lic housing finance ltd - shodhganga : a reservoir of...

LIC Housing Finance Limited5.1 ESTABLISHMENT OF LICHFL

The Life Insurance Corporation of India has been established by the

government of India under the company law of 1956, to provide the life

insurance for Indian citizens and collect their small savings for their bright

future. LIC of India is providing loans for housing since 1964i. The LIC of

India is the largest provider of funds for the house construction and house

purchase. It invests about 12 to 19ii percent of its total investible resources in

the housing sector. LICs investment account for about 70 percent of total

indirect institutional finance. It caters to the housing finance requirements of

state housing boards, Apex co-operative societies and HUDCO. The remaining

portion of funds are channelised directly to its policy holders agents

employees, staff house building programs and co-operative housing societies

promoted public limited companies. Some of the well-known schemes in which

it directly lends are: Bima Niwas Yojana (BNY), Own Your Home Scheme

(OYHS), and Own Your Apartment Scheme (OYAS). In 1989 Government of

India disclosed its new “Rastriya Grah Nirman Neeti” and established National

Housing Bank (NHB) in the same time in 19 june 1989 Life Insurance

Corporation of India also established a separate corporation for the housing

finance that is Life Insurance corporation Housing Finance Limited

(LICHFL) LIC Housing Finance Ltd. is one of the largest Housing Finance

company in India. The company was promoted by LIC of India and went

public in the year 1994. The Company launched its maiden GDR issue in 2004.

The company enjoys ‘AAA’ rating from CRISIL on its debt issuances indicating

highest safety with regard to the ability to service interest and repay capital.

The company recently launched its maiden Fixed Deposit program, rated

FAAA/stable by CRISILiii.

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LIC Housing Finance Limited

5.2 OBJECTIVES OF LICHFL

Due to insufficient investment and higher required of housing finance LIC of

India established LICHFL to fill the gap of housing investment demand and

supply The main objectives of the Company are:

(i) To provide secured housing finance at an affordable cost;

(ii) To promote sound healthy, viable and efficient housing finance to

cater to all segments of the population;

(iii) To provide housing finance to adequately serve different regions and

different income groups;

(iv) To make housing more affordable;

(v) To augment and upgrade the housing stock in the country;

(vi) To augment the financial resources for the sector;

(vii) To enable the housing finance system to assess the capital market for

resources;

(viii) To providing long term finance to individuals for purchase /

construction / repair and renovation of new / existing flats / houses;

(ix) To provide finance on existing property for business / personal

needs and give loans to professionals for purchase / construction of

Clinics / Nursing Homes / Diagnostic Centers / Office Space and

also for purchase of equipments; and

(x) To promote saving for housing.

5.3 ORGANISATION OF THE LICHFL

Organization is the process of so combining the work which individuals

or groups have to perform with facilities necessary for its execution, that the

duties so performed provide the best channels for efficient, systematic, positive

and coordinated application of available efforts. Organization is the executive’s

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structure of an enterprise- a basic framework within which the executive’s

decision-making behavior occurs. The managerial function of organizing is the

process of establishing relationship among available organization resources so

that their structure enables achievement of objectives of the enterprise.

Resources are personnel, function, and physical factors. Relationships center

round status, role, responsibility, authority and accountability, structure may be

fictionalized-line, line and staff, committee and project. In the organization

employees are placed in the four categories: to managers, middle managers,

first line managers, and operative. How these organizational categories are

determined, and how is the interaction among these levels defined? Who

reports to whom, and who has the authority to make decisions? These are just

some of the aspects of the organization that we are going to be looking in the

housing industry. Diagram below will represent the picture of organizational

and management structure of specialized housing finance institution in India.

Following diagram exhibits the organizational and management position of the

LICHFL, it is clear that LICHFL adopt the line structure and clear hierarchy

and unity of command, specialization, clear unbroken line of authority,

delegation, span of control by the different senior executives at different level.

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Managing Director

General Manager

Deputy Manager

Vice Chairman

Branch Manager

Section Manager

Chairman

Executive Staff


Management Structure

From the above structure it is very clear that all the major decisions-making

powers in the hand of top management at the head office level and regional level. For

the sanctioning of the certain level of loan amount in the hand of branch level like the

5-10 lacss, and than upto 20-25 lacss in the hand of regional level, General Manager,

Deputy General Manager level, and above that it is in the hand of top executives at

the head office leveliv. Same hierarchy has been followed in others matters of

management. Major policy decisions are taken by the top level managers at the head

office level regarding the interest rates changes, investments, maximum and minimum

loan amount reduction of processing and administrative expenses. 09 persons are in

the board of directors list (Seven non executives and two executives directors), 1 is

General manger (taxation) & company secretary, 8 are senior executives and six are

Regional Managers of different regions (Central Region, South Central Region,

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Head Office Level

Branch Level

Regional Level


Eastern Region, Western Region, Southern Region, Northern Region)v. The Company

possesses one of the industry's most extensive marketing network in India :

Registered and Corporate Office at Mumbai, 7 Regional Offices, 13 Back Offices, 1

customer service point and 183 marketing units across India backed by chain of camp

offices. In addition the company has appointed over 1292 Direct Sales Agents

(DSAs), 6800 Home Loan Agents (HLAs) and 535 Customer Relationship Associates

(CRAs) to extend its marketing reach. Back Offices spread across the country conduct

the credit appraisal and administrative functions. The Company has set up a

Representative Office in Dubai and Kuwait to cater to the Non-Resident Indians in the

Gulf countries covering Bahrain, Dubai, Kuwait, Qatar and Saudi Arabia. Today the

Company has a proud group of over 12,00,000 prudent house owners who have

enjoyed the Company's financial assistance.

