will proceed to allot the shares on receipt of the application moneypayable on 90% of the 1,43,18,063 equity shares.

If the Company does not receive the minimum subscription of 90% of the issued amount upto the date of closure of theissue, or if the subscription level falls below 90% after the closure of issue on account of cheques having been returnedunpaid or withdrawal of applications, the Company shall forthwith refund the entire subscription amount received within 42days from the date of closure of the issue. If there is a delay beyond 8 days after the Company becomes liable to paythe amount, the Company shall pay interest for the delayed period as per Section 73 of the Companies Act, 1956.

BASIS OF ALLOTMENT

In the event of the issue being oversubscribed, the basis of allotment will be made only within the overall size of the RightsIssue, as stated in the Letter of Offer and the Board will proceed to allot the equity shares in consultation with thedesignated stock exchange in the following order of priority:

a) Full allotment to the Shareholders who have applied for their Rights entitlement, either in full or in part and also therenouncee(s) who have applied for equity shares renounced in their favour either in full or in part (subject to the otherprovisions contained under the paragraph titled “Renunciation”).

b) Allotment to the shareholders who have applied for additional equity shares provided that they have applied for all theequity shares offered to them, provided there is a surplus after making full allotment under (a) above. The allotmentof such additional equity shares will be made as far as possible on the basis of the equity shares held as on the RecordDate.

c) Allotment to the renouncees who have applied for all the equity shares renounced in their favour and have appliedfor additional equity shares, as the Board may in its absolute discretion deem fit, provided there is a surplus aftermaking full allotment (a) and (b) above.

d) Allotment to any other person as the Board may in their absolute discretion deem fit, provided there is a surplus aftermaking full allotment under (a), (b), (c) above.

The unsubscribed portion of the equity shares, if any, offered to the shareholders after considering the application forRights/Renunciation and additional equity shares, as above, shall be disposed off at the sole discretion of the Board ofDirectors of the Company.

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DISPOSAL OF APPLICATION AND APPLICATION MONEY

No receipt will be issued for application money received. However, the Bankers to the Issue receiving the CAF(s) willacknowledge its receipt by stamping and returning the acknowledgement slip at the bottom of each CAF. In the event ofshares not being allotted in full, the excess amount paid on application will be refunded to the applicant within six weeksof the date of closure of the issue. The Board reserves its full, unqualified and absolute right to accept or reject anyapplication in whole or in part and in either case without assigning any reason. In case an application is rejected in full,the whole of the application money received will be refunded and where an application is accepted in part the excessmoney will be refunded after adjusting the money payable for the shares allotted. All refunds will be made within six weeksof the date of closing of the Subscription List.

FORFEITURE

The entire price of Rs. 35/- per share is payable on application. Since the shares allotted will be fully paid-up at the timeof allotment, the forefeiture clause will not be applicable to the equity shares being allotted in terms of this Letter of Offer.

RANKING OF EQUITY SHARES

The Equity Shares offered and allotted through this Letter of Offer shall be subject to the Memorandum and Articles ofAssociation of the Company and shall rank pari passu with the existing Equity Shares in all respects including dividend,if any, declared.

RIGHTS OF EQUITY SHAREHOLDERS

The Shareholders are entitled to receive dividend, as and when declared, and bonus and rights shares, as and whenissued. Further, the rights of the above and other holders of shares are subject to the provisions of the Companies Act,the Memorandum and the Article of Associations, the terms of this Letter of Offer and other laws as applicable from timeto time.

ALLOTMENTS/REFUNDS

A) For applications made by Cheques/Drafts

The Company will issue and despatch letter of allotment/securities certificate and/or letter of regret alongwith the refundorders or credit the allotted securities to the respective beneficiaries account, if any, within a period of six weeks fromthe date of closure of issue. If such money is not repaid with 8 days from the day the Company becomes liable to payit, the Company shall pay that money with interest as stipulated under Section 73 of the Companies Act, 1956.Refunds, if any, will be made alongwith Allotment Letters and /or Regret Letters by refund order / pay order drawn onthe Bankers to the Company and will be despatched within 6 weeks from the date of closure of Issue, by RegisteredPost if the amount of such refund exceeds Rs.1500/-. Such cheque refund order / pay order will be payable at parduring their validity period at all centres where the applications are received. In case of joint applications, RefundOrders, if any, will be made out in the First applicant’s name and all communication will be addressed to the personwhose name appears on the CAF.

B) For application by Non-Resident Indians / Foreign Institutional Investors (FIIs)

In case of Non-Resident Indians/FIIs who remit their application money from funds held in NRE/FCNR/NRO Accounts,refund/payment of interest and other disbursements, if any, shall be credited to such account, details of which shouldbe furnished in the column provided for that purpose in the CAF. In case of non-residents who remit their applicationmoney through Indian Rupee drafts purchased from abroad, refunds/payments of interest and other disbursements, ifany, will be made in US dollars at the exchange rate prevailing at such time, subject to the permission of the RBI. TheCompany will not be responsible for any loss on account of exchange fluctuations for converting the Indian Rupeesamount into US Dollars.

ALLOTMENT / DESPATCH OF REFUND ORDERS

The subscription received in respect of the issue will be kept in Separate Bank Account(s). The Company would not haveaccess to such funds unless it has received the minimum subscription of 90% of the issue and the permission of theDesignated Stock Exchange to use the amount of subscription.

The Company agrees that as far as possible allotment of securities offered to the existing shareholders on right basis shallbe made within 30 days of the closure of the issue.

Interest in case of delay in allotment / despatch

The Company agrees that it shall pay interest at the rate as prescribed under sub-section (2) and (2A) of Section 73 ofthe Companies Act, 1956, if the allotment has not been made and/or the equity share allotment letters/refund orders havenot been despatched and relevant equity shares have not been credited to the beneficiary account of the investors within30 days from the date of closure of the issue.

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All the pay orders / refund orders and Letter(s) of Allotment / Share Certificates will be despatched to the first named / soleapplicant at his / her own risk. The Refund Orders will be payable at par in India at all the centres where the applicationswere originally accepted. The instruments will be marked “Account Payee Only” and in the name of the sole/first applicant.Bank charges, if any, for encashing such refund orders / pay orders will be payable by the applicants.

The Company has given an undertaking that the requisite funds will be made available to the Registrar for complying withthe requirement of despatch of refund orders / allotment letters. The Company shall ensure despatch of refund orders ofvalue over Rs.1,500/- by Registered Post only and adequate funds will be made available to the Registrar.

APPLICATION UNDER POWER OF ATTORNEY

In case of applications under Power of Attorney or by Limited Companies or Bodies Corporates or Societies registeredunder the applicable laws, a certified copy of the Power of Attorney or the relevant authority, as the case may be, alongwith the certified copy of the Memorandum and Articles of Association or Bye-laws, as the case may be, must be lodgedseparately by registered post at the office of the Registrar to the Issue simultaneously with the submission of the CAF,indicating the serial number of the CAF and the name of the bank and the branch office where the application is submittedwithin 10 days of closure of the offer, failing which the application is liable to be rejected. In case the Power of Attorneyis already registered with the Company, then the same need not be furnished again. However, the serial number of theRegistration under which the Power of Attorney has been registered with the Company must be mentioned below thesignature of the Applicant.

BANK DETAILS OF THE APPLICANT

The applicant must fill in the relevant column in the CAF giving particulars of Savings Bank/Current Account Number andthe name of the Bank with whom such accounts is held, to enable the Registrar to the Issue to print the said details inthe Refund Orders, if any, after the name of the payees. Please note that provision of Bank Account details has nowbeen made mandatory and applications not containing such details are liable to be rejected.

APPLICATION NUMBER ON THE CHEQUE/DEMAND DRAFT

To avoid any misuse of instruments, the applicants are advised to write the application number and name of the firstapplicant on the reverse of the cheque / demand draft.

GENERAL

(a) All applications should be made on the printed CAF provided by the Company and should be complete in all respects.Applications which are not complete in all respects or are made otherwise than as herein provided or not accompaniedby proper application money in respect thereof will be refunded without interest.

(b) Please read the instructions in the enclosed CAF carefully.

(c) ALL COMMUNICATIONS IN CONNECTION WITH YOUR APPLICATION FOR THE EQUITY SHARES INCLUDINGANY CHANGE IN YOUR REGISTERED ADDRESS SHOULD BE ADDRESSED TO THE REGISTRAR TO THE ISSUE.

(d) Application Forms must be filled in ENGLISH in BLOCK LETTERS.

(e) Signatures should be either in English or Hindi or the languages specified in the Eighth Schedule to the constitutionof India. Signatures other than in the aforementioned languages or thumb impressions must be attested by a NotaryPublic or a Special Executive Magistrate under his/her official seal.

(f) In case of Joint Holders, all joint holders must sign the relevant parts of the Application Form in the same order andas per the specimen signatures recorded with the Company.

(g) In case of joint applicants, refunds and all payments will be made to the person whose name appears first on theapplication form and all communications will be addressed to him/her. To prevent any fraudulent encashment of refundorders by third parties, the Sole/First Applicant must indicate Saving / Current Account number and the name of thebank and its branch with whom such account is held in the space provided in the CAF for the purpose so that RefundOrders are printed with these details after the name. Applications without this information are liable to be rejected.

(h) The Application Form should be presented to the Bank in its entirety. If any of the Part(s) A,B,C and D of the ApplicationForm(s) is /are detached or separated, such application will forthwith be rejected.

(i) All shareholders must submit the CAF along with remittance only to the Bankers to the Issue mentioned elsewherein this Letter of Offer and not to the Company, the Registrar or the Lead Manager.

(j) Any dispute or suit action or proceedings arising out of or in relation to this Letter of Offer or in respect of any matteror thing herein contained and claimed by either party against the other shall be instituted or adjudicated upon ordecided solely by the appropriate Court where Registered Office of the Company is situated.

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(k) The last date for receipt of CAF alongwith the amount payable is 19/01/2005. However, the Board will have the rightto extend the same for such period as it may determine from time to time, but not exceeding 60 days from the dateof opening of the subscription list. If the CAF together with the amount payable thereunder is not received by thebankers to the issue on or before the closure of the banking hours on the aforesaid date, or such date as may beextended by the Board, the offer contained in this Letter of Offer shall be deemed to have been declined and the Boardshall be at liberty to dispose the Rights hereby offered.

For further instructions please read CAF carefully.

DEMATERIALISATION

As per the provisions of the Depositories Act, 1996, the shares of a body corporate may be held in dematerialized formi.e. not in the form of physical certificates but be fungible and be represented by the statement issued through electronicmode. The equity shares of Dewan Housing Finance Corporation Limited are traded in the demat segment The Companyhas entered into a tripartite agreement dated 24/09/2003 with the National Securities Depository Ltd. (NSDL) and IntimeSpectrum Registry Ltd. (Registrar and Transfer Agent) for dematerialisation of the equity shares of the Company. TheCompany has also entered into a tripartite agreement dated 19/06/2003 with the Central Depository Services Limited(CDSL) and Intime Spectrum Registry Ltd. for dematerialisation of the equity shares of the Company. The ISIN No. grantedto the equity shares of the Company is INE – 202B01012.

An applicant has the option to seek allotment in physical or demat mode. An applicant who seeks allotment in demat modemust have atleast one Beneficiary Account with any of the Depository Participants (DP) of NSDL or CDSL registered withSEBI, prior to the application. Such applicants must necessarily fill in the details (including the Beneficiary Account Numberand Depository Participant’s ID Number) appearing under the head “Request for shares in electronic form” in the CAF.

Applicant must indicate in the CAF, the number of shares they wish to receive in electronic form out of the totalnumber of equity shares applied for. In case of partial allotment, shares will first be allotted in electronic form andthe balance, if any, will be allotted in physical form.

Names in the CAF should be identical to those appearing in the account details in the Depository. In case of joint holders,the name should necessarily be in the same sequence as they appear in the account details in the Depository.

No separate application for demat and physical shares is to be made. If such applications are made the application forphysical shares will be treated as multiple applications and rejected accordingly. It may be noted that electronic shares canbe traded only on the stock exchanges having electronic connectivity with NSDL and CDSL.

Non transferable allotment letters/ refund orders will be directly sent to the applicant by the Registrar to the Issue.

The applicant is responsible for the correctness of the applicants demographic details given in the share application form vis-à-vis those with his/her DP. Equity shares allotted in demat mode will be credited directly to the respective Beneficiary Account.

TAX BENEFITS TO THE COMPANY AND ITS SHAREHOLDERS

M/s. B. M. Chaturvedi & Co., Chartered Accountants and Statutory Auditors of the DHFL have vide their letter dated02/09/2004 advised that under the current provisions of Income Tax Act (hereinafter referred as (“the Act”), 1961 andexisting laws for the time being in force, the following benefits are available to the Company and to its Shareholders. Thetax benefits available to the “Company” and its Shareholders are as under the current tax law presently in force in Indiaas also proposed under the Finance (No.2) Bill, 2004 as introduced in the Lok Sabha on 8th July, 2004. Several of thesebenefits are dependent on the Company or its shareholders fulfilling the conditions prescribed under the relevant tax laws.Hence, the ability of the Company or its shareholders to derive the tax benefits is dependent upon fulfilling such conditions,which based on business imperatives the Company faces in the future, the Company may or may not choose to fulfill.

To the Company

1. The Company enjoys tax benefits under section 36(1)(viii) of the Act, the Company transfers 40% of the profits earnedfrom long term lending for residential housing purposes to a Special Reserve on which tax is not payable. The effectivetax rate on income from such long term lending is subject to tax rate of (35% less 14%) 21%. The deduction isrestricted to the extent of twice the aggregate of the amount of the paid up Share Capital and of the General Reservesof the Company, which are transferred to such Special Reserve Account from time to time.

2. In accordance with, and subject to the provisions of Section 32 of the Act, the Company will be entitled to claimdepreciation on tangible and specified intangible assets.

3. By virtue of section 10(34) of the Act, any dividend income received by the Company will be exempt from tax.

4. In accordance with and subject to the conditions specified in section 35D of the Income Tax Act, the Company isentitled to amortization, over a period of five years, of all expenditure of connection with the proposed Rights Issue,subject to the overall limit prescribed in the said section.

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5. Interest income accruing to the Company on long term finance provided to enterprises engaged in the infrastructurebusiness comprising of housing projects as per section 80-IB(10), will be exempt from tax, subject to conditionsprescribed under section 10(23G) of the Act.

6. By virtue of new section 10(35) of the Act, the following income shall be exempt, subject to certain conditions, in thehands of the Company:-

(a) income received in respect of the unit of a Mutual Fund specified under clause (23D); or

(b) income received in respect of units from the Administration of the specified undertaking; or

(c) income received in respect of units from the specified Company;

7. The Finance (No.2) Bill, 2004 has proposed vide section 10(38) of the Act that long-term capital gains on sale of shareswhere the transaction of sale is entered into on a recognized stock exchange in India, on or after the date on whichChapter VII of the Finance (No.2) Act, 2004 comes into force, shall be exempt from tax.

8. The Finance (No. 2) Bill, 2004 has proposed vide Section 111A of the Act that short-term capital gains on sale of shareswhere the transaction of sale is entered into on a recognized stock exchange in India, on or after the date on whichChapter VII of the Finance (No.2) Act, 2004 comes into force shall be subject to tax at a rate of 10 per cent (plusapplicable surcharge and Education Cess).

To the Shareholders of the Company– Under the Act

1. Income received by any assessee as dividend from an Indian Company is exempt under section 10(34) of the Act.

2. In accordance with section 48 of the Act, long-term capital gains arising out of sale of shares of the Company shallbe computed after indexing the cost of acquisition/improvement. Under Section 112 of the The Act, such gains whichare not exempt under the proposed section 10(38) of the Act, shall be taxed at the rate of 20% (subject to surchargeas applicable), where the tax so payable exceeds 10% (subject to surcharge as applicable) of the amount of capitalgains computed before indexing the cost of acquisition, improvement, then such excess shall be ignored.

3. The Finance (No. 2) Bill, 2004 has proposed vide Section 111A of the Act that short-term capital gains on sale of shareswhere the transaction of sale is entered into in a recognized stock exchange in India, on or after the date on whichChapter VII of the Finance (No.2) Act, 2004 comes into force shall be subject to tax at a rate of 10 per cent (plusapplicable surcharge and Education Cess).

4. The Finance (No.2) Bill, 2004 has proposed vide section 10(38) of the Act that long-term capital gains on sale of shareswhere the transaction of sale is entered into in a recognized stock exchange in India, on or after the date on whichChapter VII of the Finance (No.2) Act, 2004 comes into force shall be exempt from tax.

5. In accordance with, and subject to the conditions and to the extent specified in section 54EC and 54ED of the Act,long term capital gains tax arising on transfer of the shares of the Company, shall be exempt from capital gains taxif the gains are invested within six months from the date of transfer in the purchase/acquisition of specified assets.

6. In accordance with, and subject to the conditions and to the extent specified in Section 54F of the Act, long term capitalgains arising on the transfer of the shares of the Company held by an individual or Hindu Undivided family shall beexempt from capital gains tax if the net sales consideration is utilized, within a period of one year before, or two yearsafter the date of transfer, in the purchase of a new residential house, or for construction of a residential house withinthree years subject to the condition that the assessee should not own more than one residential house, other than thenew asset, on the date of transfer of original asset and the assessee should not purchase or construct any residentialhouse, other than the new asset, in case of purchase within a period of one year after the date of transfer of originalasset and in case of construction, within a period of three years after the date of transfer of original asset.

7. In accordance with, and subject to Section 48 of the Act, capital gains arising to non-resident, out of transfer of capitalassets being shares in an Indian Company shall be computed by converting the cost of acquisition, expenditure inconnection with such transfer and full value of the consideration received or accruing as a result of the transfer of thecapital assets into the same foreign currency as was initially utilized in the purchase of shares and the capital gainscomputed in such foreign currency shall be reconverted into Indian currency.

8. Non-Resident Indian has the option to be governed by the provisions of Chapter XII-A of the Act according to which;

i. Under Section 115E of the Act, any income from investment acquired out of convertible foreign exchange will betaxable at 20% (subject to surcharge as applicable) while income from long-term capital gains on transfer of sharesof the Company acquired out of convertible foreign exchange shall be taxed at the rate of 10% (subject tosurcharge as applicable)

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ii. Under Section 115F of the Act, subject to the conditions and to the extent specified therein, long-term capital gainsarising to a Non-Resident Indian from transfer of shares of the Company acquired out of convertible foreignexchange shall be exempt from capital gains tax if the net consideration is invested within six months of the dateof transfer of the asset in any specified asset or in any saving certificates referred to in clause (4B) of Section 10of the Act.

iii. Under Section 115G of the Act, it is not necessary for a Non-Resident Indian to file a return of income underSection 139(1) of the Act, if his total income consists only of investment income and/or long-term capital gainsearned on transfer of such investment acquired out of convertible foreign exchange, and the tax has beendeducted at source from such income under the provisions of Chapter XVII-B of the Act.

9. Under section 10(23FB) of the Act, all venture capital companies/funds registered with Securities and Exchange Boardof India, subject to the conditions specified, are eligible for exemption from income tax on all their income, includingincome from sale of shares of the Company.

Under the Wealth Tax Act, 1957

Shares of the Company held by the shareholder will not be treated as an asset within the meaning of section 2(ea) of theWealth Tax act, 1957; hence Wealth Tax Act will not be applicable.

Under The Gift Tax Act, 1958

Gift of shares of the Company made on or after October 1, 1998, would not be liable to Gift Tax.

Please note that all the above tax benefits will be available only to the sole/first named holder in case the shares are heldby joint holders. Legislation, its judicial interpretation and the policies of the regulatory authorities are subject to changefrom time to time, and these may have a bearing on the advice that we have given. Accordingly, any change or amendmentin the law or relevant regulations would necessitate a review of the above. Unless specifically requested, we have noresponsibility to carry out any review of our comments for changes in laws or regulations occurring after the date of issueof this Note.

In respect of non-residents, the tax rates and the consequent taxation mentioned above shall be further subject to anybenefits available under the Double Taxation Avoidance Agreements, if any, between India and the country in which thenon-resident has fiscal domicile.

The above Statement of Possible Direct Tax Benefits sets out the provisions of law in a summary manner only and is nota complete analysis or listing of all potential tax consequences of the purchase, ownership and disposal of ordinary shares.The statements made above are based on the tax laws in force as also under the Finance (No.2) Bill, 2004 and asinterpreted by the relevant taxation authorities as of date. Investors are advised to consult their tax advisors with respectto the tax consequences of their holdings based on their residential status and the relevant double taxation conventions.

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V. PARTICULARS OF THE ISSUE

OBJECTS OF THE ISSUE

The present rights issue of 1,43,18,063 equity shares of Rs.10/- each at a premium of Rs.25/- per share aggregatingto Rs.5011.32 lacs is being made :

1. To augment the long-term resources.

2. To enhance and strengthen the equity base of the Company so as to maintain the Debt Equity Ratio and CapitalAdequacy Ratio as per Prudential Norms issued by National Housing Bank (NHB).

3. To increase the net owned funds of the Company, thereby increasing the eligibility for refinance/ borrowing fromNational Housing Bank/ Banks and other Financial Institution.

4. To Redeem 9% cumulative redeemable preference shares.

5. To list the equity shares being issued in terms of the rights issue.

1. To augment the long-term resources

Housing Finance Companies have a perennial requirement of funds for the purposes of providing long term housingfinance for various categories of borrowers where finance is provided to individuals on a long term basis. The Companyis engaged in the business of providing long-term housing finance to the individuals. As the tenure of loans financedby the company ranges between 5 years to 20 years, company requires the long-term resources to be deployed insuch activities. Further, as per the NHB guidelines, company has to follow Asset Liability Management Guidelines(refer page no. 39 of the Letter of Offer). Raising of long term equity will help the company in achieving the objectiveof strengthening such management.

2. To enhance and strengthen the equity base of the Company so as to maintain the Debt Equity Ratio and CapitalAdequacy Ratio as per Prudential Norms issued by National Housing Bank (NHB).

As per the prudential norms of NHB on Capital Adequacy Ratio every housing finance company shall, maintain aminimum capital ratio consisting of Tier-I and Tier-II capital which shall not be less than 12% of its aggregate riskweighted assets and of risk adjusted value of off-balance sheet items.

DHFL had a CAR of 17.12% as on 31st March 2004. However considering the growth projections of the company, itwill be prudent to strengthen the equity base.

The Debt Equity Ratio of the company should be within the limits prescribed by National Housing Bank. The NHBDirection on such ratio is as follows:

“No housing finance company shall have deposits inclusive of public deposits, the aggregate amount of which togetherwith the amounts, if any, held by it which are referred in clauses (iii) to (vii) of sub-section (bb) of Section 45 I of theReserve Bank of India Act, 1934 as also loans or other assistance from the National Housing Bank, is in excess ofsixteen times of its NOF”.

3. To increase the net owned funds of the Company, thereby increasing the eligibility for refinance/ borrowingfrom National Housing Bank/ Banks and other Financial Institutions.

The Company is engaged in the business of providing housing finance by raising the money from banks and institutions.Raising money from banks and institutions will require banks’ comfort in terms of Debt Equity Ratio. Therefore, raisingfunds through equity capital will enable the company to raise further debt for its growth.

Objectives 1, 2 and 3

The Company proposes to raise Rs.5011.32 Lacs by way of this rights issue of equity shares including premiumthereon. Prior to this proposed issue, the Company has raised Rs.1684 Lacs by way of equity and premium in June,2000, i.e almost 4 years back. At that time, the total borrowings of the Company were Rs.48140 Lacs (as on 31/12/1999). As the company is a Housing Finance Company approved by The National Housing Bank, it is allowed to raisethe debt for the purpose of housing finance equal to 16 times of its net owned funds. Based on these guidelines, theCompany has raised its borrowing from Rs.48140 Lacs as on 31/12/1999 to Rs.132651 Lacs as on 30/09/2004.However, during this period the Company has not raised any equity funds and on the basis of retained profits thenetworth of the company has increased to Rs.14334 Lacs as on 30/09/2004.

During the seven month period ended on 31/10/2004 the Company has disbursed Rs.37624 Lacs as housing loanswhich is equal to a monthly average of Rs.5375 Lacs.The total funds raised pursuant to the rights issue will be usedpartly to redeem the high cost preference shares to the extent of Rs.500 Lacs and the balance amount of Rs.4471.82Lacs (after incurring the rights issue expenses) will be utilized towards disbursement of housing loans. The additionalinput of Rs.5011.32 Lacs will enable the company to raise almost Rs.80000 Lacs by way of debt.

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Thus, apart from achieving the twin objectives of increasing the borrowing powers of the company and furtherstrengthening the asset liability management, the funds to the extent of Rs.4471.82 Lacs will be utilized towardsdisbursement of housing loans.

4. To Redeem 9% cumulative redeemable preference shares

In view of the high cost of servicing of the preference shares, the company will be redeeming its 9% preference sharesamounting to Rs.500 lacs out of the proceeds of this fresh issue of shares.

5. To list the equity shares being issued in terms of this Letter of Offer

Listing of the equity shares involves the entire process of the rights issue where the management perceives thefollowing expenses:

(Rs. In Lacs)

Particulars Amount

Intermediary Fees 10.00

Statutory Fees 0.50

Printing 5.00

Despatch of Letter of Offer/ Refund Orders/ Allotment Advice 5.00

Connectivity and Other Charges 1.00

Advertising 15.00

Miscellaneous 3.00

Total 39.50

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VI. COMPANY MANAGEMENT & PROJECT

BRIEF HISTORY OF THE COMPANY

Dewan Housing Finance Corporation Limited (DHFL) was incorporated as “Dewan Housing Finance & Leasing CompanyLimited” on 11th April 1984 under the Companies Act, 1956 and obtained the Certificate of Commencement of Businesson 26th April 1984. The name was subsequently changed to “Dewan Housing Development Finance Ltd.” on 26th September,1984 and later to “Dewan Housing Finance Corporation Limited” on 25th August 1992. The Company was formed with anobject to meet the requirements of the large middle and lower income segment of the population which had the need forhousing but did not have adequate monetary resources to fulfill their desire to acquire their own house.

The Company was promoted by the late Shri Dewan Kuldip Singh Wadhawan and late Shri Rajesh Kumar Wadhawan. LateShri Rajesh Kumar Wadhawan, founder Chairman and Managing Director, who unfortunately expired at a very young ageof 51 years on 30/09/2000, was a visionary and leader par excellence. He was the main driving force behind the growthof the Company to unprecedented heights from humble beginning to fulfill the housing dreams of over 1 Lac families andtrusted by more than 1 Lac investors, who have placed their savings with the Company. The Wadhawan family membershave 48.62% stake in the equity and have controlling interest in the Company. Presently the promoters of DHFL are ShriRakesh Kumar Wadhawan, Shri Kapil Wadhawan and Shri Sarang Wadhawan. Shri Rakesh Kumar Wadhawan, Chairman,has 25 years of business experience in Land Development and Construction. Shri Kapil Wadhawan, Managing Director,holds a Masters Degree in International Finance from Edith Cowan University, Perth, Australia. Mr. Sarang Wadhawan,Executive Director holds Masters degree in Business Management from Clark University, Boston, USA.

The Company is managed by the Board of Directors comprising of distinguished and eminent professionals from variousfields of Finance, Banking, Taxation, Construction, Urban policy and development. As on date, Unit Trust of India (UTI) isthe single largest stakeholder with the stake of 13.69% in the equity of the Company and Union Bank of India (UBI) hasthe equity stake of 8.32%. UTI and UBI have nominee directors on the Company’s Board.

The Company initially faced teething problems since the concept of housing finance itself was new and rather undevelopedand as a consequence, resource mobilisation was difficult. The Company received approval from Reserve Bank of Indiaas Housing Finance Company in April, 1986 and later from the National Housing Bank in 1990. The Company’s performanceshowed a marked improvement after it was given formal recognition as a Housing Finance Institution by the NationalHousing Bank and considered eligible for refinance. Simultaneously, the Government earmarked a greater resource allocationto this core sector and paved the way for greater participation in this sector through its institutions.

The Company went public in December 1984, with the object of strengthening the capital base and broad basing theshareholding. The equity shares were listed on BSE, NSE, ASE and DSE. Subsequently, the Company entered the capitalmarket with a Rights Issue in the ratio of 2:1 in February 1992 and 1:1 in the year 1994. Fresh capital was infused intothe Company through a rights issue of equity shares in the ratio of 30:100 in the year 2000. The equity shares were delistedfrom the ASE and DSE in terms of SEBI Guidelines in respect of voluntary delisting of equity shares pursuant to approvalfrom members at the Annual General meeting held on 31/07/2003.

During the year 2003-04 DHFL and its promoters acquired 91.22% equity stake in Vysya Bank Housing Finance Limited,a housing finance Company registered with NHB and having operations in the States of Karnataka, Andhra Pradesh,Tamilnadu and Maharashtra.

MAIN OBJECTS OF THE COMPANY

The Main Object of the Company is:

To advance money to any person or persons or co-operative society or A.O.P Company or Corporation, jointly or individually,for long term, either at interest or without and/or with or without any security for the purpose of enabling the personborrowing the same to erect or purchase, any house or building or any part or portion thereof for residential purposes inIndia upon such terms and conditions as the Company may think fit.

The above is the Main Object Clause reproduced from the Memorandum and Articles of Association of the Dewan HousingFinance Corporation Limited. The main object of the Memorandum of Association of the Company enables the Companyto undertake the activities it has been carrying out till date.

BUSINESS OF THE COMPANY AND ITS PRODUCTS AND SERVICES

DHFL has, since inception, focused only on housing finance business and after twenty years of sustained operations, it isthe fourth largest housing finance Company. Its loan portfolio has since grown to Rs.1114.92 crores on March 31, 2004.It has also floated associate companies in the areas of property services and insurance broking. These businesses arecomplimentary to DHFL’s business.

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Operations of the Company

DHFL has concentrated on financing individuals over the years and has stopped disbursements to builders during the lastthree years. On March 31, 2004, around 96.92% of the total outstanding loans were primarily to individuals. Within theindividual segment, DHFL has largely lent to salaried individuals. Thus, the housing loan portfolio is adequately de–riskeddue to the low outstanding loan amount per obligor. DHFL has been diversifying its product profile by introducing newerand higher yielding products like home improvement loans, home loan plus, etc.

Approvals And Disbursements

Loan approvals during the financial year ended 31st March 2004, were Rs.525.94 crores as against Rs.447.36 crores inthe previous year, representing a growth of 17.57%. Loan disbursements during the twelve-month period ended 31st March2004 were Rs. 468.54 crores as against Rs.418.68 crores in the previous year, representing a growth of 11.91%.

Computation chart showing approval and disbursement for last 5 years are given below:

(Rs. crores)

As on 31st March 1999 2000 2001 2002 2003 2004 Cumulative

Sanctions 103.29 181.17 211.23 215.85 447.36 525.94 1,684.84

Disbursements 92.39 163.58 165.81 203.04 418.68 468.54 1,512.04

The growth of DHFL’s housing loan business has continued to be good throughout. In value terms, housing loan approvalsas well as disbursements have shown a growth of over 100% in the last 3 years, despite stiff competition from other playersin the market.

Asset Quality

Housing loans as an asset class have experienced very low default rates due to the emotional attachment an individualhas to his home, the low probability of depreciation in asset value, the relative difficulty of shifting a house etc.

Over the years, DHFL has also developed effective sanctioning and disbursement processes to ensure that its asset qualityremains high. It has its own legal and technical staff to perform the due diligence. DHFL emphasizes on building up andmaintaining customer relationships and does not believe in using Direct Selling Agents (DSAs). It has established strongcollection and recovery mechanisms.

This is reflected in the consistently low levels of NPAs over the years. Its gross NPAs have declined from 1.35% as onMarch 31, 2001 to 1.18% as on March 31, 2004. Net NPAs have also declined from 1.15% to 0.98% over the same period.

Funding

DHFL in the initial years was heavily dependant on NHB refinance and fixed deposits for funds. However, over the yearsit has diversified its resource base by accessing bank loans, non-convertible debentures and securitization. As on March31, 2004, bank loans and NCDs accounted for about 73.55% of its total resources as against 21% as on March 31, 2000.The share of NHB refinance and fixed deposits has come down from 64% to 15.91% over the same period. The changein resource profile has also improved DHFL’s maturity profile. DHFL has been making concerted efforts to bring down itscost of borrowings.

The Company has raised Fixed Deposits from Public as eligible under the National Housing Bank’s norms and the FixedDeposit Programme has been rated “CARE AA” by CARE and “AA” by FITCH India Private Ltd., representing highinvestment grade-debt paper

During the year 2003-04 the Company issued Non Convertible Debentures worth Rs. 34 crores Rated “AA” by CARE andFITCH. The Company has also issued short term debt paper of Rs. 50 Crores Rated by Crisil as P1+ representing verystrong degree of safety. It initiated a securitization programme for Rs. 69 crores rated as AAA(So) by CARE and FITCH.The company availed of a US$12.5 mn loan from IFC, Washington and obtained an in-principle funding approval for US$20mn from the Asian Development Bank (ADB) during the year 2003-2004

NHB has conducted an inspection of DHFL under Section 34 of the NHB Act, 1987 and no adverse findings have beenreported by NHB.Further, NHB has sanctioned refinance assistance to DHFL not exceeding Rs.100 Crores for the year2004-05 (July-June) as applicable to housing finance companies including Golden Jubilee Rural Housing Refinance Scheme,1997 vide their letter no. NHB(ND)/ROD/HFC-RFN/2.5/SL/1798/2004-05 dated 26/10/2004.

Capital Adequacy

DHFL has consistently endeavoured to raise low cost funds and adequate leverage. The Capital Adequacy Ratio of DHFLas on 31/03/2004 was 17.12% against the minimum stipulated requirement of 12 percent.

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Asset Liability Management (ALM)

The ALM profile of an Housing Finance Company (HFC) would be normally adverse because the assets generated by aHFC are of average tenor of 10-12 yrs. As against this, the liabilities contracted are of an average tenor of 7-10 yrs.However, comfort may be drawn from the high renewal rate and the prepayments experienced by DHFL. The securitizationroute presents another opportunity to manage the ALM mismatches. DHFL is attempting to shorten its asset profile, throughthe launch of various products, which have a shorter repayment period. However, this exposure comprises only a fractionof their long term loan portfolio

Interest Rate Risk

A large part of DHFL’s borrowings were in the form of bank loans which carry variable interest rates linked to the PrimeLending Rates (PLRs) of the respective banks, whereas a large part of DHFL’s housing loan portfolio was fixed rate. Topartly mitigate this risk, DHFL has started offering variable rate mortgages from May 2002. A large portion of the incrementaldisbursements is with variable interest rates.

Brief financials of the Company for the past three years are as follows:(Rs. In lacs)

Particulars as on 31st March 2002 2003 2004

Income 11542.02 13030.55 14688.56

Expenditure 9408.93 10650.04 11947.75

Profit After Tax 2133.09 2380.51 2740.81

Equity & Preference Capital 4354.81 4079.81 4079.81

Reserves 7202.99 7910.76 9090.37

Networth 11500.14 11945.37 13135.92

EPS 4.90 5.83 6.72

NAV 26.41 29.28 32.20

Dividend (%) 15 15 25*

* Including 20th Anniversary Special Dividend @ 10%

Growth Trends

Sanctions V/s. Disbursals Revenues V/s. Profits

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The steady rise in the revenue and profits of the Company is the result of strategic, appropriate and timely businessdecisions taken by the management. In a highly competitive business environment, the Company:

* Lent more,

* At better spreads,

* With better collection efficiencies.

DIVIDEND

The Company has been consistent in paying dividend to its shareholders. The dividend payout history of the Company forthe last five years is given below:

Year Ended Dividend (%) Div. Yield (%)

March 2004 25.00* 11.14

March 2003 15.00 9.55

March 2002 15.00 9.20

March 2001 15.00 6.38

March 2000 15.00 6.00

* including 20th Anniversary special dividend @ 10%

PRODUCTS

The Company offers different types of products:

a. Home Loans for purchase or construction : DHFL Home Loans are offered to Individuals, Co-operative Societies,Corporate bodies and Associations of Persons. The home loan seeker can avail loans ranging from Rs.10,000/- toRs.100,00,000/- but not exceeding 85% of the cost of the property. The actual loan amount is determined after takinginto account factors like repayment capacity, age, educational qualifications, stability and continuity of income, numberof dependents, co-applicant’s income, assets, liabilities, saving habits etc. The tenure of the loan ranges from 1 to 20years. The term however does not extend beyond the retirement age or 60 years whichever is earlier (65 years forself employed individuals). The size of the EMI depends on the quantum of loan, interest rate applicable and tenureof loan.

b. Home improvement and Extension Loans: Home Extension Loans are offered to individuals who wish to extend theexisting accommodation, say by adding a bedroom, enclosing open balcony, building an extra room on the terrace etc.The customer can avail these loans ranging from Rs.10,000/- to Rs.100,00,000/- but not exceeding 85% of the costof the extension. The actual loan amount is determined after taking into account factors like repayment capacity, age,educational qualifications, stability and continuity of income, number of dependents, co-applicant’s income, assets,liabilities, saving habits etc. The tenure of the loan ranges from 1 to 15 years. The term, however does not extendbeyond the retirement age or 60 years whichever is earlier (65 years for the self employed individuals). The size ofthe EMI depends on the quantum of loan, interest rate applicable and tenure of loan.

c. NRI Home Loans: NRI Home Loans are offered to Non Resident Indians (NRIs) for residential properties in India.These loans can be availed for purchase, construction, improvement & extension also. The NRI can avail these loansranging from Rs.10,000/- to Rs.100,00,000/- but not exceeding 85% of the cost of property / estimate (for improvement/ extension). The actual loan amount is determined after taking into account factors like repayment capacity, age,educational qualifications, stability and continuity of income, number of dependents, co-applicant’s income, assets,liabilities, saving habits etc. The tenure of the loan ranges from 1 to 10 years. The term however does not extendbeyond the retirement age or 55 years whichever is earlier. The size of EMI depends on the quantum of loan, interestrate applicable and tenure of loan.

d. Mortgage Loans: DHFL’s Mortgage Loans can be availed by professionally qualified individuals who are salaried orself employed, against the mortgage of their residential property. The loan seeker can avail these loans ranging fromRs.1,00,000/- to Rs.100,00,000/-. The actual loan amount is determined after taking into account factors like repaymentcapacity, age, educational qualifications, stability and continuity of income, number of dependents, co-applicant’sincome, assets, liabilities, saving habits etc. The tenure of the loan ranges from 1 to 7 years. This term however doesnot extend beyond the retirement age or 60 years whichever is earlier. (65 years for self employed individuals).

e. Variable Rate Home Loans (VRHL): DHFL has introduced a Variable Rate Home Loan (VRHL) in the larger interestof today’s informed and market savvy home loan seeker. This product is aimed at giving the customer the benefit ofthe fluctuations in the rates of interest in the competitive housing finance market.