Subsidiary companies:

The financial statements along with the Reports of the Directors of the

Company’s wholly owned subsidiaries namely LICHFL Care Homes Limited,

LICHFL Financial Services Limited, LICHFL Trustee Company Private Limited and

LICHFL Asset Management Company Private Limited for the year ended 31st March

2008, are attached along with the statement pursuant to Section 212 of the Companies

Act, 1956, with respect to the said subsidiaries. The brief reviews of the subsidiary

companies are as under:

1. LICHFL Care Homes Limited

To address to the crying need of housing for the senior citizens of the country,

the Company had promoted LICHFL Care Homes Limited, to establish and operate

assisted living centres. It launched its eco-friendly pilot project in Bangalore with

cost-effective independent cottages and all other on-campus amenities, fully

structured and self-contained to address every possible need of residents. It has

library, community centre, home theatre, meditation centre, doctors on call and

ambulance to take the ailing to the nearest city medicare centre – all that would make

the lives of senior citizens comfortable and satisfying. During the current year, the

Company proposes to start construction of project at Bhubaneswar and finalise the

purchase of land for few more projects. Company’s total loss was 13,04,457 rupees

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(31 March 2010)for the previous financial years of the subsidiary since it became

subsidiary of LICHFL.

2. LICHFL Financial Services Limited

LICHFL Financial Services Limited was incorporated on 31st October 2007

for undertaking non fund based activities like marketing of housing loans, insurance

products, credit cards, mutual funds, personal loans etc. Effective steps for starting the

business of the Company are also being taken. However, till 31st March 2010, the

Company has earned profit 5,38,625 rupees.

3. LICHFL Trustee Company Private Limited

LICHFL Trustee Company Private Limited was incorporated on 5th March

2008 for undertaking the business of trustees of venture capital trust, funds – in India

and offshore fund. Company’s total loss was 37,602rupees till 31 March 2010.

4. LICHFL Asset Management Company Private Limited

LICHFL Asset Management Company Private Limited was incorporated on

14th February 2008 for undertaking the business of managing, advising, administering

mutual funds, unit trust, investment trust in India as well as in abroad. This subsidiary

company was also in loss its total loss was 91,05,977 rupees till March 2010.

5.4 RESOURCES OF FINANCIAL FUNDS-

The Authorized Capital of the Company is Rs.1500 Million (Rs.150

Crores) and its paid up Capital is Rs.850 Millions (Rs.85 Crores). The

Company is recognized by National Housing Bank and listed on the National

Stock Exchange (NSE) & Bombay Stock Exchange Limited (BSE) and its

shares are traded only in Demat format. The GDR's are listed on the

Luxembourg Stock Exchange.

The sources of funds of LICHFL are broadly categories in two

categories shareholders’ fund and loan funds this can be derived by below flow

chart

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Sources of Funds of LICHFL

Share holders’ Fund Loan Funds

Capital Unsecured LoansSecured LoansReserves and Surplus


Table 5.4.1

Sources of Funds of LICHFL (Amount in

Rupees) Sources Of Funds 31.03.2011 31.03.2010

Share holders' fund

Capital * 949,963,475 949,963,475

Reserves and Surplus ** 40,741,077,797 32,926,760,119

Loan FundsSecured Loans*** 407,006,087,696 310,149,822,039

Unsecured Loans **** 44,622,240,744 37,431,745,717

Total 493,319,369,712 381,458,291,350Source: computed from annual reports

According to above information it is clear that capital position was same

in 2011 and 2010 but reserve and surplus have been increased form

Rs.32,926,760,119 to 40,741,077,797 the total increment was of

Rs.7814317678. Secured loan increased from Rs. 310,149,822,039 to

407,006,087,696 and unsecured loan also increased from Rs. 37,431,745,717 to

Rs. 44,622,240,744 the detail of these sources of funds were as under-

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* CAPITAL (Amount in Rupees)

CAPITAL 31.03.2011 31.03.2010Authorised (Equity Shares of Rs.10/- each) 1,500,000,000 1,000,000,000(a) Issued, Subscribed and Paid Up 474,663,000 Equity Shares of Rs.2/- each(Previous year 94,932,600 of Rs. 10/ each) fully paid up

949,326,000 949,326,000

(b)Add: Amount received on forfeited shares 637,475 637,475

Total (a+b) 949,963,475 949,963,475

Source: computed from annual reports

The authorized capital of company was 100 crore rupees in the F.Y.

2007 that has been increased upto Rs.150 crore for the F.Y. 2010-11. Issued,

Subscribed and paid up capital of the company was same 94.9326 crore rupees

for the FY 2009-10 and 2010-11. Total amount received on forfeited shares

was 0.0637 crore rupees and total capital was 94.9963crore rupees.

**RESERVES AND SURPLUS (Amount in Rupees)

RESERVES AND SURPLUS 31.03.2011 31.03.2010

(a) Capital Reserve 4,793,333 4,793,333

(b)Share Premium 9,012,854,875 9,012,854,875

(c)Special Reserve - I (in terms of Section 36(1)(viii) of the Income-tax Act,1961 and Section 29C of National Housing Bank Act, 1987) (Upto financial year 1996-97)

389,800,000 389,800,000

(d)Special Reserve - II (in terms of Section 36(1)(viii) of the Income-tax Act,1961 and Section 29C of National Housing Bank Act, 1987) (From financial year 1997-98)

14,544,901,385 11,924,901,385

(e)Market fluctuation Reserve 0 0(f)General Reserve 11,480,400,108 7,980,400,108(g)Surplus in Profit and Loss Account 5,308,328,096 3,614,010,418

TOTAL 40,741,077,797 32,926,760,119Source: Computed from annual reports

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Capital reserves was 0.4793 crore rupees, share premium was 901.2854

crore rupees, special reserve-І was Rs. 38.98 crore , special reserve-II was Rs.

1454.490 crore, general reserve was 1148.04 crore and surplus was 530.83

crore rupees and total reserves and surpluses were 4074.107 crore rupees for

the year ended 31 March 2011.

***SECURED LOANS (Amount in Rupees)

SECURED LOANS 31.03.2011 31.03.2010

Non-Convertible Debentures with zero coupon debentures 258,900,731,890 170,534,030,527

Term Loans from scheduled banks 125,286,165,395 116,515,995,391

From National Housing Bank (Refinance) 15,334,941,411 12,914,131,121

From Life Insurance Corporation of India 7,484,249,000 10,185,665,000

Interest accrued and due on loan – - 0

Total 407,006,087,696 310,149,822,039

Source: Computed from annual reportsLoans and advances from banks and other loans and advances are secured by a negative lien on all assets of the Company and an irrecovable Power of attorney given by the Company for creation of Mortgage on the properties of the borrowers of Housing Loans and for recovery of monies directly from the borrowers of Housing Loans.

Secured loan comprises four types of funds namely- Non convertible

debentures, Term loans for scheduled banks, Refinance from NHB and Loan

from LIC of India. Total secured loans were of Rs. 40700.608 crore which was

31014.982 crore rupees in FY2009-10. The part of non-convertible debentures,

term loan from scheduled banks and refinance of NHB were increasing

gradually but the part of LIC of India was decreasing.

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****UNSECURED LOANS (Amount in Rupees)

No. UNSECURED LOANS 31.03.2011 31.03.2010

1 Public deposits@ 2,457,918,820 3,261,937,820

2 Other loans and advances

I Upper tier II Bonds# 15,000,000,000 5,000,000,000

Ii Subordinated Bonds ## 15,000,000,000 10,000,000,000

Iii Life Insurance Corporation of India 1,862,862,826 1,568,050,539

Iv Commercial Paper – 5,350,000,000 8,300,000,000Less: Discount not written off – -48,540,902 -148,242,642[Maximum outstanding during the year Rs.12,350,000,000 – (Previous Year Rs.14,800,000,000 )]

5,301,459,098 8,151,757,358

v Non-convertible Debentures & 5,000,000,000 9,450,000,000

Total 44,622,240,744 37,431,745,717Source: Computed from annual reports## Subordinated bonds are repayable at par after ten years from the date of issue i.e. 24th October, 2005 @ The company is in the process of creating a floating charge on the statutory liquid assets in favour of the Trustee for Depositors -The company has designated the following liquid assets amounting to Rs.1227749208 ( Previous Year Rs. 414634208) for this purpose Government Securities 1,065,650,000

Fixed Deposits Placed with Bank 162,099,208

Total 1,227,749,208

# Upper Tier II Bonds are redeemable at the end of 15 years from the deemed date of

allotment (with call option exercisable after 10 years) with prior approval of National

Housing Bank

& Due and payable within one year Rs. 5,000,000,000

Unsecured loans play an important role in the financial situation of the

company. Total unsecured loans were 4462.22 crore rupees for the FY 2010-11

which shows 719.05 crore rupees increment over the previous financial year.

Part of Bonds , Debentures and Life Insurance Corporation Of India were

increasing but the part of commercial paper borrowings was decreasing.

LICHFL started public deposit scheme in 2008 in this scheme company got

15.702 crore rupees in 2008 and 245.79 crore rupees in 2010-11.

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Domestic borrowings

During the volatile and rising interest rate scenario, the Company was

able to contain its borrowing costs. As a policy, efforts were made to re-price

the existing borrowings either by negotiation or through entering into

derivatives. The company’s borrowing is planned taking into consideration LM

gaps, interest rate mismatches. But, this depends on the prevailing market

conditions. LIC housing finance has got the highest rating in four categories (1)

Bank borrowings (2) Non convertible debentures (3) Commercial paper and (4)

Public deposit schemes, from CRISIL/CARE rating agencies, which has helped

the company to procure funds at very competitive rates. The Company also

explored the option of public deposit and mobilized Rs.245.79 crore. The

composition of outstanding borrowings as on 31st March 2011 and the ratings

assigned by rating agencies were as under:

Table 5.4.2

Borrowings of LICHFL

Particulars% to total

borrowingRating

Term loans from scheduled

banks27.78% “AAA/Stable”/ P1+ by CRISIL

Refinances from NHB 3.40%

Term loans from LIC of India 1.66%

Upper tier II bonds 3.33%“AAA/Stable” by CRISIL /

“CAREAAA” by Care

Non-convertible debentures 58.39%“AAA/Stable” by CRISIL /

“CAREAAA” by Care

Subordinated bonds II tier 3.33% “AAA/ Stable” by CRISIL

Public deposit 0.57% “FAAA” by CRISIL

Commercial paper 1.13% P1+by CRISIL

Others 0.41%

Source: Computed from annual reports

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5.5 SCHEMES OF LIC HOUSING FINANCE LIMITED

'You have a need, we have a scheme.'

This simple principle has made LIC Housing Finance one of the biggest

success stories of recent times. Company offers home loans at low and

attractive interest rate to Resident Indians as well as Non-Resident Indians.

Company’s special schemes for Pensioners have been appreciated by all.

Company provides loans not only for purchase, construction, repair, renovation

or purchase of plot, but also for consumer durables. Company offers two

schemes of ‘Sampurna Griha’ for buying of housing goods up to Rs. 2 Lacs.

Interest Rate has been fixed at a very low value as they aim to increase the

standard of living of the people. Company announced a special scheme called

‘Green House’ for professionals like Doctors, Software Engineers, CA's etc.

Step-Up EMI scheme has been introduced for those youngsters below the age

of 35 years who have future prospects of increase in income. Company also

offers special facilities to NRI's in Gulf countries residents.