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f. Non Residential Property Loan: The Non Residential Property Loans (NRPL) are targetted at attracting professionalslike medical practitioners, chartered accountants, architects and solicitors among others and will help them either buyor construct a property to operate their lines of business.

DHFL has been regularly innovating new products to provide value added services to its customers and also to increaseits reach. The number of products that have been offered to customers has increased from 1 to 8 over a period of 15 years.

The following have been some of the new products which have been successfully launched in recent years:

i. Home Loan for Women:

This product has been innovated to cater to the large potential market of working women, whether single or married.

ii. Home Loan Plus:

This is in extension of the services provided to the existing customers by way of providing them consumer loans, autoloans or personal loans. This not only enables DHFL to retain the customers but also broad bases its existing products.

iii. Plot Loans:

This loan has been introduced in order to enable customers to buy a plot for residential purposes and is available fora maximum tenor of 3 years.

iv. Lease Rental Financing:

Discounting of cash flow/lease rentals from the lessee to be received by a renowned corporate (lessor) from leasingof commercial as well as residential properties held by it. This has helped the Company to broad base its customerbase and penetrate into the corporate market.

v. Corporate tie-ups:

DHFL is concentrating on tie-ups with large corporate houses for providing home finance to its employees. Theeducational qualification and background of the employee will be kept in consideration in order to safe guard theinterests of DHFL.

New Initiatives

DHFL has taken an initiative of venturing into the Insurance sector by joining hands with Birla Sun Life Insurance CompanyLimited. It has successfully launched its Insurance services cell to leverage on its brand equity and distribution network.By cross – selling various products to its customers the Company also retains its present customer base and also generatesfee- based income leading to high returns. At present DHFL has a tie-up with Birla Sun Life for the distribution for LifeInsurance Products and is negotiating with other insurance companies for distribution of Non- life insurance products.

DHFL has also launched a Property Services Cell in order to leverage on its technical expertise. The exhaustive database,tie-ups with property developers helps in finding the right property for its customers. The properties are carefully selected,which are approved by the technocrats under “Advanced Processing Scheme”. It provides an array of vast services suchas buying, selling or renting properties, legal and technical clearances.

For the first time in the history of Housing Finance in India, DHFL introduced a scheme linking housing loan with TripleProtection Plan by way of Earthquake Risk Cover, Free Accident Risk Cover and Property Insurance to the extent of theLoan Liability at no extra cost to the borrowers.

MARKETING NETWORK

DHFL has a network of 45 branches, 15 service centers and more than 150 outreach programmes. The Company approachesits customers directly and as a policy has not used any middlemen/ DSAs.

DHFL has concentrated on developing new camps. DHFL has built its franchises in upstate areas, wherein its branchesgenerate business. In such places, DHFL begins its penetration by holding regular camps in a month, which are advertisedin regional papers in advance. In these camps, the employees of DHFL interact with the borrowers to understand theirrequirements and explain DHFL’s criteria.

The next step is upgradation of the camps into service centers depending on the volume, value and profitability of the camplocation. Depending on the returns generated by the service center a cost-benefit analysis is done in order to take furtherdecision of establishing a branch in the area.

This method of selection of location for camps and their upgradation to a branch has been a backbone in establishing astrong Distribution Network in the country.

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Future Outlook of the Company

Following opportunities may be tapped by the Company to grow in the future:

i. Growth Potential: Housing Finance Industry has been growing at 30% CAGR and there is an estimated shortage of19 million units and fund shortage to the tune of Rs. 1,500 billion (Source: National Housing Bank). The Company hasstrengths by way of an already established brand, a strong distribution network and a competent employee base whichhas facilitated it to survive competition and grow profitably.

ii. Diversification: Under the banner of the Home Loans Plus, the Company offers consumer loans, auto loans andpersonal loans to people who have already taken housing loans from them. By doing this, the Company is increasingits financial strength in other areas and also creating customer loyalty. This market is also a big opportunity for theCompany. The Company’s other successful product launches include Variable Home loans, Home Loans for women,Lease Rental Financing etc. The Company also intends to gradually increase the product portfolio by launching newerproducts to cater to the customer needs.

iii. Special Rural Housing Scheme: Under this scheme Rs. 500 Crores has been allocated to the HFCs, this shall giveaccess to cheaper sources of funds.

iv. Regulatory Framework: The recent guidelines issued by RBI on foreclosure, mortgage backed securitisation, andasset reconstruction once implemented shall provide a further impetus to growth in the Housing Finance Industry.

v. Consolidation in Industry: The industry is witnessing consolidation by way of smaller housing finance companiesbeing merged by the stronger players in the market and also by take over of housing loan portfolios of other companies.This can lead to a faster expansion of the companies asset base by acquiring synergistic portfolios. The Company hasalso acquired Vysya Bank Housing Finance Limited, a subsidiary of ING Vysya Bank Ltd. to increase its market basein Southern parts of India.

vi. Repeal of Urban Land Ceiling and Regulations Act: This was done to free the supply of useable urban land forHousing Construction, which is going to increase the construction activity in the Urban sector and hence is going tobe a big opportunity for the companies in the Housing Finance.

vii. Expanding in the villages: The Company has started expanding in villages by giving loans at the rate of 12% to12.75% for construction of housing units. This market has a vast potential and is mostly untapped.

Branch Network

Over the years, the Company relentlessly provided credit widely across the vast population through an extensive reach.This comprises:

� A distribution network of 45 branches, 15 service centres and more than 150 out-reach programmes in customerproximity

� The extension of branch coverage across a radius of 100 kms and an out-reach programme coverage of prospectiveapplicants across an additional 50 kms: helping the Company service existing customers in the shortest possible timeand potential customers in untouched regions.

� A comprehensive geographic coverage of more than 930 areas, comprising 80 talukas, 282 tehsils and 27 villages inplaces with a population size of less than 20,000.

SUBSIDIARIES OF THE COMPANY:

DHFL Vysya Housing Finance Ltd. (DVHFL)

Date of incorporation: 26/11/1990

Board of Director : Shri Kapil Wadhawan, Shri R. Nambirajan, Shri. R.S.Hugar, Shri Bikrum Sen and Shri Sarang Wadhawan .

During the year 2003-04, DHFL and its promoters acquired 85.91% stake in Vysya Bank Housing Finance Ltd. from INGVysya Bank and 5.31%, which was held by National Housing Bank. With this acquisition, the total holding of DHFL andits promoters has increased to 91.21%, by virtue of which it became a subsidiary of DHFL.

DVHFL is a housing finance Company registered with NHB and has operations primarily in the states of Karnataka, AndhraPradesh, Tamil Nadu and Maharashtra.

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Brief audited financials of the subsidiary Company for the past three years are as follows:

(Rs. in Lacs)

Particulars as on 31st March 2002 2003 2004

Equity Capital 708.07 708.07 708.07

Reserves excluding Revaluation Reserve 1,834.60 2,309.24 2,417.37

Sales and Other Income 2,443.88 2,820.25 2,175.58

Profit/(Loss) after Tax (PAT) 292.90 470.10 318.87

Net Asset value/Book value per Share (Rs.) 35.91 42.61 44.15

Earning per Share (Rs.) 4.26 6.64 4.50

The Company is not a sick company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995.

PROMOTERS’ BACKGROUND:

The Company was promoted by late Shri Dewan Kuldip Singh Wadhawan and late Shri Rajesh Kumar Wadhawan alongwiththeir family members, who had varied and diverse experience in the field of construction. Mr. Rakesh Kumar Wadhawan,Mr. Kapil Wadhawan and Mr. Sarang Wadhawan are the present Promoters of DHFL.

Shri Rakesh Kumar Wadhawan, aged 52 years, is a Commerce Graduate with more than 25 years of experience in realestate development and civil construction.

Shri Kapil Wadhawan, aged 31 years, son of late Shri Rajesh Kumar Wadhawan, is a Bachelor of Commerce from MumbaiUniversity and MBA (Finance) from Edith Cowan University, Perth, Australia. He joined the Board in November 1996, asExecutive Director.

Shri Sarang Wadhawan, aged 28 years, is a Bachelor of Commerce from Mumbai University and MBA from ClarkUniversity, U.S.A. He joined the Company in December 1994, as a Management Trainee.

Other details of promoters are as follows:

Sr. Name, Designation, Functions/ PAN/Bank Account No./Voter ID / PhotographNo. and Address overall Passport No./Driving License No.

experience

1. Rakesh Kumar Wadhawan Chairman PAN: AAEPW7656GChairman Bank A/C No. SB A/c. No. 5816222/23, Sea View Palace, Union Bank of IndiaPali Hill, Bandra (W), Hill Road, Bandra West, Mumbai.Mumbai – 400050. Voter Id.:

Passport No. E9452176Driving Licence No. 450652

2. Kapil Wadhawan Managing PAN: AAOPW6145LManaging Director Director Bank A/C No. SB A/c. No. 56277422/23, Sea View Palace, Union Bank of IndiaPali Hill, Bandra (W), Hill Road, Bandra West, Mumbai.Mumbai – 400050. Voter Id.:

Passport No. 2-1511558Driving Licence No. MH-02-93-20749

3. Sarang Wadhawan Executive PAN: AAAPW2530RExecutive Director Director Bank A/C No. SB A/c. No. 5755522/23, Sea View Palace, Union Bank of IndiaPali Hill, Bandra (W), Hill Road, Bandra West, Mumbai.Mumbai – 400050. Voter Id.:

Passport No. A3504253Driving Licence No. MH-02-95-212941

The above details have been submitted to BSE.

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INTEREST OF PROMOTERS/DIRECTORS

All the Directors may be deemed to be interested to the extent of the sitting fees and other remuneration for the servicesrendered and the reimbursement of expenses, if any, payable to them under the articles. The Directors may also be deemedto be interested to the extent of:

- the shares, if any, held by them or by the relatives or by firms or companies of which any of them is a partner anda Director/ Member, as the case may be.

- the shares if any, out of the present Offer that may be subscribed for and allotted to them or their relatives or anyCompany in which they are Directors / members or firms in which they are partners.

OTHER ASSOCIATE COMPANIES

1. DHFL PROPERTY SERVICES LTD.

Date of Incorporation : 17/01/1997

Main Business : Property Services (Fee based Activity)

Brief Audited Financials

(Rs. in Lacs)

Particulars as on 31st March 2002 2003 2004

Equity Capital 5.00 5.00 5.00

Reserves excluding Revaluation Reserve Nil Nil 1.16

Sales and Other Income Nil Nil 33.77

Profit/(Loss) after Tax (PAT) (0.34) (2.43) 5.33

Accumulated Losses 1.75 4.17 Nil

Book value per Share (Face Value Rs.10.00) (Rs.) 6.51 1.66 12.32

Earning per Share (Rs.) (0.68) (4.84) 10.66

Contingent Liabilities of the Associate: Nil

Transactions of DHFL with Associate: Nil

The company is not a sick company within the meaning of Sick Industrial Companies (Special Provisions) Act, 1995.

2. DHFL INSURANCE SERVICES LTD.

Date of Incorporation : 04/09/1984

Main Business : Insurance Services (Fee Based Activity)

Brief Audited Financials

(Rs. in Lacs)

Particulars as on 31st March 2002 2003 2004

Equity Capital 5.00 5.00 5.00

Reserves excluding Revaluation Reserve 52.55 16.93 19.48

Sales and Other Income 6.18 4.76 8.05

Profit/(Loss) after Tax (PAT) 3.93 (35.62) 2.55

Accumulated Losses Nil Nil Nil

Book value per Share (Face Value Rs 100.00) (Rs.) 1151.00 438.60 489.51

Earning per Share (Rs.) 78.79 NA 50.86

Contingent Liabilities of the Associate: Nil.

Transactions of DHFL with Associate: Nil.

The company is not a sick company within the meaning of Sick Industrial Companies (Special Provisions) Act, 1995.

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3. INTERACTIVE MULTIMEDIA TECHNOLOGIES PVT. LTD.

Date of Incorporation : 03/07/1998

Main Business : Media Communication Software

Brief Audited Financials

(Rs. in Lacs)

Particulars as on 31st March 2002 2003 2004

Equity Capital 5.00 5.00 5.00

Reserves excluding Revaluation Reserve 2.27 12.10 28.54

Sales and Other Income 12.64 34.56 33.61

Profit/(Loss) after Tax (PAT) 0.65 9.83 16.43

Accumulated losses Nil Nil Nil

Book value per Share (Face Value Rs.10.00) (Rs.) 14.50 34.21 67.08

Earning per Share (Rs.) 1.31 19.66 32.86

Contingent Liabilities of the Associate: Nil

Transactions of DHFL with Associate: Nil

The company is not a sick company within the meaning of Sick Industrial Companies (Special Provisions) Act, 1995.

4. DHFL ASSET RECONSTRUCTION CORPORATION LTD.

Date of Incorporation : 24/12/2002

Main Business : Finance

Brief Audited Financials

(Rs. in Lacs)

Particulars as on 31st March 2002 2003 2004

Equity Capital N.A. 5.00 5.00

Reserves excluding Revaluation Reserve N.A. Nil Nil

Sales and Other Income N.A. Nil Nil

Profit/(Loss) after Tax (PAT) N.A. (0.30) (1.89)

Accumulated Losses N.A. Nil Nil

Book value per Share (Face Value Rs.10.00) (Rs.) N.A. 9.94 6.16

Earning per Share (Rs.) N.A. N.A. N.A.

Contingent Liabilities of the Associate: Nil

Transactions of DHFL with Associate: Nil

There is no business activity in the Company and the loss is on account of prelimianary expenses written off.

The company is not a sick company within the meaning of Sick Industrial Companies (Special Provisions) Act, 1995.

5. WADHAWAN HOLDINGS PRIVATE LTD.

Date of Incorporation : 22/4/2002

Main Business : Finance

Paid up Equity Capital: Rs.1,00,000/-

Wadhawan Holdings Private Ltd., associate company of DHFL is not in operations since its incorporation in April 2002.

The company is not a sick company within the meaning of Sick Industrial Companies (Special Provisions) Act, 1995.

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ALLIANCES & TIE-UPS

At present, there are no alliances or tie-ups by the Company.

Conflict of Interest

Some of associate companies of DHFL are operating in areas of property services. These businesses are complimentaryto DHFL’s business. As such there is no conflict of interest among the associate companies and DHFL.

BOARD OF DIRECTORS

Name of the Directors, Age Other Directorships Date of HoldingQualification, Address, & Appointment in DHFLDesignation DOB. as Directors (%)

in DHFL

Shri Rakesh Kumar 52 yrs DHFL Properties Services Ltd. 14/04/1984 10.17Wadhawan 14/10/1952 DHFL Insurance Services Ltd.B. Com, DBM DHFL Asset Reconstruction Corp. Ltd.22/23 Sea View Palace, Wadhawan Holdings Pvt Ltd.Palli Hill, Bandra (West) MemberMumbai - 400 050. Finance Committee:Chairman Dewan Housing Fin Corp. Ltd.

Shri Kapil Wadhawan 31 yrs DHFL Vysya Housing Finance Ltd. 24/09/1996 11.83MBA 18/10/1973 DHFL Insurance Services Ltd.22/23 Sea View Palace, DHFL Property Services Ltd.Palli Hill, Bandra (West) DHFL Asset Reconstruction Corp. Ltd.Mumbai - 400 050. Wadhawan Holding Pvt. Ltd.Managing Director Member

Finance Committee:Dewan Housing Fin Corp. Ltd.MemberInvestors Grievance CommitteeDewan Housing Finance Corp Ltd .

Shri Sarang Wadhawan 28 yrs DHFL Vysya Housing Fin. Ltd. 04/10/2000 3.66MBA 05/10/1976 DHFL Insurance Services Ltd.22/23 Sea View Palace, DHFL Property Services Ltd.Palli Hill, Bandra (West) DHFL Asset Reconstruction Corp. Ltd.Mumbai - 400 050.Executive Director

Shri R P Khosla 74 yrs DCM Shriram Fertilizers Ltd. 18/08/1993 –IAS 04/11/1930 M/s. HCL Infosystems Ltd.20A, Palam Marg, MemberVasant Vihar, Remuneration Committee:New Delhi - 110 057 Dewan Housing Finance Corp. Ltd.Non-Executive Director

Shri Waryam Singh 52 yrs M/s. Punjab & Maharashtra Co-op. Bank Ltd. 31/03/1997 0.20B.Com. 15/12/1951 M/s. DHFL Properties Services Ltd.1401-02 Stellar Tower, Member2nd Cross Lane, Investors Grievance CommitteeLokhandwala Complex, Dewan Housing Finance Corp Ltd.Andheri (West)Mumbai 400 053Non-Executive Director

Shri M. S. Sundara Rajan 54yrs Nil 22/05/2001 –M.A. (Economics), 15/03/1950 MemberCAIIB, ACS Finance Committee:Platinum Jubliee Bldg, Dewan Housing Finance Corp. Ltd.Wadala, MumbaiUnion Bank of India -Nominee Director

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Name of the Directors, Age Other Directorships Date of HoldingQualification, Address, & Appointment in DHFLDesignation DOB. as Directors (%)

in DHFL

Shri Ram K Gupta * 65 yrs Modi Rubber Ltd. 28/01/2003 –MBA, FICWA 24/04/1939 Hotline Glass Ltd.E-25, Gitanjali Enclave, Noida Medicare Centre Ltd.Off S Panchashila Park, Kool Breweries Ltd.New Delhi - 110 017 Shreyam Industries Ltd.UTI Nominee Director IPI Steel Ltd.

Fintcom Consulting Pvt. Ltd. (Fully owned)MemberRemuneration Committee:Dewan Housing Finance Corp. Ltd.

Shri G P Kohli 64 yrs Zauri Forex Limited 23/05/2001 –M.A. 15/06/1940 Member1403-04 Dheeraj Enclave, Finance Committee:Off Western Express Dewan Housing Finance Corp. Ltd.Highway, Borivali (East) Audit Committee:Mumbai - 400 066. Dewan Housing Finance Corp. Ltd.Non-Executive Director

Shri Ashok Kumar Gupta 54 yrs Deccan Gold Mines Ltd. 25/10/2002 –B.Com. (Hons.), LL.B, FCA. 20/05/1950 Punjab & Maharashtra Co-op Bank Ltd.401 Dheeraj Dhan, DHFL Vysya Housing Finance Ltd.St. Alexious Road, DHFL Insurance Services Ltd.Bandra (West), DHFL Asset Reconstruction Corporation Ltd.Mumbai - 400 050. Gold Finger Finance & Investment Pvt. Ltd.Non-Executive Director Member

Audit Committee:Dewan Housing Finance Corp. Ltd.Punjab & Maharashtra Co-op Bank Ltd.

Shri R S Hugar 64 yrs IPCA Laboratories Ltd. 31/07/2002 –M.A. (Econometrics) 01/06/1940 Zicom Electronic Security System Ltd.Pitambar, Kalyan Nagar, DHFL Vysya Housing Finance Ltd.10th Cross University MemberRoad, Dharwad Audit Committee:Karnataka – 580 007 Dewan Housing Finance Corp. Ltd.Non-Executive Director DHFL Vysya Housing Finance Ltd.

MemberRemuneration Committee:Dewan Housing Finance Corp. Ltd.

*Shri Ram K. Gupta is also the nominee director , nominated by UTI on the Board of Modi Rubber Ltd., a company includedin the list of defaulters announced by CIBIL.

Details of Gaurantees by Directors

Term loan of Rs.7567.13 lacs secured from the National Housing Bank, loan of Rs.48,535.81 lacs from Scheduled Banks,foreign currency loan of Rs.10,053.62 lacs and loan of Rs.7,728.55 lacs from Financial Institutions are guaranteed by thethree directors - Shri Rakesh Kumar Wadhawan, Shri Kapil Wadhawan and Shri Sarang Wadhawan.

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OUTSTANDING LITIGATIONS, DEFAULTS, MATERIAL DEVELOPMENTS AND ADVERSE EVENTS

Outstanding Litigations against the Company

There are outstanding claims amounting to Rs.19.30 lacs pending against the company, the details of which are given below:

Sr. Amount Court/Consumer Forum Nature of claimsNo. (Rs. in Lacs)

1 14.27 Various Consumer Forum 36 minor claims for refund of processing fees, prepaymentcharges etc.

2 2.02 Labour Commissioner Disputed claim and gratuity *

3 3.01 Various Courts 12 miscellenous matters pertaining to loan account.

* Dispute/pending before the labour Commissioners related for gratuity of one of the ex-employees of the Companywithheld/adjusted

Pursuant to relevant provisions of the Payment of Gratuity Act, 1972, the Company has withheld/adjusted gratuity payableto an ex-employee against the amount recoverable from him. The company has filed its replies before the Asst. LabourCommissioner being the Controlling Authority under the said Act at Indore and the matter is pending. The company willabide by the final decision that may be given by the said authority in this behalf.

Against the Directors of the Company

There are no outstanding litigations, disputes or penalties against the Directors of the Company, including tax liabilities,economic offences, criminal or civil prosecution for any offence, irrespective of whether specified under any enactment inParagraph 1 of Part 1 of Schedule XIII, of the Companies Act, 1956 or any other liability in their personal capacities oras Director/Partner/Sole Proprietor in the Company or any other Company/firm.

There are no litigations against the Directors involving violation of statutory regulations or criminal offences. No disciplinaryaction has ever been taken by the Securities and Exchange Board of India or Stock Exchanges and no penalty has beenimposed by any authority.

Defaults

The Company, its subsidiaries and sponsored institutions have not defaulted in meeting any of its statutory or institutionaldues and have made all payments/refunds on fixed deposits.

Further, no proceedings have been initiated against the Company, its subsidiaries and sponsored institutions for any of theoffences specified in paragraph 1 of Part I of Schedule XIII of the Companies Act, 1956.

Other than as stated above, there are no disputes/litigations towards tax liabilities or any criminal or civil prosecutionsagainst the Company, its subsidiaries and sponsored associations for any offence – economic or otherwise. No criminalproceedings have been launched against the Company under any of the enactment irrespective of whether specified inparagraph 1 of part 1 of Schedule XIII of the Companies Act, 1956.

Further, there are no disputes/litigations towards tax liabilities or criminal prosecutions against the Company and itsDirectors for any offence, economic or otherwise. As regards civil litigations against the Company and its Directors, thereare no material disputes/legal actions other than those disclosed above.

There are no pending proceedings initiated for economic offences against the Company, its subsidiaries and sponsoredinstitutions. Besides the above, no disciplinary action/ investigation has been taken by the SEBI against the Company, itssubsidiaries and sponsored institutions and its respective directors.

Committees of the Board of Directors:

The Board has constituted the following committees - Audit Committee, Finance Committee, Remuneration Committee,Investors’ Grievance Committee, Asset Liability Management Committee and Investment Committee.

Audit Committee:

This committee comprises of 3 independent directors- Shri R.S. Hugar (Chairman of the Committee), Shri Ashok KumarGupta and Shri G.P. Kohli. It has been formed to monitor and provide effective supervision of the financial control andreporting process. The terms of reference of the committee is to review the financial reporting process, internal auditprocess, adequacy of internal control systems, management audit and risk management policies and also to recommendthe appointment of the statutory auditors and their remuneration.

The Chairman of the Board, the statutory auditor, internal auditor and members of the senior management are permanentinvitees to the committee meetings.

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Finance Committee:

The Committee comprises of Shri Rakesh Kumar Wadhawan (Chairman of the Committee), Shri Kapil Wadhawan,Shri M.S. Sundara Rajan and Shri G.P. Kohli.

Brief Functions: Any single loan proposal exceeding Rs.5 crores will be discussed in the Finance Committee meeting.Sanctioning power below Rs.5 crores rests with the Managing Director/Executive Director of the Company.

Remuneration Committee:

This committee has been formed to recommend to the Board the appointment/ reappointment of the executive and non-executive directors, the induction of Board members into various committees and the remuneration package of the executivedirector(s). The committee has also been empowered to determine the periodic increments in salary and annual incentiveof the executive director(s).

This committee comprises of Shri R.S. Hugar, Shri R.P. Khosla and Shri Ram K Gupta.

Investors’ Grievance Committee

The terms of reference of this committee encompasses formulation of investors’ servicing policies, looking into redressalof investors’ complaints relating to transfers, transmissions, transpositions, splitting, consolidation of shares and debentures,demat/remat requests.

It comprises of Shri Waryam Singh (Chairman of the Committee) and Shri Kapil Wadhawan.

Asset Liability Management Committee (ALCO)

ALCO was constituted on 25th October, 2002. The committee consists of Managing Director, GM-Finance, Chief Operations,GM-Accounts and Taxation.

Brief Functions: This committee has been constituted in line with the NHB guidelines. The first report on ALM has beensubmitted to NHB in Oct. 2003. The overall functioning of the committee will include discussions on Gap Report, GapReprising Report and Dynamic liquidity report and shall also discuss the product mix, spread management and profit centreconcepts.

Investment Committee

The investment committee was constituted on 24/01/2002. The committee consists of Managing Director, Executive Director,GM Accounts and Taxation and GM Finance.

Brief Functions: This committee discusses the sale and purchase of SLR and Non SLR Securities to keep in mind theliquidity, safety and returns on the investments.

MANAGERIAL COMPETENCE & KEY MANAGERIAL PERSONNEL

The Company is managed by its Board of Directors, assisted by qualified professionals, with vast experience in the fieldsof production/finance/distribution/marketing and corporate laws. The Management is assisted by the following key personnel:

Name Date of Qualification Details of previous Employment Designation /joining Functional

Responsibility

Mr. Bikrum Sen 01/09/2004 BA, LLB, 26 years experience in the financial Chief ExecutiveFellow of sector at senior level OfficerSloansFoundation,LondonBusinessSchool

Mr. Mahesh Payannavar 02/06/2003 MMS, B.E. Vice President -Business Development Head - FinanceEngineering & Corp. Finance SMIFS Capital Services and Resources

Mr. J. N. Shah 22/02/1993 B. Com., Purity Textiles Pvt Ltd - Manager Accounts Head - AccountsF.C.A. & Finance PJ Pipes & Vessels Ltd - and Taxation

Manager Accounts & BankingGovind Rubber Ltd - Chief AccountantBedrock Ltd - Accounts OfficerKhosla Group of Companies - Mgr.Accounts & Finance

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Name Date of Qualification Details of previous Employment Designation /joining Functional

Responsibility

Mr. Satish Kotian 01/12/1992 B. Com., Proline Software Ltd. - Programmer Adlabs Head - MISDCM. - EDP Manager

Datamatic Consultants Ltd. - EDP Officer

Mr. Prashant Chaturvedi 18/11/1998 B. Com., BM Chaturvedi & Co - Audit In-charge Head - AuditA.C.A., and InspectionA.C.S.

Mr. C. G. S. Babu 05/02/2001 B. Com., Union Bank of India - Chief Manager Head -CAIIB Operations

Mr. Subhash Chaudhury 27/03/2003 B.E., MBA, Afcon Infrastructure Ltd. - GM - HR & Head - HR andLL.B. Admin. Administration

Deepak Fertilisers & Petro ChemicalsCorp. - GM- HRGerman Remedies - Personnel DirectorTata Power Co. - Head of HRColgate Palmolive - CorporatePersonnel ManagerUnion Carbide India Ltd.- PersonnelOfficerGrind Well Norton India Ltd.Production Engineer

Mr. Gaurav Modwel 06/09/2003 B.E. (Chem.), Times Guaranty Financial Ltd Head -PGDM-Fin. Darashaw Investment Banking Corporate

Captech Onlines Pvt Ltd PlanningTCG Software Services

Mr. Pradeep Sawant 10/02/2004 B.Com., Canara Bank - Officer Legal Head - LegalLL.B., Canbank Investment - Officer LegalCAIIB Management Services Ltd.

Stock Holdings Corporation of India Ltd.

Mr Kiran Thacker 03/09/2004 B.Com., Mather & Platt Pumps Ltd. - CompanyLL.B., (G.M.- Legal & Company Secretary) SecretaryF.C.S. Hindustan Dorr-Oliver Ltd. -

(G.M.- Legal & Company Secretary)Creative Eye Ltd., - Company SecretaryApple Industries Ltd. - Company Secretary

The above persons are on the rolls of the Company as permanent employees

CHANGES IN KEY MANAGERIAL PERSONNEL

Name Designation / Functional Date of Date of ReasonResponsibility Joining Leaving

Mr. Josef Pattathu Head - Finance and Resources 01/06/1996 30/06/2003 Resigned

Mr. Mohan A. Head - Marketing 01/07/2000 01/07/2003 Resigned

Mr. D. J. Bagchi Company Secretary 12/06/1996 15/02/2004 Resigned

Mr. Subhash Chawdhary Head - HR & Administration 27/03/2003 _ Appointed

Mr. Gaurav Modwel Head - Corporate Planning 06/09/2003 _ Appointed

Mr. Pradeep Sawant Head - Legal 10/02/2004 – Appointed

Mr. Kiran Thacker Company Secretary 03/09/2004 – Appointed

Mr. Bikram Sen Chief Executive Officer 01/09/2004 – Appointed

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MANAGEMENT ORGANISATION CHART

Board of Directors

Managing Director /Executive Director

CEO

Zonal Manager

Branch Manager

Head-Accounts &Taxation

Head-Audit & Insp. Head-MIS & Systems Head-Finance & Res.

Supporting Managers Supporting Managers Supporting Managers Supporting Managers

Head-Credit Company Secretary Head-Legal Head-Corp. Planning &Strategy

Supporting Managers Supporting Managers Supporting Managers Supporting Managers

Head-HR & Admin.

Supporting Managers

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HOUSING FINANCE INDUSTRY OVERVIEW

(Source NHB & FICCI)

INTRODUCTION

The housing finance sector in India has undergone unprecedented change over the past five years. The importance of thehousing sector in India can be judged by the estimate that for every Indian rupee (INR) invested in the construction ofhouses, INR 0.78 is added to the gross domestic product of the country. There are about 276 industries in India, big andsmall which are dependent on the housing sector. The big ones being cement, steel, paints, etc. and the small ones arewho make nuts and bolts, furniture etc. The real estate sector is also the second largest employment generator in thecountry.

MARKET SIZE

The total number of houses that would be required cumulatively during the Tenth Plan period (2002-2007) is estimated at22.44 million dwelling units. However, this official estimate is based on the 1991 Census and unofficial estimates peg thecurrent housing shortage in India at 40 million units. Further, the Tenth Five Year Plan has estimated an outlay of INR 7,263billion to the housing sector, of which the contribution envisaged from public institutional sources, is only INR 4,150 billion.Therefore, substantial contribution from private sector players would necessarily be required to tackle the growing housingshortage.

MARKET PLAYERS

The industry is fragmented with a large number of players spread across different parts of the country. The governments’liberalized policy attracted not only new customers, but also new entrants to the business of housing finance. As result,an industry that was limited to a single private player 20 years ago, is now inhabited by about 350 registered HFCs andhas recently been joined by commercial banks. Currently, banks have garnered close to 35% share of the housing financemarket by offering competitive rates of interest. Among banks, State Bank of India and ICICI Bank have been the mostaggressive as far as loan disbursals are concerned. In the HFCs category, Housing Development Finance Corporation(HDFC) continues to enjoy the market leadership with more than 30% share, while LIC Housing Finance (LICHFL) followedwith about 13% market share.

MARKET STRUCTURE

In 1988, the National Housing Bank (NHB) was established as a 100% subsidiary of the Reserve Bank of India, (the centralbank of the country), to promote housing finance through a refinance mechanism to banks, housing finance companies(HFCs) and other institutions and also to function as the supervisory and regulatory body for housing finance companies.National Housing Bank does not itself give loans or finance individuals or a party as such but is only a corporate body topromote, establish, support or aid housing finance institutions.

The Indian housing finance sector is crowded with players of all sizes and nature. The housing finance institutions can besegregated into three categories as follows:

HOUSING FINANCE INSTITUTION

Public Sector Finance Banks Private Sector Finance

Housing And Urban Housing Development FinanceDevelopment Corporation Ltd Corporation

Life Insurance Corporation Dewan Housing FinanceHousing Finance Limited Corporation Ltd

General Insurance Corporation Global Housing FinanceHousing Finance Limited Corporation Ltd.

Punjab National Housing Bank Birla Home Finance LtdHousing Finance Limited

Others (Indbank housing, Others (Sundaram HomeCoprbank Homes, etc) Finance, Hometrust Housing, etc)

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The government’s support to housing had traditionally been centralized and directed through the State Housing Boards andDevelopment Authorities. In 1970, the central government set up the Housing and Urban Development Corporation (HUDCO)to finance housing and urban infrastructure activities. The public sector insurance companies – Life Insurance Corporationof India (LIC) and General Insurance Corporation of India (GIC) were also mandated to support housing finance activities,both directly through their housing subsidiaries (both established in 1989) and indirectly through a mandated requirementto invest a certain proportion of their annual accretion in socially oriented schemes which includes housing.

In 1977, Housing Development Finance Corporation (HDFC) was the first housing finance Company in the private sectorto be set up in India.

Although commercial banks were the largest mobiliser of savings in the country, traditionally banks were rather reluctantto lend for housing as they preferred financing working capital needs of industry. Several banks had set up housing financesubsidiaries which functioned as independent units with little support or interest from their parent bank.

Towards the end of the 1990s, against the backdrop of lower interest rates, industrial slowdown, sluggish credit off-takeand ample liquidity, commercial banks recognized that if they had to maintain their profit margins, they needed to shift theirfocus from the wholesale segment and build their retail portfolios. The lower interest rate regime, rising disposable incomes,stable property prices and fiscal incentives made housing finance attractive business. Further, housing finance traditionallyhas been characterized by low nonperforming assets (NPAs) and given the vast demand for housing loans, almost all themajor commercial banks plunged into the business of housing finance. Almost all the banks through out India providehousing finance, except a few small branches. The major banks that provide loans for housing are SBI, ICICI, Bank ofBaroda, Bank of India, Bank of Punjab, Citi Bank NA, IndusInd Bank and many others.

GROWTH TRENDS

The Indian housing finance industry has grown by leaps and bounds in past few years. The sector has emerged as oneof the outstanding successes over the last decade, second perhaps only to the country’s software industry. It is growingat an estimated rate of 28 to 30%. Total home loan disbursements by Banks and Housing Finance Companies (HFCs) hasrisen from Rs.29359.29 crores in 2001-02 to Rs. 51672.7 crores in 2002-03 witnessing a phenomenal growth of 76% duringthis period.

Table: Home Loan Disbursements (Rs. in crores)

Year HFCs Banks Total Growth over previousyear (%)

1999-2000 9,812.03 9,911.35 19,723.38 –

2000-2001 12,637.85 9,787.24 22,425.09 13.70

2001-2002 14,614.44 14,744.85 29,359.29 30.92

2002-2003 17,832.17 33,840.53 51,672.70 76.00

The housing finance industry is witnessing a boom at present boosted by the generous budget sops low and stable interestrates and property prices. The demand is a result of genuine individual needs. The industry growth rate in percentage termsis given below:

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The growth has been mainly fuelled by certain fiscal, social and regulatory drivers:

� Changes in demographic profile including increase in the rate of household formation due to structural shift from jointfamily system to nuclear family

� Ever increasing middle class, migration of population and increasing urbanization resulting in acute shortage of housingunits

� Increase in disposable income levels due to decrease in marginal tax rates and increase in total income levels

� Tax benefits and other fiscal incentives announced in the Union Budgets

� Increasing affordability of housing property purchase due to declining interest rates and stable property prices

� Decline in the average house cost to annual income ratio to around 4-5 from 11-14 during the last decade resultingin an affordable EMI as a percentage of monthly income

� Aggressive lending by banks to the housing sector due to lower credit offtake by the corporate sector, attractive spreadand lower non performing assets

INDUSTRY PERFORMANCE

The housing finance sector is doing well due to strong demand for housing loans. Two factors that have been driving growth- the low interest rate regime and tax sops. Interest rates on housing finance loans have plunged to 7.5-9%, from 13-14%about two years ago, and from as much as 18% a few years ago. The impact that lower interest rates have had on homeloan disbursements can be seen from the graph given below:

Home Loan Disbursements vs. Interest Rates

Note: Interest rates plotted in the above graph are fixed interest rates calculated on an annual rest basis for a loan of Rs.5 lacs and tenure of 15 years.