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Home Loan

Residential Indian

Pensioners

Builders/Developers

Loans to Professionals

Reserve Mortgage

Home Entity

Facilities

Corporate Employees

Office premises

Loan of Credit to corporate

Co-Op. Societies

Non-Residential Indians

Staff Quarters

Individual Loan

Corporate Loan

Others

Public agencies


LOAN CLASSIFICATION CHART OF LICHFL

Individual loan

(a) For Resident Indians

Schemes for individual at the basis of citizenship can be broadly

classified in two categories one for Resident Indians and another for Non-

Resident Indians. At the basis of purpose schemes can be divided in five

categories:-

(i) Loan for Purchase

(ii) Loan for Construction

(iii) Loan for Extension

(iv) Loan for Repairs/Renovation

(v) Loan for Plot purchase

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Indian Residents Non-Indian Residents

PurchaseConstruction Consumer DurablesPlot -PurchaseExtensionRepair/Renovation PurchaseConstructionExtensionRepair/RenovationPlot -PurchaseConsumer Durables


Schemes of LIC HOUSING FINANCE Ltd.

Griha- Griha- Griha- Griha- Grih- Sampurna- Griha- Griha- Griha- Griha- Griha- Sampurna-Prakash Prakash Prakash Prakash Prakash Griha Sobha Sobha Sobha Sobha Sobha Griha

Griha- Griha- Griha- Griha- Griha- Griha- Griha- Griha- Griha- Griha-Laxmi Laxmi Laxmi Laxmi Laxmi Laxmi Laxmi Laxmi Laxmi Laxmi

‘GRIHA PRAKASH’

This is a basic and very successful scheme of LICHFL this is available

only for Resident Indians. It covers many aspects of finance needs as purchase /

Construction / Extension / Repair / Renovation / Plot Purchase to individual

home or flat, finance provided under ‘Griha Praksha’ scheme the minimum

amount is rs.100000.00 rupees and maximum 1 crore rupees. Under this

scheme up to 85% loan of the total Cost of the property including stamp duty

and registration charges, provided. Required securities are mortgage of the

property, a demand promissory note and life insurance policy of LIC of India

have to submit by borrower. Maximum loan term is 20 years or retirement or

age 70 years whichever is earlier. Repayment mode is equated monthly

installments (EMI) and processing fee is 1% of the sanctioned loan amount and

service tax extra.

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Griha Prakash

1 Loan Amount Min. Rs. 1,00,000.00

2 Purpose Purchase / construction / Extension / Repair /

Renovation / Plot Purchase

3Loan to Property

Cost

85% of total Cost of the property including Stamp

Duty and Registration Charges.

4 Loan Term Maximum 20 years

5 Repayment ModeEquated Monthly Instalments(EMI) - Monthly Rest

Basis

6 Security

1. Equitable Mortgage of Residential

House/Flat/Plot

2. Demand Promissory Note.

3. Life Insurance Policy of LIC of India

7 Upfront Fees1.00% of Loan Amount Sanctioned + Service Tax as

applicable.

8 Rate Of Interest As per current rate

9 Special conditions

Source: Company documents and brochure

‘NEW GRIHA LAXMI’

LIC Housing Finance Limited is one of the largest housing finance

company in India, has started a new scheme on 31 October 2005 offering home

loans against the security of certain approved financial assets like bank fixed

deposits, national savings certificates and life insurance policies, called ‘New

Griha Laxmi’, under this scheme, home loans is available up to 95% of the

liquid value of the security, subject to a minimum of Rs. 50,000. There is no

upper limit on the amount borrowed or on the term of the loan. Repayment of

loan can be through Equated Monthly Installments (EMI), or by way of

interest. Loan can be taken for purchase / construction / repairs / renovation /

extension of house or flat. One time upfront fee Rs. 1,000 charged to the

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customer, irrespective of the loan amount applied for. This product is also

available in combination with the other products of the Company.

This product offers a great deal of flexibility to the home loan

borrowers. It makes enable them to acquire real estate assets without

liquidating their financial assets. Guarantors are also not required. It makes

also enable the customers to acquire home loans against the security of life

insurance policies which are essentially long-term assets with restricted

liquidity. Processing time and paperwork for granting this loan is also virtually

nil.

New Griha Laxmi1 Loan Amount Min 50,000.00, Max No upper limit

2 Purposepurchase / construction / repairs / renovation /

extension of house or flat

3Loan to Property

CostUp to 95% of the liquid value of the security

4 Loan Term Max. 20 years

5 Repayment ModeEquated Monthly Installments (EMI), or way of

interest

6 Security

life insurance policies

Approved financial assets like bank fixed deposits,

national savings certificates

7 Upfront Fees Rs. 1,000


9 Special conditions Guarantors are not required


(b) For Non-Resident Indians

‘GRIHA SHOBHA’

‘Griha Shobha’ is a very successful scheme of LICHFL for Non-

Resident Indians (NRI’s) under this scheme loans are provided for purchase /

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Construction / Extension / Repair / Renovation / Plot Purchase to individual

home or flat, under ‘Griha Shobha’ scheme the minimum loan amount is

rs.500000.00 and maximum 1 crore rupees. Under this scheme up to 85% loan

of the total Cost of the property including stamp duty and registration charges,

provided. Under security mortgage of the property such as house/flat/plot, a

demand promissory note and life insurance policy of LIC of India have to be

provided by borrower. Maximum loan term is 10 years for Non-professionals

and 15 years for professionals or retirement or age 70 years whichever is

earlier. Repayment mode is equated monthly installments (EMI) and

processing fee is 1% of the sanctioned loan amount, service tax extra. For this

scheme NRI’s have to fulfill all the terms and conditions of the Reserve Bank

of India (RBI)

Griha Shobha

1 Loan Amount Min. Rs. 5,00,000.

2 Purpose Purchase / construction / Extension / Repair / Renovation / Plot Purchase

3 Loan to property cost

4 Loan TermNon- Professional : Maximum 10 yearsProfessional : Maximum 15 years

5 Repayment ModeEquated Monthly Instalments(EMI) - Monthly Rest Basis

6 Security1. Equitable Mortgage of Residential House/Flat/Plot2. Demand Promissory Note.

7 Upfront Fees1.00% of Loan Amount Sanctioned + Service Tax as applicable.

8 Special ConditionsAll conditions including payment of margin money as per RBI Guidelines.

9 Rate of Interest As per current rateSource: Company documents and brochure(c) For pensioners

(i) Before retirement-

LICHFL has special schemes for pensioners, before their retirement.

Under this scheme minimum loan amount Rs. 100000.00 is available for

purchase / construction and extension of house or flat. Persons whose age is 50

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years or more and having a pension scheme after retirement may apply for loan

under this scheme. Person has to provide a undertaking letter to the company

that the entire loan or 30% or an amount as decided by the area office will be

repaid out of the retirement benefits is required. The balance is to be repaid

from the pension income. The amount of principal to be repaid at the time of

retirement will depend on the pension amount the applicant is eligible after

retirement. Maximum loan term is 15 years or 70 years of age whichever is

earlier.

Before retirement

1 Loan Amount Min Rs.100000.002 Purpose purchase, construction, extension of House / Flat

3Loan to Property Cost

85% of total Cost of the property including Stamp Duty and Registration Charges.

4 Loan TermThe term of the loan will be up to 15 years or 70 years of age whichever is earlier.

5Repayment Mode

Entire loan or 30 % or an amount as decided by the Area Office will be repaid out of the retirement benefits is required. The balance is to be repaid from the pension income

6 SecurityA Guarantor acceptable to the Company is requiredEquitable Mortgage of Residential House/Flat/Plot

7 Upfront Fees 8 Rate of Interest As per current rate

9Special conditions

(i) Persons whose age is 50 or more and having a pension scheme after retirement may apply for loan under this scheme.

(ii) An undertaking letter that the entire loan or 30 % or an amount as decided by the Area Office will be repaid out of the retirement benefits is required.

(iii) The balance is to be repaid from the Pension Income. The amount of Principal to be repaid at the time of retirement will depend on the Pension amount the applicant is eligible after retirement.


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(ii) After retirement-

LICHFL introduced schemes for pensioners, after their retirement.

Under this scheme minimum loan amount is Rs. 100000.00 and loan is

available for purchase / construction and extension of house or flat. Persons

who have retired and having a stable income throughout their life from pension

may apply for loan. Under this scheme pension or any portion thereof is not

allowed. Maximum loan term is 70 years of age.

After retirement

1 Loan Amount Min Rs.100000.00

2 Purpose purchase, construction, extension of House / Flat

3Loan to

Property Cost

85% of total Cost of the property including Stamp Duty and

Registration Charges.

4 Loan Term 70 years of age.

5Repayment

Mode

The loan is to be repaid before the applicant attains the age

of 70 years.

6 SecurityA Guarantor acceptable to the Company is required

Equitable Mortgage of Residential House/Flat/Plot

7 Upfront Fees


9Special

conditions

(i) Pensioners having a stable income throughout their

life from pension may apply for loan under this

scheme.

(ii) Commutation of Pension or any portion thereof is

not allowed.


(d) Facilities

(i) Green-Channel facility:

LICHFL provides a green channel facility for

Professionals like Practicing Doctors, Chartered Accountants, Cost

Accountants, Executives holding IIM diplomas and Computer Engineers.

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Loans can be applied under any of the usual Schemes. A one-time

processing and Administrative fee (non-refundable) @ 1.0% of loan applied

for, is payable. Inspection of property and title clearances are undertaken

simultaneously as soon as the loan is sanctioned. Under this scheme loan is

disbursed quickly. Collateral security of LIC Policy upto the extent of 50% of

the loan amount is sufficient.

(ii) Step-up EMI Facility:

This facility is extended, keeping in view the prospective increase in

income of the Borrowers, and is available to people who have good prospect of

future increase in income, viz., young Professionals/Executives who are less

than 35 years of age.

This facility envisages flexible mode of repayment through Stepping up

of EMI during the tenure of loan. Under this Facility, the EMI will initially be

fixed at a lower amount; this would be changed twice (i.e., on the 6 th and the

11th year) during the loan tenure (15 years); the rate at which the EMI will be

stepped-up in the 6th and 11th year would be at 10/15/20 % of the initial EMI as

preferred by the Applicant.

Corporate loan :(a) Corporate employees

‘CORPORATE EMPLOYE ES' HOUSING LOAN SCHEME’

It is a special scheme for employees of approved corporates by

LICHFL under this scheme housing Loan is available for Construction /

Purchase / Extension / Renovation of House / Flat at concessional terms for

employees of approved 179 corporates with whom the company has a tie-up.

Any of the following concessions are applied selectively or in combination

depending on the tie-up which can be ascertained from the Nodal Area Office

from where the proposal originated.

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Corporate Employees' Housing Loan Scheme

1 Loan Amount Min Rs.100000.00

2 PurposeConstruction / Purchase / Extension / Renovation of House / Flat


-

4 Loan TermMaximum loan term is 20 years or retirement or age 70 years whichever is earlier

5Repayment Mode

Repayments by Equated Monthly Installment (EMI) through Salary Deduction.

6 SecurityLife Insurance policy as collateral Security may be waivedGuarantor may be waived

7 Upfront FeesUpfront Fees payable will be of only 0.50 % of the Loan Amount, subject to a maximum of Rs.10000/- .

8Rate Of Interest

0.25% lesser than the normal schemes.

9Special conditions

1. Joint Declaration by Employer and Employee for Deduction of EMI from salary and Recovery of Loan dues incase the employee resigns/ retires/ gets terminated.

2. Scheme is open for employees of Public Sector Undertakings, Reputed Public/ Private Limited Companies with atleast 50 employees. The Scheme can be made applicable to the employees after a Tie-up arrangement is finalized.


(b) Staff Quarters

LICHFL provides housing finance to reputed listed public limited or

PSUs. for construction or purchase of staff quarters. Under this scheme

minimum amount is Rs. 20 lacs and maximum Rs. Is 7.50 crore. Loan term is

minimum 5 years and maximum 7 years, modes of repayment are Equated

Monthly / Quarterly Instalment. Under this scheme equitable mortgage and any

other security is required.