Mortgage

NHB introduced the Mortgage backed Securitization (MBS) transactions in the industry under their provisions of theNational Housing Bank (Amendment) Act, 2000 and has been floating MBS issues from time to time as part of its Charter.

Recognizing the role of mortgage backed securitization (MBS) in linking the housing sector with the capital market theReserve Bank of India issued guidelines in May 2002 for investments by banks in MBS. In terms of the RBI guidelines,investments by banks in MBS backed by the mortgages of housing finance companies recognized and supervised byNational Housing Bank, will carry risk weightage of 50% for the purpose of capital adequacy and shall qualify for inclusionin the annual housing finance allocation stipulated for the banks by the RBI.

However, the Mortgage to GDP ratio (ratio of outstanding home loans to GDP), which is used to determine the extent ofpenetration of housing finance in the country is one of the lowest for India as compared to developed countries where itranges from 25% to 60%. The mortgage to GDP ratio stood at an abysmal 2.5% in India in 2001 when compared to 57%in UK, 54% in USA, 40% in European Union (EU), 7% in China and 14% in Thailand.

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Mortgage/GDP ratio (in%)

Changing Age Profile of Borrowers

The Indian home loan market has witnessed a distinct shift in the age profile of borrowers. Two to three years back, a largenumber of borrowers used to be in their late 30s and early 40s but today greater number of borrowers are in their mid 30s.This is because loans today are more affordable and are available at better terms. Housing finance companies and banksare introducing various schemes to attract this new segment of borrowers. Free home insurance, lower rates for purchaseof consumer durables, household goods, personal computers, cars, two wheelers for existing home loan customers,refinance option being some of them.

Higher Loan to Cost Ratio

Borrowers can today raise upto 100 percent or in some cases even 110 percent (in which case lenders provide financialassistance for the complete property value, stamp duty, registration and an additional 10% is given as personal loans) oftheir borrowing requirements from the lenders. Introduction of credit guarantee by India Mortgage Credit Guarantee Corporationbeing floated by the National Housing Bank is expected to further reduce the margin contribution of the borrowers.

Increasing Share of Banks

Banks despite being a late entrant have overtaken the HFCs in the home loan market. The share of banks in total homeloan disbursements has risen from 43.6% in the year 2000-01 to 65.5% in 2002-03. Banks have increased their focus onretail finance market, particularly in housing finance due to lower NPA levels.

Key Issues affecting the Profitability of HFCs

In the long term, the profitability of the housing finance industry will depend on the certain issues such as:

a) Declining Spreads

The spreads in the business have declined significantly after the aggressive entry of banks in direct lending. Bankshave the advantage of lower cost of funds due to access to retail deposits. As a result, they have been aggressivelycutting the interest rates on housing loans. Apart from lower interest rates banks offer lower or no processing fees(processing fees accounts for a large portion of administration cost of HFCs), monthly or daily rest loans and lowerpre-payment charges, which affects the yields of the housing finance industry.

In the medium term, the pressure on housing finance spread is expected to increase as banks are expected to competeon interest rates with the HFCs for increasing their market share.

b) Pre-payment

Pre-payment is undertaken largely on the higher yield loans when the interest rates are on a downward trend, due torefinancing of the outstanding loan amount by another HFC / Bank. This erodes the portfolio of the HFCs. Pre-paymentresults into a lower than expected profitability for a housing finance Company. Pre-payment penalty is largely applicableon the fixed rate loans while, adjustable rate loans have zero pre-payment charge

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Critical success factors

Housing finance industry is facing tough competition from banks and witnessing declining spread (for HFCs). Hence, theplayers should have sustainable advantages to remain profitable in the long-term.

a) Cost of Funds

Cost of funds is the most crucial determinant of profitability for HFCs in the housing finance business. After the entryof banks in this business, which have access to low cost deposits, the spread of the HFCs has come under pressure.

b) Intermediation cost

Intermediation cost or cost of operation is also critical in determining the profitability, more importantly from the pointof view of HFCs. The average intermediation cost of HFCs ranges from 0.7 per cent to 1 per cent of average totalassets (one time cost). Banks are also expected to have the average operating cost for housing finance operation insimilar range.

c) Management of NPAs

The average gross NPA of the industry is estimated at around 2-2.5 per cent of the outstanding portfolio. However,within the industry, the NPA levels vary from less than 1 per cent to 5 per cent. With declining spreads, one of thecrucial factors determining the profitability of HFCs will be the management of NPAs and their recovery. Hence, creditappraisal mechanism and recoveries will assume significant importance.

d) Product features

Housing finance industry is getting increasingly commoditised. Features like adjustable rate plans, lower processingfees, monthly rest, low interest rates, low EMI, lower margin money, no pre-payment penalty have become commonacross the industry. As a result, loan products can be differentiated by offering free add-ons. However, in future, add-ons many not remain the differentiating factor for the products.

To make the loan products more attractive, finance companies have also begun to include the cost of registration,stamp duty, society charges and other associated costs while sanctioning loans. This has further lowered the thresholdlimit for purchasing a house.

Some players like ICICI Bank, SBI, HDFC and LICHFL have started organizing property fairs, where projects ofdifferent construction companies are brought together and are bundled with a lower than normal interest rate loanproduct. Such steps are expected to result in a more organized housing market and more value for the customer.

Distribution reach

Distribution reach is critical for HFCs for deposit mobilisation as well as loan disbursements. Till March 2002, HDFC, thelargest player, had 118 offices in India and covered another 90 locations through its outreach programme (mobile offices).The Company has extension counters at several companies as well as loan desks at HDFC Bank branches. Banks enjoya distinct advantage over the housing finance companies in terms of having a branch presence across the country.However, most banks (except private sector banks and some nationalised banks) lack a clear focus on home loan product.

Branches Camp Offices

HDFC 118 90

DHFL 45 120

Canfin Homes 42 n.a.

ICICI Bank Home Loans * 140 n.a.

State Bank of India # 1,400 n.a.

n.a.: Not Available

* Number of locations

# Includes 500 housing loan intensive branches

Source: DHFL

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DSAs unlike other retail finance segments do not have a significant presence in the housing finance industry largely dueto factors like.

a. HFC, whose spreads are under pressure, are not in a position to share margins.

b. Banks do not perceive a need for DSAs due to their large branch network.

c. DSAs are not equipped with the specialized skills to sell a long tenure, high value loan product.

d. Customers prefer identifying a house and then availing a loan. In case of other retail finance products, customersobtain finance from the financier who has presence in dealers shop.

Recent Initiatives taken by the Government

Key Initiatives taken by the Government to give impetus to the Housing Finance Sector:

� National Housing Bank has launched the Mortgage Credit Guarantee Scheme, which is provided to all housing loansthereby fully protecting lenders against default. Towards this end the Asian Development Bank (ADB) approved aninvestment of up to US$10 million equivalent in November 2002 to help pioneer the first mortgage guarantee Companyfor India. Mortgage financing through the India Mortgage Guarantee Company (IMGC) will help narrow the housingshortfall. The India Mortgage Guarantee Company will improve the efficiency of housing finance and protect mortgagelenders such as banks and housing finance companies in cases of borrower default.

� With the enactment of The Securitization and Reconstruction of Financial Assets and Enforcement of Security InterestAct, 2002 (The Securitization Act), banks have been empowered to attach assets of the defaulters without interventionof lengthy and time consuming court procedures. This has also been extended to Housing Finance Companies.

� The prospects of the industry would be further strengthened on the amendments to the Rent Control Act and repealingof the controversial Urban Land Ceiling Act.

� Further impetus to Rural Housing development in the Union Budget for 2004-2005.

Outlook for the Housing Finance Industry

The importance of housing finance can be judged by the fact that despite the recent recessionary trend the world overhousing finance continues to grow at a robust pace. The Indian housing finance industry has been no exception. The Indianhousing finance industry is on solid grounds and has interesting prospects. Given the size of the market, given the factsthat there is a huge shortage of housing and given the low penetration level, housing loans will continue to grow rapidlyand show strong growth for next few years.

Realistic property prices, low interest rates, tax incentives and innovative products offered by housing finance companiesaugurs very well for the growth of the housing sector. Moreover securitization and foreclosure norms will pave the way forthe creation of an active secondary mortgage market, enhance the liquidity into the sector at low cost and speed up theloan recovery mechanism thereby increasing the pool of lendable resources.

Further, Indian housing finance industry mainly caters to the organized or the employed sector and traditionally confinedto metros and other big cities. Industry has to go a long way to cover vast populace of semi urban and rural towns thatlive outside the formal sector.

High cost of land, higher interest rates and outdated legislation on urban land had all deterred the growth of this sectorin the past. With several of this hurdles been tackled in the present India, things are beginning to look brighter for housingfinance companies. By and large, with the overall demand for housing on an upswing, the housing finance industrycontinues to benefit.

CHANGE IN BOARD OF DIRECTORS

The changes in the Board of Directors for the past three years is given below:

Name of Director Nature of Change Date

Shri V. N. Nadkarni Resigned 12/06/2003Shri S. D. Khosla Resigned 18/09/2003Shri Abdul Hasib Resigned 15/09/2003Shri Madhav Kumar Resigned 28/01/2003Shri Ram K. Gupta Appointed 28/01/2003Shri Ashok Kumar Gupta Appointed 25/10/2002Shri R. S. Hugar Appointed 31/07/2002

CHANGE IN AUDITORS

There has been no change in the Auditors of the Company in the last 3 years.

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VII. FINANCIAL INFORMATION

AUDITORS’ REPORT

ToThe Board of DirectorsDewan Housing Finance Corporation Ltd.“MADHAVA”Bandra-Kurla ComplexMumbai – 400 051

Dear Sirs,

We have examined the Financial Information of DEWAN HOUSING FINANCE CORPORATION LIMITED (“the company”)as attached to this report stamped and initialed by us for identification and as approved by the Board of Directors of thecompany, which has been prepared in accordance with Part II of Schedule II of ‘The Companies Act, 1956’ of India (the‘Act’), the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000 issued by theSecurities and Exchange Board of India (SEBI) and amendments thereto [the SEBI Guidelines] to the extent applicable,in accordance with instructions of the Company requesting us to report on such financials for the purpose of their inclusionin the letter of offer to be issued by the Company for its proposed issue of equity shares on rights basis to the existingequity shareholders of the company, we report thereon as follows :

1. We have examined the accounts of the company for the five financial years ended on 31st March 2004 audited by usand approved by the shareholders and also for the six months ended on 30th Sept, 2004 prepared and approved bythe Board of Directors of the company and audited for the purposes of disclosure in the Offer Document being issuedby the company in connection with its Right Issue of Equity Shares in the company. The attached Summary of Assetsand Liabilities (Annexure 2) as on 31st March, 2000, 2001, 2002, 2003 and 2004 and as on 30th September, 2004and the related Summary of Profit and Loss Account for the each of the five years ending upto 31st March, 2004 andsix months period ended on 30th September, 2004 (Annexure 1) together referred to as ‘summary statements’, readwith the notes as per (Annexure 3). These summary statements have been extracted from the audited financialstatements audited by us and approved by the shareholders and Directors of the company as stated herein above.

Our audit of the financial statements as above comprise of audit tests and procedures deemed necessary for thepurpose of expressing an opinion on such financial statements taken as a whole.

Based on our examination of these summary statements, we confirm that:

(a) These statements reflect the profits and losses and the assets and liabilities of the Company for each of therelevant years and period as extracted from the Profit and Loss Account for the financial years ended on 31stMarch, 2000, 2001, 2002, 2003 and 2004 and six months period ended on 30th September, 2004 and the BalanceSheet as at above dates after making therein the disclosure and adjustments wherever applicable and which arerequired to be made in accordance with the provisions of paragraph 6.18.7 of the “the guidelines” and suchregroupings as we considered necessary.

(b) The above financial statements have been drawn up by the Company in compliance with the Guidelines and inaccordance with the requirements of clause B of Part II of Schedule II of the “Act” 1956 as amended from timeto time.

(c) The Significant Accounting Policies adopted by the Company are enclosed as (Annexure 3) to this report.

2. We have also examined the Consolidated Balance Sheet of the Company and its subsidiaries (“the group”) as at March31, 2004 and as on 30th September, 2004 and the Consolidated Profit and Loss Account of the group for the yearand period ended on that date and the significant accounting policies, all of which have been audited by us. Theseare enclosed as (Annexure 4 to 6) to this report. We confirm that these statements reflect the assets and liabilities ofthe group as at March 31, 2004 and as on 30th September, 2004 and the profit of the group for the year and periodended on that dates.

3. We have examined the ‘Statement of Accounting Ratios’ of the Company for each of the five financial years ended31st March, 2000, 2001, 2002, 2003 and 2004 and six months period ended on 30th September, 2004 enclosed as(Annexure 7) to this report and confirm that these have been correctly computed from the figures stated in the‘Statements of the Profits’ and ‘the Statement of Assets and Liabilities’ of the Company referred to in paragraph 1 above.

4. We have examined the ‘Statement of Dividend Paid’ by the Company in respect of each of the five financial yearsended 31st March, 2000, 2001, 2002, 2003 and 2004 and six months period ended on 30th September, 2004 on theshares of the Company, enclosed as (Annexure 8) to this report and confirm that it correctly records the dividenddeclared and paid in respect of each of those years.

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5. We have examined the ‘Statement of Tax Shelter’ for each of the five financial years ended 31st March, 2000, 2001,2002, 2003 and 2004 and six months period ended on 30th September, 2004, enclosed as (Annexure 9) to this reportand report that, in our opinion, it correctly reflects the ‘Tax Shelter’ for each of those years.

6. We have examined the ‘Capitalization Statement’ enclosed as (Annexure 10) to this report and report that it correctlyrecords the matters stated therein.

We further report that the information mentioned in the paragraphs 3 to 6 above has been correctly computed from thefigures stated in the Statements of Profits and Losses and Assets and Liabilities, referred to in paragraph 1(a) above.

This report is intended solely for your information and for inclusion in the letter of offer in connection with the proposedissue equity shares on rights basis to the existing equity shareholders of the company and is not to be used, referred toor distributed for any other purpose without our prior written consent.

Yours faithfully,

For B.M.CHATURVEDI & CO.For Chartered Accountants

B.M.CHATURVEDIICAI M.No.17607

Place: MumbaiDated: 30th November 2004

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ANNEXURE I

STATEMENT OF ADJUSTED PROFITS OF THE COMPANY

The statement of adjusted profits of the Company for each of the financial years ended on 31st March, 2000, 2001, 2002,2003 and 2004 and six months period ended on 30th September, 2004 are as set out below.

(Rs. in Lacs)

H.Y.E. YE YE YE YE YE30-9-2004 31-3- 2004 31-3-2003 31-3-2002 31-3-2001 31-3-2000

Income :

Interest – Loan 6,731.35 13,308.77 11,713.07 10,322.49 9,099.16 8,187.06

Fees & Other Charges 557.35 787.29 821.68 838.12 819.92 502.56

Income from Operations 72,88.70 14,096.06 12,534.75 11,160.61 9,919.08 8,689.62

Income from Investments 263.65 325.31 291.16 134.97 376.77 364.64

Other Income 99.63 267.19 204.64 246.44 10.32 41.11

Total Income 7,651.98 14,688.56 13,030.55 11,542.02 10,306.17 9,095.37

Expenditure :

Interest :-

On Loans (Banks / NHB / FIs) 3,659.53 7,019.96 6,141.23 5,487.43 4,356.77 3,635.84

On Deposits 496.52 1,287.71 1,565.55 1,693.37 2,098.12 2,353.32

On Debentures 724.24 1,129.07 910.05 754.31 656.88 265.91

Others 60.20 268.02 308.39 17.04 – –

Interest Expenses 4,940.49 9,704.76 8,925.22 7,952.15 7,111.77 6,255.07

Payment to & Provision for employees 380.60 673.53 585.12 490.33 368.01 283.72

Operational & Other Expenditure 486.59 1,062.08 1,013.40 882.48 783.10 642.01

Depreciation 60.22 83.69 73.10 63.23 46.22 35.29

Provision for Contingencies 298.00 406.27 33.24 – – –

Misc. Exp. W-off 5.83 17.42 19.96 20.74 20.51 12.03

Total Expenditure 6,171.73 1,1947.75 10,650.04 9,408.93 8,329.61 7,228.12

Profit before Tax 1,480.25 2,740.81 2,380.51 2,133.09 1,976.56 1,867.25

Less : Provision for Taxation 316.14 500.89 418.39 426.00 340.00 430.00

Profit After Tax 1,164.11 2,239.92 1,962.12 1,707.09 1,636.56 1,437.25

Add: Bal. B/f from previous year 59.58 114.97 31.69 63.61 11.51 25.05

Trf. From Gen. Reserve – – – – 200.00 200.00

Profit available for Appropriations 1,223.69 2,354.89 1,993.81 1,770.70 1,848.07 1,662.30

Appropriations :

Special Reserves u/s 36(1((viii) of I.T.Act, 1961 – 810.00 790.00 765.00 750.00 750.00

Transfer to General Reserve – 425.00 425.00 175.00 45.00 38.50

Contingencies Reserve – – – 135.00 215.00 35.00

Debenture Redemption Reserve – – – – 44.50 183.54

Dividend paid of Preference Shares – 45.00 59.79 115.32 153.00 138.65

Interim Dividend – – – – – 280.19

Proposed Equity Dividend – 536.93 536.93 536.93 492.46 140.09

Proposed 20th Anniversary Special Dividend – 357.95 – – – –

Tax on Dividend – 120.43 67.12 11.76 84.50 84.82

Bal. C/f to Balance Sheet 1,223.69 59.58 114.97 31.69 63.61 11.51

Total 1,223.69 2,354.89 1,993.81 1,770.70 1,848.07 1,662.30

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ANNEXURE 2

STATEMENT OF ASSETS AND LIABILITIES OF THE COMPANY

The statement of Assets and Liabilities of the Company for each of the financial years ended as on 31st March, 2000, 2001,2002, 2003 and 2004 and as on 30th September, 2004 are as set out below:

(Rs. In Lacs)

H.Y.E. YE YE YE YE YE30-9-2004 31-3-2004 31-3-2003 31-3-2002 31-3-2001 31-3-2000

ASSETS:

Loans 133,617.37 112,588.02 94,803.60 73,792.78 61,535.00 52,756.97

Investments 4,326.45 6,943.72 2,872.13 4,350.35 1,090.46 2,325.39

Deferred Tax Assets (46.05) (46.05) 16.26 – – –

Current Assets

Interest Accrued but not Due on Inv. 252.85 145.72 194.53 319.18 286.53 218.82

Stock in Trade 0.00 0.00 0.00 219.19 886.21 880.66

Sundry Debtors 89.81 59.14 39.83 46.81 39.29 22.83

Cash & Bank Balance 7,824.71 3,886.39 2,564.27 5,979.27 2,774.17 3,107.88

Loans & Advances 4,880.02 3,156.96 2,718.27 2,739.08 2,270.09 1,970.27

13,047.39 7,248.21 5,516.90 9,303.53 6,256.29 6,200.46

Misc. Expenditure Not W/off 36.67 34.26 45.20 57.66 47.83 46.60

Fixed Assets

Gross Block 1,909.35 1,655.14 1,448.00 1,272.38 1,177.09 991.11

Less Depreciation 431.09 374.54 305.01 233.95 177.51 143.59

Net Block 1,478.26 1,280.60 1,142.99 1,038.43 999.58 847.52

Total Assets ( A ) 152,460.09 128,048.76 104,397.08 88,542.75 69,929.16 62,176.94

LIABILITIES & PROVISIONS

Loan Funds

Secured Loans 107,332.52 85,694.49 68,414.91 59,839.84 42,659.11 34,528.10

Unsecured Loans 25,318.76 26,051.80 20,923.47 14,706.18 13,880.31 16,677.36

132,651.28 111,746.29 89,338.38 74,546.02 56,539.42 51,205.46

Current Liabilities & Provision

Current Liabilities 2,509.36 1,753.30 2,068.63 1,656.91 1 ,655.92 1,332.57

Provision 528.46 1,378.99 999.50 782.02 614.41 897.32

3037.82 3,132.29 3,068.13 2,438.93 2,270.33 2,229.89

Total Liabilities ( B ) 135,689.10 114,878.58 92,406.51 76,984.95 58,809.75 53,435.35

Net Assets ( A- B ) = C 16,770.99 13,170.18 11,990.57 11,557.80 11,119.41 8,741.59

Represented By

Shareholders’ Funds:

Share Capital 4079.81 4,079.81 4,079.81 4,354.81 4,854.81 4,081.92

Share Application money 2436.71 – – – – –

Reserves & Surplus 10254.47 9,090.37 7,910.76 7,202.99 6,264.60 4,659.67

Total ( C ) 16770.99 13,170.18 11,990.57 11,557.80 11,119.41 8,741.59

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ANNEXUTRE 3

NOTES TO ACCOUNTS OF THE COMPANY :

A. SIGNIFICANT ACCOUNTING POLICIES: -

FINANCIAL YEAR 2003-2004

1. Basis of preparation of financial statements:

a) The financial statements have been prepared under the historical cost convention, in accordance with the generallyaccepted accounting principles and the provisions of the Companies Act, 1956 and Accounting Standards (AS)referred to in the notes are as issued by the Institute of Chartered Accountants of India.

b) Accounting policies not specifically referred to otherwise are consistent with the generally accepted accountingprinciples followed by the company.

2. Interest on housing loans:

Repayment of housing loan is by way of Equated Monthly Installments (EMI) comprising principal and interest. Interestis calculated each year on the outstanding balance at the beginning of the Company’s financial year. EMI commencesonce the entire loan is disbursed. Pending commencement of EMI, pre-EMI interest is payable.

3. Interest & other related borrowing cost:

Interest accrued on cumulative fixed deposits and payable at the time of maturity is clubbed with the principal amounton the date of periodical rest when interest is credited in Fixed Deposit account in accordance with the particulardeposit scheme. Interest and related expenses being part of borrowing cost are recognized as an expense in theperiod for which they are incurred as specified in Accounting Standard (AS 16) on “Borrowing Costs”.

4. Revenue Recognition:

a) Interest on performing assets is recognized on accrual basis and on non-performing assets on realization basisas per the guidelines prescribed by the National Housing Bank.

b) Dividend income on investments and penal interest income on delayed EMI/PEMI are recognized on receipt basis

5. Foreign Exchange Transactions:

Transactions in foreign currencies are recorded at the rates prevailing on the dates of the transactions. Monitory itemsdenominated in foreign currency are stated at contracted rates as those are covered by forward contracts. Premiumfor forward contracts is recognized as expenditure over the life of the contract.

6. Provision for Contingencies:

Provisions for Contingencies have been made for diminution in investment value and on non-performing housing loansand other assets as per the Prudential Norms prescribed by the National Housing Bank.

7. Investments:

All Investments, other than Investments in mutual funds, are in the nature of long term Investments and are valuedat cost as per Accounting Standard (AS 13) on “Accounting for Investments” and the guidelines issued by the NationalHousing Bank. However full provisions for diminution in the value of said Investments is made.

8. Fixed Assets:

Fixed Assets are capitalized at cost inclusive of expenses incidental thereto. Depreciation on fixed assets is providedon straight-line method at the rates prescribed under Schedule XIV to the Companies Act, 1956.

9. Share and NCD issue expenses:

Expenses in connection with issue of shares have been amortized in accordance with Section 35(D) of the Income TaxAct, 1961 and expenses relating to issue of non-convertible debentures have been amortized over the period for whichthey have been issued.

10. Brokerage paid on Fixed Deposits:

Brokerage paid on long term fixed deposits mobilized during the year has been treated as revenue expense only forthe period relating to the year ended 31.03.2004 and balance is treated as prepaid expenses to be adjusted on pro-rata basis in the future accounting years.

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11. Employees Retirement Benefits:

a) Company’s contribution to provident fund is charged to Profit & Loss Account.

b) Gratuity & Leave encashment payable at the time of retirement are charged to Profit & Loss Account on the basisof actuarial valuation.

12. Earnings per share

The earnings per share has been computed as per Schedule “P” in accordance with Accounting Standard (AS-20) on,“Earnings per share” and is also shown in the profit & loss account.

13. Income Tax:

Income tax provision based on the present tax laws in respect of taxable income for the year and the deferred tax aretreated in the accounts based on the Accounting Standard (AS-22) on “Accounting for Taxes on Income”. The Deferredtax assets and liabilities for the year, arising out of timing difference, are reflected in the profit and loss account. Thecumulative effect thereof is shown in the Balance sheet. The deferred tax assets are recognized only if there is areasonable certainty that the assets will be realized in future.

14. Principal Terms of Loan & Assets Charged as Security

Term loans from the National Housing Bank, other Banks, International Finance Corporation (IFC Washington), FinancialInstitutions and Secured Non Convertible Debenture are secured/to be secured by way of first charge to and in favourof the participating banks, Institutions, National housing bank and Debenture Trustees jointly ranking pari passu inter-se, on the company’s book debt and the whole of the present and future movable properties and assets whereversituated. The loans are further secured / to be secured on pari passu basis by constructive delivery of various titledeeds of certain immovable properties, to the Union Bank of India, acting for itself and as an agent of other participatingbanks, Financial Institutions, National Housing Bank and Debenture trustees, and are also guaranteed by threedirectors of the company.

15. The unsecured loans received by the company from banks are guaranteed by the three directors of the company andbacked by the Demand Promissory Notes issued by the company.

B. OTHER NOTES

FINANCIAL YEAR 2000 - 2001

1. One of the Directors of the Company, being nominee and representing one of lending Financial Institutions, is alsoa Director of other Companies have been nominated by said Financial Institution, and some of these otherCompanies having defaulted on their financial obligations within the meaning of section 274(1)(g) of the CompaniesAct, 1956

FINANCIAL YEAR 2001 - 2002

1. The company has transferred to General Reserve Rs 236 lacs being the excess amount credited to special reservecreated out of profit & loss account in earlier year in terms of section 36(1)(viii) of the Income Tax Act 1961.Further, a sum of Rs 44.50 lacs has been transferred from the Debenture Redemption reserve to the GeneralReserve, as creation of debenture redemption reserve is not required as clarified by the Company Law Board videits circular no.9/2002 dated 18/04/2002.

2. Contingency reserve includes amount provided for loans and other advances Rs.298.88 lacs (Rs.215.44 lacs) andfor investments Rs.171.74 lacs (Rs.150.00 lacs). Loss on sale of long term investments incurred during the yearamounting Rs.29.82 lacs has been adjusted against the contingency reserve.

FINANCIAL YEAR 2002 - 2003

1. In terms of the requirements of National Housing Bank (NHB) the Company is required to make Provisions forContingencies of Rs.506.57 lacs as on 31st March 2003 in respect of Non-Performing Assets. In the earlier yearsthe Company has created Contingency Reserve for the required amount. During this year, in addition to thetransfer of Rs.33.24 lacs from the Profit & Loss Account and Rs.223.27 lacs from General Reserves, the amountof Rs.250.06 lacs being the balance amount of Contingencies Reserves created out of retained earnings in earlieryears has also been transferred to Provision for Contingencies.

2. In compliance with NHB Directions, the Company has changed its method of meeting the requirement ofContingencies from its retained earnings, credited in Contingency Reserves to a system of making provisions forcontingencies and accordingly it has transferred its unused Contingency Reserve balances to Provision forContingency. Also consequent to this change there has been an additional charge for provisions of Rs.223.27 lacswhich relates to the earlier years and to meet the requirement pertaining to earlier years an equivalent amount

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has been transferred from the General Reserves to Provisions for Contingency. Had there been no change in themethod related to accounting for Contingency, the profit for the year would have been higher by Rs.33.24 lacs andReserves & Surplus would have been higher by Rs.506.57 lacs as on 31-03-2003.

Penal Interest income on delayed EMI/PEMI, which hitherto was accounted on accrual basis, is now beingaccounted on cash basis. Had this change in accounting Policy not been done profits for the year and correspondingcurrent assets would have been higher by Rs.39.55 lacs,.

FINANCIAL YEAR 2003 - 2004

1. Other Income includes interim dividend of Rs.49.45 lacs received from subsidiary company and other dividend ofRs1.91 lacs on other investments (Rs.38.10 lacs) and Rs.215.83 lacs (Rs.116.91 lacs) from profit on sale ofinvestments including mutual fund dividend. Income from sale of investment & Dividend includes Rs.217.66 lacs(Rs.144.84 lacs) pertaining to current investment. Interest on bank deposits includes Rs.143.28 lacs (Rs.228.88lacs) in respect of short-term investments, deposits and inter corporate deposits.

2. In terms of the requirements of National Housing Bank (NHB), the Company is required to have provisions forContingencies of Rs.484.29 lacs (Rs.506.57 lacs) as on 31st March 2004 in respect of Non-performing Assets.During this year company has transferred Rs.406.27 lacs (33.24 lacs) from the Profit & Loss account. TheCompany has written off certain NPA of Rs.428.55 lacs (Rs.220.56 lacs) during the year utilising Contingencyprovisions which includes accumulated penal interest on NPA accounts recognised as income in earlier years.

3. The Company has taken over the management & acquired 58.20% equity shares of the Vysya Bank HousingFinance Ltd. (a subsidiary of ING Vysya Bank) during the year on 2nd July 2003 as approved by the Reserve Bankof India and National Housing Bank. Consequent to the above acquisition the Vysya Bank Housing Finance Ltd.became the subsidiary of the company and its name was changed with the permission of the Registrarof Companies w.e.f. 15/10/2003 to DHFL Vysya Housing Finance Ltd.

4. As per Accounting Standard (AS-18) on “Related Party Disclosures”, the disclosure of transactions with relatedparties as defined therein are given below:

A) LIST OF RELATED PARTIES WITH WHOM TRANSACTIONS HAVE TAKEN PLACE AND RELATIONSHIP:

1. COMPANIES(i) Subsidiary Company

DHFL Vysya Housing Finance Corporation Ltd.

(ii) Associate Companies

a. DHFL Insurance Services Ltd.

b. DHFL Properties Services Ltd.

c. Inter Active Multi Media Technology P. Ltd.

d. DHFL Assets Reconstruction Corporation Ltd.

2. KEY MANAGEMENT PERSONNEL

(I) Shri Kapil Wadhawan

(ii) Shri Sarang Wadhawan

3. RELATIVES OF KEY MANAGEMENT PERSONNEL

(i) Shri Rakesh Kumar Wadhawan

4. OTHERS

Rajesh Kumar Wadhawan Education Trust

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B) TRANSACTIONS DURING THE YEAR WITH RELATED PARTIES:

(Rs. in lacs)

Name of Transaction Subsidiary Associate Key Relatives Of OthersCompany Companies Management Key

Personnel ManagementPersonnel

Investment 1667.28 – – – –

Advance Recoverable in cash or kind – – – – –

Balance as at 1st April 03 – 30.98 – – –

Advance during the year – 37.36 – – –

Recovered during the year – 4.38 – – –

Balance as at 31st March 04 – 63.96 – – –

Income

Dividend 49.45 – – – –

Expenditure

Professional charges – 3.02 – – –

Remuneration – – 33.99 0.66 –

Directors sitting fee – – – 0.55 –

Donation – – – – 10.00

Financial Half Year Ending 30th September, 2004.

1. The main business of the Company is to provide loans for the purchase of construction of residential houses and allother activities of the Company are allied to the main business and as such there are no separate segments as perthe Accounting Standard on Segment Reporting (As 17), issued by the Institute of Chartered Accountants of India.

2. Income from operation of reporting period includes Rs.238.40 lacs (Rs.183.74 lacs) being income from securitisation,Rs.16.29 lacs (Rs.40.33 lacs) being interest on househod goods loan, Rs.53.06 lacs (Rs.55.57 lacs) being interest onloans against real estate rental finance and Rs.263.65 lacs (Rs.127.95 lacs) being other interest.

3. The Company has made Pro-rata provision during the half year for contingencies in compliance with new NPAguidelines of NHB for provision on over three months overdues and its other directions, aggregating to Rs.298.12 lacs(Rs.45.06 lacs) which is included in other expenses.

4. Company regularly valued Investments in Mutual funds being Short Term Investment at cost as per AccountingStandard [AS-13] and make full provisions for diminution in its value, if any.

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ANNEXURE - 4

DEWAN HOUSING FINANCE CORPORATION LIMITED

CONSOLIDATED BALANCE SHEET AS AT 31ST MARCH,2004 AND AS ON 30TH SEPTEMBER, 2004

(Rs. In Lacs)

Consolidated ConsolidatedAs at 30.09.2004 As at 31.03.2004

SOURCES OF FUNDS:

Shareholders Fund

Share Capital 4,079.81 4,079.81

Reserves & Surplus 10,523.50 9,242.10----------------------- -----------------------

14,603.31 13,321.91

Minority Interest 1,390.68 1,306.44

Share Application Money 2,436.71

Loan Funds

Secured Loans 114,765.69 93,448.74

Unsecured Loans 27,464.48 29,700.62----------------------- -----------------------

142,230.17 123,149.36----------------------- -----------------------

TOTAL 160,660.87 137,777.71----------------------- -----------------------

APPLICATION OF FUNDS:

Fixed Assets:

Gross Block 2,214.70 1,955.84

Less: Depreciation 690.18 628.23----------------------- -----------------------

1,524.52 1,327.61

Housing & Other Loans 146,325.70 125,794.72

Investment 3,031.41 5,673.69

Deferred Tax Assets [Liability] 0.96 -8.01----------------------- -----------------------

Current Assets, Loans & Advances 13,397.59 8,492.04

Less: Current Assets 3,655.98 3,536.60

9,741.61 4,955.44

Miscellaneous Expenditure 36.67 34.26----------------------- -----------------------

TOTAL 160,660.87 137,777.71----------------------- -----------------------

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ANNEXURE - 5

DEWAN HOUSING FINANCE CORPORATION LIMITED

CONSOLIDATED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH,2004 AND SIX MONTHS PERIODENDED ON 30TH SEPTEMBER, 2004

(Rs. In Lacs)

Consolidated ConsolidatedAs at 30.09.2004 As at 31.03.2004

INCOME :

Income from Operations 8,419.91 16,596.96

Other Income 126.45 205.37----------------------- -----------------------

TOTAL 8,546.36 16,802.33----------------------- -----------------------

EXPENDITURE:

Interest & Other charges 5,412.11 11,104.36

Payment to and Provision for Employees 448.24 798.80

Operational & other expenses 557.28 1,197.08

Provision for contingencies 323.00 522.15

Depreciation 65.64 95.10----------------------- -----------------------

TOTAL 6,806.27 13,717.49----------------------- -----------------------

Profit before tax 1,740.09 3,084.85

Less : Provision for Taxation 374.44 587.87----------------------- -----------------------

Profit after tax (before minority interest) 1,365.65 2,496.98

Add: Balance B/F from previous year 95.98 92.94

Less: Prior period adjustment – (7.34)

Less: Minority share in profits (84.24) (133.29)----------------------- -----------------------

Profit Available for Appropriation 1,377.39 2,449.29----------------------- -----------------------

Appropriations:

Special Reserve under Section 36(1)(viii) – –

Of the Income Tax Act 1961 – 810.00

Transfer to General Reserve – 425.00

Proposed Equity dividend – 545.81

Proposed 20th Anniversary Special Equity Dividend – 357.95

Interim Dividend Paid on Preference Share – 80.52

Tax on Dividend – 134.04

Balance carried to Balance Sheet 1,377.38 95.98----------------------- -----------------------

TOTAL 1,377.38 2,449.30----------------------- -----------------------

Earning Per Shares (Rs.) 3.58 6.46

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ANNEXURE 6

NOTES TO CONSOLIDATED ACCOUNTS

For Financial Year : 2003 –04

1. The Company has taken over the management & acquired 58.20% equity shares of the Vysya bank housing financeltd. (a subsidiary of ING Vysya bank) during the year on 2nd July 2003 as approved by the Reserve bank of India andNational Housing Bank. Consequent to the above acquisition the Vysya bank housing finance ltd. became the subsidiaryof the company and its name was changed with the permission of the Registrar of Companies w.e.f. 15/10/2003 toDHFL Vysya Housing Finance Ltd.

2. As per Share Transfer Agreement with respect to above acquisition , earlier holding company, i.e. ING Vysya Bank Ltdhas taken over certain housing loan portfolio by paying Rs.435 lakhs, which were hitherto classified as NPA. TheCompany has written off part of the above debts out of the contingency provision made in respect thereof in earlieryears amounting to Rs.186.75 lakhs and balance amount of Rs.83.59 lakhs out of the General Reserves of theCompany as it represented the earlier year’s transaction.

3. The earlier holding company of the subsidiary i.e. ING Vysya Bank Ltd had also agreed to take over certain specifiedoverdue accounts in case they become NPA within specified period at a consideration of total amounts due from theborrowers forming part of specified over due accounts in two tranches. The Company has already submitted certainaccounts from the specified pool for transfer to ING Vysya Bank Ltd., by way of first tranche in terms of Share TransferAgreement and Agreement for Assignment of Receivables.

4. The earlier holding company of the subsidiary i.e. ING Vysya Bank Ltd has also agreed in terms of above agreementsto make good the losses, if any, suffered by the company due to deficiencies in documentation noticed under the duediligence audit reports and not able to be cured during the period of 6 years from the date of change of management.

5. In terms of the requirements of National Housing Bank (NHB), the Company is required to have provisions forContingencies of Rs 484.29 lacs (Rs 506.57 lacs) as on 31st March 2004 in respect of Non-performing Assets. Duringthis year company has transferred Rs 406.27 lacs (33.24 lacs) to the transfer of Rs 33.24 lacs from the Profit & Lossaccount. The Company has written off certain NPA of Rs 428.55 lacs (Rs 220.56 lacs) during the year utilizingContingency provisions which includes accumulated penal interest on NPA accounts recognised as income in earlieryears. The subsidiary is required to have net aggregate provisions for Contingencies of Rs 123.45 lacs (Rs 194.33 lacs)as on 31st March 2004 in respect of Non-performing Assets.