168


Staff Quarters

1 Loan Amount Min Rs 20 lacs, Max Rs 7.50 crores.2 Purpose Construction/purchase of Staff Quarters.3 Loan to Property Cost 10% of Net Worth and 70% of Project Cost.4 Loan Term 5 to 7 Years 5 Repayment Mode Equated Monthly / Quarterly Instalment 6 Security Equitable Mortgage and any other security.

7 Upfront FeesProcessing Fees: Rs.5000. Admin Fee : 1% of amount sanctioned


9 Special conditionsThis scheme only for Reputed Listed Public Limited or PSUs.


(c) For Office Premises

LICHFL’s special scheme “Office Premises” to reputed public Ltd.

or PSU’s for Purchase / Repairs / Renovation of office premises. Under this

scheme minimum amount is Rs. 25 lacs and maximum 50% of project cost

subject to 5% of net worth. Maximum loan term is 7 years and mode of

repayment is Equated Monthly Installment (EMI).

Office Premises

1 Loan AmountMin Rs 25 lacs - Maximum 50% of Project cost subject to 5% of Net Worth

2 PurposeLoan for Office Premises / Construction / Purchase / Repairs / Renovation of Office Premises


50% of Project cost subject to 5% of Net Worth

4 Loan Term Max. 7 years5 Repayment Mode Equated Monthly Instalment6 Security Equitable Mortgage

7 Upfront FeesProcessing Fees: Rs.5000. Admin Fees : 1% of amount sanctioned




169


(d) Line Of Credit to Corporates

The purpose of this scheme is financing house building Schemes of

Co. employees under this scheme loan is provided to reputed listed public Ltd.

or PSUs. The minimum loan amount is 25 lacs and maximum 10% of the net

worth of the project. Maximum loan term is 15 years and repayment mode is

Equated Monthly Instalment (EMI).

Line Of Credit to Corporates1 Loan Amount Min Rs 25 lacs, Max 10% of Net Worth

2 PurposeFinancing House Building Schemes of Co. employees

3 Loan to Property Cost Max 10% of Net Worth4 Loan Term Max. 15 yrs5 Repayment Mode Equated Monthly Instalment

6 SecurityEquitable Mortgage, Guarantee from individual employee, Loan agreement with the company

7 Upfront FeesProcessing Fees: Rs.5000. Admin Fees : 1% of amount sanctioned




(e) Loans to Co-Operative Societies

Under this scheme loan is provided to the individual member of

housing Co-operative societies for construction / purchase / extension but on

the basis of applicant which may be Co-operative housing societies of reputed

public Ltd. or PSUs Minimum loan amount is Rs 5 lacs and max. 70% of

property cost, loan term is maximum 15 years. Repayment mode is Equated

Monthly Installment (EMI).

170


1 Loan Amount Min Rs 5 lacs - Max 70% of Property Cost

2 PurposeLoans to individual members of Housing Co-Operative Societies of the Applicant Company

3 Loan to Property Cost Max 70% of Property Cost4 Loan Term Max. 15 yrs5 Repayment Mode Equated Monthly Installment 6 Security Equitable Mortgage and Guarantee from Co.

7 Upfront FeesProcessing Fees: Upto 25 members: Rs 2500/-, and Rs 5000/- for more than 25 members. Admin Fees : 1% of amount sanctioned


9 Special conditionsThis scheme only for member of housing co-operative society.


(f) Loans to Public Agencies

Under this scheme loan is provided to the statutory bodies in public

housing which construct houses for sale. The minimum loan amount is Rs. 25

lacs and maximum 70% of the property cost. Maximum loan term is 10 years.

Security is equitable mortgage and guarantee from respective state govt.

Repayment mode is principal by quarterly / half yearly Installment, interest to

be paid monthly.

Public Agencies1 Loan Amount 70% of Property Cost2 Purpose Loans for Construction of Housing Projects for Sale3 Loan to Property Cost Max 70% of Property Cost4 Loan Term Max. 10 Years

5 Repayment ModePrincipal by Quarterly / Half yearly Instalment.Interest to be paid monthly

6 SecurityEquitable mortgage and guarantee from respective State Govt.

7 Upfront FeesProcessing Fees: Rs 10,000/-.Admin Fees : 1% of amount sanctioned


9 Special conditionsThis scheme only for Statutory Bodies in Public Housing.


Builders / Developers :

171


LICHFL also provide housing loan to professional developers for

construction of housing projects for sale under this scheme loan is provide for

these projects which are passed by the government and local bodies. Under this

scheme minimum loan amount is Rs. 20 lacs and maximum 50% of the project

cost up to Rs 5 crores. Loan term is minimum 6 month and maximum 2 years,

under this scheme repayment of principal by monthly / quarterly installment

but interest to be paid monthly.

Builders / Developers

1 Loan Amount Min Rs 20 lacs - Max Rs 5 crores2 Purpose Loans for Construction of Housing Projects for sale3 Loan to Property Cost Max 50% of Project cost up to Rs 5 crores4 Loan Term 6 Months to 2 Years

5 Repayment ModePrincipal by Monthly / Quarterly Instalment. Interest to be paid monthly

6 SecurityEquitable Mortgage, Personal guarantee and any other security

7 Upfront FeesProcessing Fees: Rs. 5000/- for appl. up to Rs 1 crore, Rs. 10,000/- for more than Rs 1 crore.Admin Fees : 1% of amount sanctioned

8 Rate Of Interest As per current rate9 Special conditions This scheme only for professional developers.


Others :

(a) Home entity

‘GRIHA VIKAS’

To full fill the other financial requirements of house ownerships

LICHFL launched a special scheme ‘Griha Vikas’ for those who want soan

against mortgage of residential house / flat. Under ‘Griha vikas’ scheme loan

against mortgage of house / flat can be taken for these purposes but age of the

property must not be more than 35 years :

i) Children’s education / marriage

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ii) Foreign Travel

iii) Purchase of another property.

iv) Business expansion

Minimum loan amount is Rs. 2 lacs and maximum loan term is 15 years,

loan repayment mode is Equated Monthly Installments (EMI) Monthly Rest

Basis. ‘Griha Vikas’ scheme is available for both Residential and Non-

residential Indians.

Griha Vikas

1 Loan Amount Min Rs.2,00,000 Max Rs. 1 crore

2 Purpose

Loan against Mortgage of Residential House / Flat.

i) Children’s Education / Marriage

ii) Foreign Travel

iii) Purchase of another Property

iv) Business Expansion.

3 Loan to Property Cost Max 70% of Property Cost


5 Repayment ModeEquated Monthly Instalments (EMI) - Monthly Rest

Basis

6 Security

1. Equitable / Registered Mortgage of Residential

Property - Age of property not more than 35 years.


7 Upfront Fees 1.00% of Loan Amount + Service Tax, as applicable



1. Age of property not more than 35 years

2. This scheme is applicable to both Resident &

Non-Resident Indians

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(b) Reverse mortgage loan

LIC Housing Finance Ltd (LICHFL), a leading player in the Indian

housing finance sector, rolls out reverse mortgage loans for senior citizens

above 60 years of age. Loan will be given on single or on joint basis with the

spouse, if the spouse is over 60 years.

The reverse mortgage loan is offered at a fixed interest rate subject to

reset every 5 years. Under the reverse mortgage scheme, senior citizens can

avail the loan either on a monthly payment or a lump sum payment or a

combination of both. The property evaluated for the loan should have at least

20 years of residual life.

Maximum loan balance will be restricted to 90% of the value of the

property and the loan balance will include interest till maturity. Amount of the

loan will take into consideration the property value, age of the borrower, rate of

interest etc.

Loan will become due and payable only when the last surviving

borrower dies or opts to sell the home or permanently moves out of the home to

an institution or to relatives.

Reverse Mortgage loan1 Loan Amount Min Rs.2,00,000

2 Purpose

Loan against Mortgage of Residential House / Flat.

i) Children’s Education / Marriage

ii) Foreign Travel

iii) Purchase of another Property

iv) Business Expansion.



5 Repayment Mode

1. Monthly payments

2. Lump-sum payment.

3. Combination of both

6 Security The RML shall be secured by way of equitable/

174


registered

mortgage of residential property

7 Upfront Fees 1% of the loan amount

8 Rate Of Interest (Fixed) subject to reset every 5 years


1.Resident Indian Individuals

2. Borrower should be staying at self-acquired and

self owned house /flat against which loan is being

raised, as his permanent primary residence.

3. Identity Proof / Address Proof as per KYC Norms

required.

4. Borrowers should have a clear and transferable title

in their names.

5. The property should be free from any

encumbrances.

6. Residual Life of property Should be at least 20

years

(c) Loans to professionals

‘APNA OFFICE -1’

‘Apna office -1’ is entirely different scheme of LICHFL under this

scheme loan is provided for Purchase/ Extension/ Modification / Renovation of

commercial premises for carrying on own professional practice & purchase of

equipments. Min. loan amount is 5 lacs rupees and loan term is 10 years.

Repayment mode is Equated Monthly Installments (EMI) - Monthly Rest and

security is equitable/ registered mortgage of the premise for which the loan is

raised.

175


Apna Office -1

1 Loan Amount Min Rs. 5,00,000

2 Purpose

Purchase/ Extension/ Modification / Renovation of

Commercial Premises for carrying on own

Professional Practice & Purchase of Equipments.



5 Repayment Mode Equated Monthly Installments (EMI) - Monthly Rest.

6 Security

1. Equitable/ Registered Mortgage of the Premise for

which the Loan is raised.


3. Personal Guarantee of Directors / Partners, as

Applicable.

4. In case of Companies, Registration of Charges in

R.O.C.

7 Upfront Fees1% of Loan Amount (subject to maximum of

Rs.25,000/- ) + Service Tax, as applicable



Resident Indian Professionals.

Loans can also be Sanctioned to Company or

Partnership firm of such Professional

Addl. Security Hypothecation of Equipment, if

financed

5.6 WORKING PROCESS OF LICHFL

The closing of loan takes place in two steps, processing of loan and

disbursal of loan, which are laid down according to the norms of the LICHFL.

Thus, to estimate how long it would take for closing the loan, it is important to

understand the procedures of processing and disbursing of loan.

176


Loan Processing

Under the loan processing procedure, the borrower is required to submit

application in the prescribed format along with supporting documents for

consideration of the LICHFL. The borrower is expected to apprise himself with

the terms and conditions offered by the LICHFL before submitting the loan

application. After receiving the loan application, the same is perused by the

loan officer and further information/documents for processing of the loan are

obtained. Of late, housing finance institutions are required to ensure

compliance with the ‘Know Your Customer Guidelines’ for the purpose.

LICHFL besides obtaining photograph and identification proof of the borrower,

have also introduced the practice of verifying the address and other details

pertaining to the borrower by deputing their own employees or by engaging

external servicing agencies.

Similarly, property proposed to be purchased by the borrower with the

help of housing loan is visited and verified to confirm that the same is eligible

for finance. It also includes checking that the property under reference is in a

confirming area and it has been developed or is proposed to be developed in

compliance with the sanctioned plan. Housing finance institutions obtain

valuation report on the value of the property under reference through their

officers having technical expertise or empanelled approved valuers.

Similarly, legal verification of the property proposed to be financed is

done by the law officers or empanelled Advocates. LICHFL also has the

practice of verifying the credentials of the borrower by calling on the employer

and the references given by the borrower in his/her loan application.