6. The de-recognised interest income on Non Performing Assets of the subsidiary for the year 2003-04 amounted to Rs102.71lacs (Previous Year Rs.84.32 lacs)

7. The Company’s Income-tax assessment has been completed up to the financial year ending 31-03-2001. The Income-tax department has raised additional demands of Rs 54.94 lacs net of payments against which the company haspreferred appeal with the appropriate authorities. Based on the legal position and decided cases, the company hasbeen legally advised that the said demand would be set aside and accordingly no additional provisions need to bemade and hence no further provision has been made for the same. Deferred tax liability of Rs 62.31 lacs for currentyear of company is included in the provision for taxes and debited to P & L account. The Subsidiary Company’s IncomeTax assessment has been completed up to the financial year ending 31.03.2002. The Income-tax department hasraised additional demand of Rs. 105.45 lacs against which the company has preferred appeal with the appropriateauthorities. Based on the legal position and the decided cases, the company has been legally advised that the saiddemand would be set aside and also based on the facts that ING Vysya Bank Limited, earlier holding company of thecompany has issued to reimburse all tax liabilities in this respect if at all it crystalise on the company. Accordingly noadditional provisions need to be made and hence no further provision has been made for the same. Subsidiary hasutilized deferred tax Asset of Rs. 33.39 lacs during the year ended and is included in provision for taxation.

ANNEXURE 7

Statement of Accounting Ratios of the Company

(Rs. In Lacs)

H.Y.E. YE YE YE YE YE30-9-2004 31-3-2004 31-3-2003 31-3-2002 31-3-2001 31-3-2000

Return on Net Worth P.A. 16.28% 17.05% 16.43% 14.84% 14.78% 16.53%

Cash Earning per share P.A. 8.51 7.55 5.67 4.68 4.23 4.76

Net Asset Value per share RS. 38.54 35.30 31.97 29.96 27.37 26.43

Earning Per Share (Rs.) P.A. 6.50 6.12 5.31 4.41 4.14 4.63

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ANNEXURE - 8

STATEMENT OF DIVIDEND PAID BY THE COMPANY.

Statement of Dividend paid on Equity Shares

(Rs. In Lacs)

Particulars 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00

Equity Capital 3579.81 3579.81 3579.81 3579.81 3579.81 2806.92

No. of Shares 35798056 35798056 35798056 35798100 35798100 28069200

Dividend NIL 894.88 * 536.93 536.93 492.46 420.28

Dividend % NIL 25% # 15% 15% 15% 15%

# Dividend including 20th Anniversary Special Equity Dividend of 10% on completion of 20 years of the Company.* Paid on pro-rata basis for the Equity Shares issued on Rights basis during the year 2000-01.

Statement of Dividend Paid on Preference Shares

(Rs. In Lacs)

Particulars 2004-05 2003-04 2002-03 2001-02 2000-01 1999-0012% Pref. Shares – – – 275.00 1275.00 1275Dividend Paid – – # 14.79 * 92.51 153 *138.659% Pref. Shares 500 500 500 500 – –Dividend Paid Nil 45 45 * 228 – –

* Dividend paid on pro-rata basis# Shares redeemed during the year and dividend paid till the date of redemption

ANNEXURE – 9Statement of Tax Shelter for the Company for the financial year ended on 31st March 2000, 2001, 2002, 2003 and2004 and six months period ended on 30th September, 2004.

(Rs. In Lacs)YE YE YE YE YE H.Y.E.

31-3-2000 31-3-2001 31-3-2002 31-3-2003 31-3-2004 30.9.2004(A) Tax at notional rate on Adjusted profits 718.89 781.73 761.51 874.84 983.27 545.03

Adjustments:

1) Exempt Income 0.00 390.85 188.92 154.56 446.14 45.80

2) Diff. Between Tax depn & Book Depn. 8.12 34.52 33.28 39.66 33.83 33.38

3) Special Reserve Dedn. U/s 36(1)(viii) 751.01 572.96 764.34 723.67 810.00 564.36

4) Other adjustments -23.08 118.79 0.03 377.11 228.31 18.02

Net Adjustments (1+2+3+4) 736.05 1117.12 986.57 1295.00 1518.28 625.52

(B) Tax Saving on Net Adjustments 288.89 441.73 335.51 456.45 482.38 228.89

(C) Taxable Income as per I.T.Return 1131.20 859.44 1146.52 1085.51 1222.53 854.73

(D) Provision for Tax for the year (A- B = D) 430.00 340.00 426.00 418.39 500.89 316.14

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ANNEXURE - 10

CAPITALISATION STATEMENT OF THE COMPANY

(Rs. in lacs)

Pre Right issue Post Right issueAs on 30th Sept, 2004 of Equity shares

1) Secured Loan 107,332.52 107,332.52

2) Unsecured Loan 25,318.78 25,318.78

3) Total Debts 132,651.30 132,651.30

(A) Less: Short Term Debts @ 43,985.78 43,985.78

(B) Long Term Debts 88,665.52 88,665.52

4. Shareholder Funds :

Share Capital 4,079.81 5,511.61

Reserves 10,254.47 13,833.99

Total Networth 14,334.28 19,345.60

5. Long Term Debt / Equity Ratio 6.19:1 4.58:1

@ Secured and Unsecured Loan (including Fixed Deposits) repayable within 12 months are considered as ShortTermDebts.

ADDITIONAL INFORMATION NOT FORMING PART OF THE AUDITORS’ REPORT

a) Company regularly valued Investments in Mutual funds being Short Term Investment at cost as per AccountingStandard [AS-13] and make full provisions for diminution in its value, if any.

b) Shri Madhav K. Kumar was a nominee director of UTI on the Board of DHFL upto 28/01/2003. As informed by UTI videtheir letter dated 10/06/2002 to DHFL nominee director of UTI would not incur any disqualification under Section 274(1)(g) of the Companies Act, 1956.

c) Significant notes to the accounts, significant accounting policies as well as auditors’ qualification, if any, have beenincorporated in the above Auditors’ Report.

d) Age-wise break-up of Sundry Debtors as on 31/03/2004 are as follows:

Particulars Rs. In Lacs

Less than 6 months 4.99

More than 6 months 54.15--------------

Total 59.14--------------

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VIII. MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION ANDRESULTS OF THE OPERATIONS AS REFLECTED IN THE FINANCIAL STATEMENTS:

Comparison of significant items of income and expenditure

(Rs. In Lacs)

HYE YE YE YE30/09/2004 2004 2003 2002

Income:

Interest - Loan 6,731.35 13,308.77 11,713.07 10,322.49

Fees & Other Charges 557.35 787.29 821.68 838.12

Income from Operations 7,288.70 14,096.06 12,534.75 11,160.61

Income from Investments 263.65 325.31 291.16 134.97

Other Income 99.63 267.19 204.64 246.44

Total Income 7,651.98 14,688.56 13,030.55 11,542.02

Expenditure:

Interest:

On Loans (Banks / NHB / FIs) 3,659.53 7,019.96 6,141.23 5,487.43

On Deposits 496.52 1,287.71 1,565.55 1,693.37

On Debentures 724.24 1,129.07 910.05 754.31

Others 60.20 268.02 308.39 17.04

Interest Expenses 4,940.49 9,704.76 8,925.22 7,952.15

Payment to & Provision for employees 380.60 673.53 585.12 490.33

Operational & Other Expenditure 486.59 1,062.08 1,013.40 882.48

Depreciation 60.22 83.69 73.10 63.23

Provision for Contingencies 298.00 406.27 33.24 0.00

Misc. Exp. W-off 5.83 17.42 19.96 20.74

Total Expenditure 6,171.73 11,947.75 10,650.04 9,408.93

Profit before Tax 1,480.25 2,740.81 2,380.51 2,133.09

Less: Provision for Taxation 316.14 500.89 418.39 426.00

Profit After Tax 1,164.11 2,239.92 1,962.12 1,707.09

2001-02

The liquidity crunch and competition in the industry affected growth in operations during the year. However DHFL achieveda growth of 12% in income during the year. Profit before depreciation and Tax was Rs.2196 Lacs as against Rs.2023 Lacsin the previous year. The networth of the Company grew to Rs.11500 Lacs from Rs.11072 Lacs in the previous year.

2002-03

During the year housing finance companies witnessed excellent business growth coupled with tough competition due tofrequent downward revision of interest rates and DHFL had to match the market trend. DHFL could achieve a Profit AfterTax of Rs.1962.12 Lacs against Rs.1707.09 Lacs achieved in the previous year registering a growth of 14.93%.

2003-04

The housing finance sector witnessed a significant growth marked by a tough competitive market as frequent downwardrevisions in the interest rates. DHFL witnessed an increase in the volume of its business. The Company achieved a profitafter tax of Rs.2239.92 lacs against Rs.1962.12 lacs in the previous year, registering a growth of 14.16 percent. Duringthis year the equity shares of the Company were delisted from the ASE and the DSE. The Company received an in principlefunding approval from Asian Development Bank for US$ 20mn ( i.e. approximately Rs.9000 Lacs). The Company acquired58.20% of the share capital of Vysya Bank Housing Finance Ltd. and the housing loan portfolio of SMIFS Capitals housingarm.

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Unusual or infrequent events or transactions

During the year 2003-04 DHFL and its promoters acquired total of 91.22 % of the equity stake in Vysya Bank HousingFinance Ltd. (DVHFL). DVHFL is a housing finance Company registered with NHB and has operations primarily in thestates of Karnataka, Andhra Pradesh, Tamilnadu and Maharashtra. The Company also acquired the Housing Financeportfolio of SMIFS Capital’s housing arm.

Significant economic changes

The initiatives taken by the government in rural and infrastructure development during the past three years have had apositive impact on the housing finance industry. The outlook for the industry in the near term is positive.

Known trends or uncertainties

There are no known trends or uncertainties witnessed by the housing finance sector.

Future relationship between costs and revenues

The net margins earned by the housing finance sector are hugely impacted by the cost of funds mobilized. The presentbudget proposal to bring down the refinance rates of NHB augur well for the industry. Inspite of the slight hardening of theinterest rates (domestic as well as global) witnessed recently, it is anticipated that interest rates will not appreciate muchand hence there should not be a significant increase in the cost of funds.

Total turnover of the industry

The Indian housing finance industry has grown by leaps and bounds in past few years. Total home loan disbursements byBanks and Housing Finance Companies (HFCs) has risen from Rs.29,359.29 Crores in 2001-02 to Rs.51,672.70 Croresin 2002-03 witnessing a phenomenal growth of 76% during this period.

New Products

No new products have been introduced by the Company during the past year.

Seasonality of business

The business of the Company is not seasonal.

Dependence on single or few suppliers/customers

The business is not dependent on few customers.

Competitive Conditions

Competition in the housing finance segment intensified as a number of banks renewed their thrust. The main reasons forgrowth being high liquidity in the financial system and housing finance being perceived as a high yield and low credit riskbusiness. Share of banks in the housing finance industry grew from 20% in 1999-2000 to 50% in 2003-04.

Material developments after the date of the last balance sheet

There have been no material developments after the date of the last balance sheet.

Adverse events

There are no adverse events affecting the operations of the Company occurring within one year prior to the date of filingof the offer document with the Registrar of Companies/Designated Stock Exchange.

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STOCK MARKET DATA FOR SHARES OF THE COMPANY

THE STOCK EXCHANGE, MUMBAI

The equity shares of the Company are listed on The Stock Exchange, Mumbai. The stock market data for the equity shareson the BSE are as follows:

High Low

High (Rs) Date (Rs) Volume Low (Rs) Date(Rs) Volume Average on date on date Price

Particulars of high of Low (Rs.)(no. of (no. of

shares) shares)

2001 25.50 04/01/2001 314 15.00 31/12/2001 4530 19.84

2002 20.00 19/12/2002 29179 12.55 25/10/2002 2500 15.40

2003 38.00 19/12/2003 14839 15.6 01/04/2003 332 22.15

June, 2004 29.30 15/06/2004 547 22.50 11/06/2004 3089 27.60

July, 2004 30.55 14/07/2004 5964 25.00 23/07/2004 2315 27.68

Aug, 2004 28.50 10/08/2004 528 25.00 04/08/2004 2810 26.18

Sept, 2004 34.00 08/09/2004 50048 26.50 01/09/2004 3016 30.25

Oct, 2004 35.90 29/10/2004 3100 28.75 20/10/2004 1132 32.33

Nov, 2004 41.85 19/11/2004 139464 30.00 01/11/2004 6614 35.93

Week end price of equity Shares of DHFL on the BSE

Week ended Price (Rs)

12/11/2004 33.68

19/11/2004 36.32

26/11/2004 NT *

03/12/2004 34.50

* 26/11/2004 being a public holiday, the equity shares of DHFL were not traded on this day. The closing price of the equityshares on BSE on 25/11/2004 was Rs.36.75.

NATIONAL STOCK EXCHANE OF INDIA LIMITED (NSE)

The following is the movement of the existing equity share of the Company listed and traded on the National StockExchange of India Limited. (NSE). Information regarding the Company’s share prices at NSE are as given below:

High Low

High (Rs) Date (Rs) Volume Low (Rs) Date(Rs) Volume Average on date on date Price

Particulars of high of Low (Rs.)(no. of (no. of

shares) shares)

2001 27.00 03/01/2001 200 13.00 02/07/2001 13 20.31

2002 19.75 19/12/2002 10458 13.80 04/12/2002 3441 15.71

2003 38.75 22/12/2003 44193 15.65 11/03/2003 672 22.61

June, 2004 30.90 24/06/2004 901 26.25 01/06/2004 1948 27.67

July, 2004 30.40 14/07/2004 17174 25.10 23/07/2004 4941 27.64

Aug, 2004 28.80 05/08/2004 17087 21.50 27/08/2004 15200 26.25

September 2004 34.00 09/09/2004 45994 26.25 02/09/2004 11886 30.13

October 2004 33.25 08/10/2004 34476 28.76 25/10/2004 3103 30.98

November 2004 41.45 19/11/2004 240627 30.20 01/11/2004 14913 35.83

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Week end price of equity Shares of DHFL on the National Stock Exchange

Week ended Price (Rs)

12/11/2004 33.68

19/11/2004 36.21

26/11/2004 N.T. *

03/12/2004 34.60

* 26/11/2004 being a public holiday, the equity shares of DHFL were not traded on this day. The closing price of the equityshares on NSE on 25/11/2004 was Rs.37.00.

PREVIOUS ISSUE DETAILS

The Company allotted 77,28,906 equity shares pursuant to the Rights Issue of equity shares of Rs.10/- each for cash ata premium of Rs.10/- per share in June 2000. The objects of the issue were to augment the long-term resources, enhanceand strengthen the equity base and to increase the net owned funds of the Company. The objects of the issue beinggeneral in nature have been achieved.

COMPANIES UNDER THE SAME MANAGEMENT

There is no listed company under the same management within the meaning of Section 370 (1B) of the Act. The detailsof DHFL are incorporated under the head ‘Brief History of the Company’.

Promise versus Performance

- The Company allotted 77,28,906 equity shares pursuant to the Rights Issue of equity shares of Rs.10/- each for cashat a premium of Rs. 10/- per share in June 2000. Promise versus performance in respect of the issue is given below:

(Rs. in lacs)

Particulars Projected Actual

Year ended 31.03.2000

INCOME

Interest on Housing Loan 8,333.17 8,187.06

Fees and Other Services 377.33 502.56

Other Income 485.21 405.75

Total 9,195.71 9,095.37

EXPENDITURE

Interest 6,530.89 6,255.07

Employee Cost 259.79 283.72

Operation Expenses 530.00 642.01

Depreciation 38.85 35.29

Preliminary Expenses 12.63 12.03

Total 7,372.16 7,228.12

Profit before Tax 1,823.55 1,867.25

Taxation 382.95 430.00

Profit after Tax 1,440.60 1,437.25

The Company has more or less achieved the projections made by the management in the Letter of Offer for the said Rights Issue.

- The company has issued 90,33,125 equity shares of Rs. 10/- each for cash at a premium of Rs. 5/- per share on a rightsbasis in the ratio of 1:1 in the year 1994. Promise versus performance in respect of the issue is given below :

(Rs. In lacs)

Particulars Projected Actual Projected Actual Projected Actualas on as on as on as on as on as on

31/03/1995 31/03/1995 31/03/1996 31/03/1996 31/03/1997 31/03/1997

Total income 5713.00 5078.00 7699.00 6330.00 10393.00 7321.00

Net profits 1265.00 590.00 1549.00 880.00 1822.00 781.00

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- The company has issued 60,42,425 equity shares at par on a rights basis is in the ratio of 2:1 in the year 1992. Noprojections were required to be given in the Letter of Offer as per the extant guidelines.

BASIS FOR ISSUE PRICE

Quantitative Factors

Earnings per Share (on Rs. 10/- per share)

Year EPS(Rs) Wts

2001-02 4.41 1

2002-03 5.31 2

2003-04 6.12 3

Weighted Average EPS 5.57

P/E Ratio

Price per share Rs.35

P/E(based on preissue EPS) 5.72

Return on Networth

Year RONW(%) Wts

2001-02 14.84 1

2002-03 16.43 2

2003-04 17.05 3

Weighted Average RONW 16.48

Minimum RONW required to maintain preissue EPS (%) 17.48

Net Asset Value(Rs.)

NAV (pre issue as on 31/03/2004) 35.30

NAV (post issue) 35.01

Industry P/E Ratio

Highest 19.2

Lowest 3.7

Average 5.6

(Source: Dalal Street Investment Journal Nov. 1-14, 2004)

Comparison with Peer Group

Ratios DHFL Can Fin GIC Gruh LIC(As on 31/03/2004) Homes Housing Housing Housing

Finance Finance Fiannce

EPS (Rs. per share) 6.15 10.1 6.2 5.0 22.3

NAV (Rs. per share) 35.30 67.1 58.0 23.9 128.2

P/E (Price as on 21/10/2004) 4.7 3.7 4.0 6.0 6.2

The performance of the company is at par with the similar size of companies in the industry. The last traded price of theequity shares as on 03/12/2004 was Rs.34.50 on the BSE which is at a P/E multiple of 5.63 times which compares wellwith the P/E multiple of the other companies in the sector.

The minimum return on networth required to maintain preissue EPS of Rs.6.12 is 17.48% whereas the Company hasalready earned an RONW of 17.05% for the year ended 31/03/2004. The offer price of Rs.35/- is 5.72 times the pre-issueEPS, which is close to the Average P/E multiple for the industry sector in which the Company operates.

Considering the above factors, the price of equity shares at Rs.35/- is justified. The Issue Price of Rs.35/- per share is 3.5times the Face Value of Rs.10/- per share of the equity shares being issued.

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IX. WORKING RESULTS

Information relating to the Company sales, gross profit etc., as required by the Ministry of Finance Circular No.F2/5/SE/76 dated February 5, 1977 read with the amendments of even No. dated March 8, 1977 as under:

The unaudited working results of the Company for the period from 01/04/2004 to 31/10/2004 are given hereunder:

(Rs. in lacs)

Particulars For the periodended on

31/10/2004

Net Sales / Income from operations 8893.35

Other Income 107.30

Total Expenditure 7191.23

Gross profit after interest but before depreciation & amortization 1809.42

Depreciation & Amortisation 74.68

Provision for taxation 354.50

Net Profit 1380.24

Paid-up Equity Share Capital 3579.81

Week end price of equity shares of DHFL on the BSE

Week ended Price (Rs)

12/11/2004 33.68

19/11/2004 36.32

26/11/2004 NT *

03/12/2004 34.50

* 26/11/2004 being a public holiday, the equity shares of DHFL were not traded on this day. The closing price of the equityshares on BSE on 25/11/2004 was Rs.36.75.

Week end price of equity Shares of DHFL on the National Stock Exchange

Week ended Price (Rs)

12/11/2004 33.68

19/11/2004 36.21

26/11/2004 N.T. **

03/12/2004 34.60

** 26/11/2004 being a public holiday, the equity shares of DHFL were not traded on this day. The closing price of the equityshares on NSE on 25/11/2004 was Rs.37.00.

The closing market price of the equity shares of the Company on the Stock Exchange at Mumbai (BSE) as on 03/12/2004was Rs. 34.50 and on NSE it was Rs.34.60.

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X. RISK ENVISAGED BY MANAGEMENT AND MANAGEMENT PROPOSALS (MP) TOADDRESS THE RISKS

A. INTERNAL RISK FACTORS1. Contingent Liabilities

As on March 31, 2004 the contingent liabilities of the Company were at Rs.2.30 crores comprising guarantees providedby the Company.

Management ProposalThe contingent liabilities have arisen in the normal course of business of the Company.

2. Conflict of InterestDHFL Vysya housing Finance Ltd. a subsidiary of DHFL is also engaged in the business of providing housing finance.To this extent there is a conflict of interest between the two companies.

3. Legal/Regulatory RiskThe housing finance business involves creation and dealing with mortgages. However, in the case of mortgages,enforcement risks exist in markets with weak Legal and Regulatory systems, along with volatile economic and politicalconditions.

Management Proposal

This type of risk is not accepted by risk intermediaries such as mortgage insurers. Short-term unsecured loans issuedby Housing Finance Companies (HFCs) are covered by an insurance cover similar to that provided for bank depositsunder the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme. Further, the SARFAESI Act empowersHFCs to take over the assets in case of defaults, which is a much-simplified procedure.

4. Credit RiskThe housing finance companies face credit risk because of the lack of hard data and historical performance measureswith which to assess the real risk. This is typical of developing markets. The credit risk also arises on account of thequality of the mortgage loan portfolio and it is extremely important to control this risk in housing finance industry.

Management Proposal

It is important to assess the repayment capacity of the borrower, find the collateral that the borrower can offer andinsure the receivables from various uncertainties that may occur during the existence of the loan. DHFL has a teamof well-qualified and experienced professionals administering the credit function. The credit appraisal systems are inplace and are followed uniformly. These measures minimize the credit risk to a great extent. DHFL also provides TripleInsurance Cover to the borrowers to safeguard the borrowers and itself against any uncertainties in future. Low levelof NPAs in DHFL indicates the control over credit risk.

Further, formation of Credit Information Bureau (India) Limited (CIBIL) has also helped DHFL in reducing credit riskdue to the availability of data on the credit profile of its borrowers. CIBIL was formed by the State Bank of India (SBI),Housing Development Finance Corporation Limited (HDFC), Dun & Bradstreet Information Services India PrivateLimited (D&B) and TransUnion International Inc. (TransUnion)

The idea behind CIBIL was to fulfil the need for comprehensive credit information by gathering credit related informationregarding commercial and consumer borrowers, maintaining a database of this information and selling the informationin the form of credit reports to a closed user group of Members. The users of CIBIL are Banks, Financial Institutions,Non Banking Financial Companies, Housing Finance Companies and Credit Card Companies.

The establishment of CIBIL is a crucial effort made by the Government of India and the Reserve Bank of India in theirdrive to improve the working of the financial system, specifically to contain future NPAs by taking on good quality assetsin the books of the credit grantors. The relationship between CIBIL and its Members is one of close interdependence.CIBIL provides a vital service to its Members enabling them to make informed, objective and speedier credit decisions.

DHFL is one of the members and clients of CIBIL as it believes that sharing of credit information on the borrowersamong the lenders of various financial products will help in substantially bringing down the credit risk for all marketparticipants. DHFL has incorporated credit verification through the credit bureau as an integral part of its sanctioningprocess for all its applicants. It is expected that participation of the lenders in CIBIL would increase substantially in thenear future thereby increasing coverage and reducing credit risk.

Apart from this, the credit risk is mitigated in DHFL by verifying the customer’s credit record from bank statements,credit card statements, etc. which enables the Company to verify the track record of the prospective customer. DHFL’sproduct portfolio comprises of a variety of products that suits the requirements of the customers and enables theCompany to target a large customer base. DHFL through its constant innovation in the product portfolio has been ableto face the market risk.

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5. Operations RiskOperational risk occurs at all levels of activity in the mortgage operation. This risk is essentially defined as the abilityof the Company to originate and manage loans at a profit. The ability to originate the loans depends on the range ofproducts, marketing strength, branch network and technology.

Management Proposal

DHFL has a wide range of products, which caters to every segment of the market and has a network of 45 branchesand 120 camp locations. Most of the branches are connected to the head office and on line sanctioning of applicationstakes place in these branches. The most of the branches are being connected to the head office for faster processingof loan applications. Standardization of procedures results in minimization of errors and prevention of frauds. Theprofitability is being managed by strict cost control mechanism in all areas of operations.

6. Liquidity RiskLiquidity risk can be defined as the Asset-Liability mismatch caused due to the difference in the maturities profile ofthe Assets and Liabilities. Housing Finance Companies (HFCs) in particular are more exposed to this kind of risk inview of the fact that the assets generated by HFCs are of an average tenor of 10-12 years. As against this, the liabilitiescontracted are of a tenor of 7-10 years. This is more narrowed down in the current market scenario since the lendersare reluctant to take the exposures of longer tenors.

In order to maintain the liquidity ratio at desired levels, it is required to generate the short-term assets from the long-term debts. This apart from providing comfort on the liquidity front earns the higher spread for the Company and helpsin mitigating the interest rate risks. DHFL has already taken a step in this direction by launching Home Loans Plusscheme last year. The other product is Lease rental financing.

Management ProposalIn order to tackle the asset-liability mismatch, the instrument that is gaining popularity is the Securitization of Receivables.By this, bulk of the housing loans is pooled into the mortgage pass-through securities with a matching maturity profile.DHFL has already completed its maiden securitization issue. To further monitor market risk management systems, theBoard of Directors of the Company has approved an ALM policy, which inter alia defines the Company’s risk philosophy,specifies prudent gaps and tolerance limits and reporting systems. The Asset Liability Management Committee (ALCO),which comprises of senior management, apprises the Board periodically on ALM issues.

7. Interest Rate RiskThe borrowings of the Housing Finance Companies (HFCs) are largely linked to benchmarks like the Prime LendingRates (PLRs) and hence the debt of the Company is mainly floating in nature. This exposes the HFCs to the InterestRate Risk. Consequently, the Interest rates need to be managed in order to mitigate the risk.

Management ProposalDHFL has introduced Variable Rate Housing Loans to its customers. With this, any movements in rate of borrowingsare hedged by the loans advanced at variable rates. DHFL is also entering into Interest Rate Swaps (IRS) wherebythe base rates are frozen with the banks by selling off PLRs or the base rates as applicable. Moreover, constant debtreplacements are being made in order to reduce the interest rates and avail the benefits in the movements in theInterest Rates. The implementation of ALM module will also help the Company in identifying and bridging the gaps,if any.

8. Any Time Exit Options on the LoansDHFL borrows funds from Commercial Banks, Capital Market, LIC, NHB, etc. Certain borrowings from CommercialBanks have any time exit option to both the borrower (DHFL) and the lender after giving a notice of 30 days. This posesa risk of the loans being recalled by the lender at any time, which could strain the liquidity of DHFL.

Management ProposalThe company has been in existence for the past 20 years in the same line of business. There has been no precedentof recall of loans. The loans are under agreement for a specified period. The Company maintains Asset LiabilityManagement (ALM) as per the NHB guidelines. Out of the total borrowings of Rs.132651.28 Lacs only 1.88% of theloans availed by DHFL have the any time exit option.

The management views this loan recall option as a tool to repay the loans in case of change of interest rates. Themanagement in the past have repaid high cost loans under this option and replaced them with lower cost borrowingsfrom the market/lenders.

9. The company’s income tax assessment has been completed upto the financial year ending 31/03/2001. The incometax department has raised additional demands of Rs.54.94 lacs against which the company has preferred appeal withthe appropriate authorities.

The subsidiary company’s income tax assessment has been completed upto the financial year ended31/03/2002. the income tax department has raised an additional demand of Rs.105.45 lacs which the company haspreferred appeal with the appropriate authorities.

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Management ProposalPending Appeals, the Company and its subsidiary has already paid the above dues.

10. Outstanding Litigations against the CompanyThere are outstanding litigations amounting to Rs.19.30 lacs pending against the Company, the details of which aregiven below:

Sr. Court/Consumer Forum Nature of claims AmountNo. (Rs. Lacs)

1 Various Consumer Forums 36 minor claims for refund of 14.27processing fees, prepayment charges etc.

2 Labour Commissioner Disputed claim and gratuity* 2.02

3 Various Courts 12 miscellaneous matters pertaining to loan account. 3.01

(Refer to page no. 38 of this Letter of Offer)

Management Proposal*Dispute pending before the labour Commissioner related to gratuity of one of the ex-employees of the Companywithheld/ adjusted.

Pursuant to relevant provisions of the Payment of Gratuity Act, 1972, the Company has withheld/adjusted gratuitypayable to an ex-employee against the amount recoverable from him. The Company has filed its replies before theAsst. Labour Commissioner being the Controlling Authority under the said Act at Indore and the matter is pending. TheCompany will abide by the final decision that may be given by the said authority in this behalf.

The above claims are not material to affect the operations and finances of the Company.

11. Shortfall in Promise versus PerformanceShortfall in the performance vis-à-vis the promise made in the offer document by the company in respect of earlierissues are as follows:

(a) Rights Issue made in the year 2000

Particulars % Shortfallas on 31/03/2000

Total Income 1.09

Profit After Tax 0.23

(b) Rights Issue made in the year 1994

Particulars % Shortfall % Shortfall % ShortfallAs on 31/03/1995 As on 31/03/1996 As on 31/03/1997

Total Income 11.12 17.78 29.56

Profit After Tax 53.36 76.02 57.14

12. Losses incurred by other ventures of the promoters are as follows:(Rs. In Lacs)

Particulars 2002 2003 2004

DHFL Property Services Ltd. 0.34 2.43 –

DHFL Insurance Services Ltd. – 35.62 –

13. DHFL Asset Reconstruction Co. Ltd. and Wadhawan Holdings Private Ltd., associate companies of DHFL have notbeen carrying on any business since their incorporation in 24/12/2002 and 22/04/2002 respectively.

B. EXTERNAL RISK FACTORS1. Regulatory Changes

Major changes in Government/NHB policies relating to Housing Finance Sector may have an impact on the operationsof the Company.

Management ProposalThe policy changes may provide both opportunities and challenges for the Company. The Company has a longpresence in the housing finance sector and does not perceive policy changes to be a major threat. As such thecompany is not anticipating any adverse changes in Government/NHB policies.

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2. Risk of CompetitionThis risk may arise from existing players or new entrants in the business of housing finance.

Management ProposalThe Company can leverage on its vast experience as one of the pioneers of retail housing finance in India, its strongbrand name, wide distribution network and quality customer service so as to sustain its position in the market.

3. Sensitivity to the Economy and Extraneous FactorsThe Company’s performance is highly correlated to the performance of the economy and the financial markets. Thehealth of the economy and the financial markets in turn depends on the domestic economic growth, state of the globaleconomy and business and consumer confidence, among other factors. Any event disturbing the dynamic balance ofthese diverse factors would directly or indirectly affect the performance of the Company including the quality andgrowth of its assets.

4. Increasing CompetitionThe spreads in the business have declined significantly after the aggressive entry of banks in direct lending. Bankshave the advantage of lower cost of funds due to access to retail deposits. As a result, they have been aggressivelycutting the interest rates on housing loans. Apart from lower interest rates banks offer lower or no processing fees(processing fees accounts for a large portion of administration cost of HFCs), monthly or daily rest loans and lowerpre-payment charges, which affect the yields of the housing finance industry.

Management ProposalCost of funds is the most crucial determinant of profitability for Housing Finance Companies in the housing financebusiness. After the entry of banks in this business, which have access to low cost deposits, the spread of the HFCshas come under pressure. In order to remain competitive, DHFL has consistently endeavoured to bring down the costof funds and has diversified its resource base by accessing bank loans, non convertible debentures and securitization.

5. Pre-payment of LoansPre-payment is undertaken largely on the higher yield loans when the interest rates are on a downward trend, due torefinancing of the outstanding loan amount by another HFC / Bank. This erodes the portfolio of the HFCs. Pre-paymentresults into a lower than expected profitability for a housing finance Company. Pre-payment penalty is largely applicableon the fixed rate loans while, adjustable rate loans have zero pre-payment charge

XI. OTHER MATTERS

a) Investor Grievance Redressal System

The investor grievances against the Company will be handled by the Registrars and Transfer Agents in consultationwith the secretarial department of the Company. To handle the grievances received, the Company has appointed ShriKiran Thacker, Company Secretary and Compliance Officer. He will supervise redressal of complaints received fromthe investors at the office of the Company as well as the Registrars to the Issue and ensure timely settlement. Thecompany normally resolves various kinds of investor grievances within a period of 15 days.

All grievances related to the issue may be addressed to the Registrar to the issue quoting the application No. (Includingprefix), Number of preference shares applied for, amount paid on application, date, Bank and branch/ Collection centrewhere application was submitted .

DIRECTORS’ STATEMENT

In the opinion of the Directors, there have not arisen since the date of the last financial statements disclosed in the Letterof Offer, any circumstances that materially and adversely affect or is likely to affect the profitability of the Company.

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XII. MATERIAL CONTRACTS AND DOCUMENTS

The Contracts referred to in para (A) below (not being contracts entered into in the ordinary course of the business carriedon by the Company or entered into more than two years before the date of this Letter of Offer) which are or may be deemedmaterial, have been entered into by the Company.

The contracts together with the documents referred to in paragraph (B) below, copies of all of which have been attachedto the copy of this Letter of Offer may be inspected at the Registered Office of the Company between 11.00 a.m. to 1.00p.m. on any working day from the date of this Letter of Offer until the closing of the subscription list.

A. MATERIAL CONTRACTS

1. Copy of MOU dated 06/04/2004 between Dewan Housing Finance Corporation Limited and Keynote Corporate ServicesLimited, Manager to the Issue.

2. Copy of MOU dated 23/07/2004 between Dewan Housing Finance Corporation Limited and Intime Spectrum RegistryLtd., Registrar to the Issue.

3. Copy of Tri- Partite Agreement dated 24/09/2003 between Dewan Housing Finance Corporation Limited, Intime SpectrumRegistry Ltd. and National Securities Depository Limited.

4. Copy of Tri-Partite Agreement dated 19/06/2003 between Dewan Housing Finance Corporation Limited Intime SpectrumRegistry Ltd. and Central Depository Services (India) Limited.

B. DOCUMENTS FOR INSPECTION

1. Copy of Memorandum and Articles of Association of the Company.

2. Copy of Special Resolution under Section 81(1A) of Companies Act dated 24/07/2004.

3. Copies of Annual Report for the year 1999-2000, 2000-01, 2001-02, 2002-2003 and copy of audited accounts for theyear ended 31/03/2004 and the six months period ended on 30/09/2004.

4. Copy of approval no. NHB(B)/2024/90 dated 30/05/1990 received from National Housing Bank to operate as housingfinance institution and eligible for refinance.

5. Copy of certificate of registration bearing the Registration No.01.0014.01 dated 31/07/2001 received form NationalHousing Bank.

6. Copy of certificate dated 30/11/2004 issued by M/s B.M. Chaturvedi & Co. Chartered Accountants and StatutoryAuditors of the Company in terms of Part II Schedule II of The Companies Act 1956 including capitalisation statement,taxation statement and accounting ratios.

7. Copies of various Undertakings received from the Company.

8. Copies of Memorandum & Articles of Association and Balance Sheets for the years 2000-01, 2001-02, 2002-03 and2003-04 of following Associate Companies :

a. DHFL Vysya Housing Finance Ltd.

b. DHFL Property Services Ltd.

c. DHFL Insurance Services Ltd.

d. Interactive Multimedia Technologies Pvt. Ltd.

e. DHFL Asset Reconstruction Corporation Ltd.

f. Wadhwan Holdings Pvt. Ltd.

9. Copy of letter dated 02/09/2004 received from M/s B. M. Chaturvedi & Co. , Chartered Accountants and StatutoryAuditors of DHFL advising the company on the tax benefits available to the company and its shareholders.

10. Copy of in-principle approval received from BSE for the rights issue vide their letter no. DCS/SMG/NSS/04 dated23/10/2004.

11. Copy of in-principle approval received from NSE for the rights issue vide their letter no. NSE/LIST/6701-6 dated07/10/2004.

12. Copy of SEBI observation letter No. CFD/DIL/SC/ISSUES/25735/2004 dated 11/11/2004.

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XIII. DECLARATION

That all the relevant provisions of the Companies Act, 1956 and the guidelines issued by the Government have beencomplied with and no statement made in Letter of Offer is contrary to the provisions of the Companies Act, 1956 and rulesthereunder.

The Board of Directors of Dewan Housing Finance Corporation Limited certify that all disclosures made in the Letter ofOffer are true and correct.

Yours Faithfully,

Signed by the directors of Dewan Housing Finance Corporation Limited

Sd/- Sd/- Sd/- Sd/-Rakesh Kumar Wadhawan Kapil Wadhawan Sarang Wadhawan R. P. Khosla*(Chairman) (Managing Director) (Executive Director) (Director)

Sd/- Sd/- Sd/- Sd/-Waryam Singh M. S. Sundara Rajan Ram K. Gupta* G. P. Kohli(Director) (Director) (Director) (Director)

Sd/- Sd/-Ashok Kumar Gupta R. S. Hugar*(Director) (Director)

* Signed on behalf of the directors by their constituted attorney Mr. Kapil Wadhawan

PLACE: Mumbai

DATE: 06/12/2004


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