The intensity of verification and appraisal depends upon the category of

borrower and

nature of property involved. For example, in cases where the dwelling unit or

plot is being purchased from the public agency or a reputed developer whose

177


project is already approved by the housing finance institution, site verification

of the property may not be necessary.

After that company make a personal discussion with borrower during

which borrower can clear all his / her doubts about figures and procedures. In

some cases, borrower may be asked to furnished additional guarantors or

details and company makes a field verification will be done for all the

information provided, especially for-

• Residential Address

• Office address

• Employment verification

• Bank Account verification

• Residence and Office Telephone numbers

• Property Address

• Financial status

Once all the verifications and evaluation reports are available and the

borrower and the property under reference are found to be eligible for

financing, the loan is sanctioned by the LICHFL keeping in view the value of

the property to be purchased, repaying capacity of the borrower and other facts

of the case.

LICHFL also have the practice of granting in-principle sanction based

on preliminary information provided by the borrower. In such cases, the

borrower concludes the purchase transaction after obtaining in-principal

sanction and then gets the formal loan sanctioned to meet the cost of

purchase/construction.

Loan Disbursal:

The disbursal of loan is the process by which a customer receives the

loan sanctioned to him from the respective bank or HFC. The policy for

disbursing the loan varies from one housing finance institution (HFI) to

178


another. It starts with the approval of the loan application. After approving the

application company issues offer letter and sanction letter, which is followed

by the disbursal of loan by Cheque.

Offer Letter

The Offer Letter states the loan amount, rate of interest, tenure, mode of

repayment and other details and special conditions. The acceptance letter has to

given by borrower in the given standard format which is provided by the

company, along with any documents as given in the terms and conditions of the

sanction letter. It is only a financial approval of loan proposal. Loan

disbursement would be after when borrower accepted the offer and the

mortgage is legally enforceable and technically clear.

Submission of Legal Documents

Once borrower accepted the offer, he / she will be required to handover

the original documents of the property so that it can be kept as security till the

loan is fully repaid. Further documents required as per conditions of the loan

like collateral security also needs to be submitted at this stage.

Signing of Agreement

The agreement & other documents needs to be signed according to due

procedure. Disbursal also depends on the time taken by the customer in

depositing all the important documents and in completing various formalities.

As soon as all documents are submitted, the procedure for loan disbursement

begins.

Disbursement of loan is generally made by the LICHFL by means of

'Account Payee' cheque drawn in favor of the seller, in the cases of purchase of

plot, ready-built house or flat. In the case of a housing loan for construction of

house or flat, loan disbursement is generally made in installments,

commensurate with the progress of construction. Varied practices are in vogue

for verifying construction progress. LICHFL depute their employees/

179


representatives for site-verification, but some time it insist on submission of

certificate from a qualified architect or engineer.

Before sanctioning and disbursement of loan, LICHFL also verify the

submitted documents, application, title of the property, verification of

borrower’s credentials and compliance with “Know Your Customer”

guidelines. Besides, LICHFL also have the right to with hold the disbursement

of loan even after approval, if conditions attached to sanction are not complied

by the borrower.

Required document to obtain Housing loan:

Common requirements for all applicants.

(a) Application form duly filled in.

(b) Copy of sanctioned plan and sanction letter.

(c) Copy of NA permission/ULC clearance, wherever applicable.

(d) One guarantor form and his/her salary certificate in company

format. If guarantor is in business or profession, a copy of his

/her latest IT returns / assessment order.

(e) Bank Pass-book or statements for the last two years.

(f) Power of Attorney, wherever applicable

Additional Requirements - For salaried persons

(a) Employer's salary certificate in company format/and latest salary

slip.

(b) Identity card of applicant/s.

(c) TDS certificate of applicant/s.

(d) PF/ESIS slip of applicant/s.

180


Additional Requirements -For Businessmen / Self-employed

(a) Three years' income tax returns/assessment orders alongwith

computation of income and statements of accounts certified by

C.A.

Property Documents - In case of purchase from builder

(a) Copy of Agreement for sale.

(b) Copy of registration receipt.

(c) Copies of receipts of payment already made.

(d) NOC from builders.

Property Documents - In case of direct allotment in a Co-operative

Housing Society

(a) Allotment letter.

(b) Share certificate.

(c) Society registration certificate.

(d) Copy of sale/lease deed in favour of the society.

(e) NOC from society

Property Documents - In case of direct allotment in a Co-operative

Housing Society by Public Agency

(a) Allotment letter, Share certificate, Society Registration

certificate.

(b) Lease Agreement.

(c) Public agency's approved list of members.

(d) NOC from Public Agency in favour of LICHFL.

(e) NOC from society.

181


Property Documents - In case of Public Agency's allotment to

individuals

(a) Allotment letter from Public Agency.

(b) Tripartite Agreement between the borrower, LICHFL and the

Public Agency in the prescribed format.

182


Flow chart for obtaining Housing loan

Application with full requirements

Application submitted to office with full requirements and processing fee

Preliminary discussion with the applicants

Preliminary inspection of property by office

Sanction and issue loan offer

Acceptance of loan offer terms and conditions and payment of administrative fee

Submission of original title deeds and title verification / investigation

Acceptance of the title

Valuation of the property

Compliance of requirements for disbursement in documentation

Release of loan cheque towards first installment to final instalment

183


5.7 ROLE OF ‘LICHFL’ IN THE FIELD OF HOUSING FINANCE

The mission of the company is to provide secured housing finance at

affordable cost, maximizing shareholders value with higher customer

sensitivity. Almost 93% of the company’s loans are to retail customers and the

balance 7% to project developers. The promoter, namely LIC of India, meets

8% of the total fund requirements, whereas 80% is funded by term loans from

banks, bonds and debentures, and the remaining 12% in the form of refinance

from NHB and others.

Sanctions & Disbursals (Rs Bn) LICHF has been steadily growing its

loan book with loan sanctions and disbursal growing at a compounded annual

growth rate (CAGR) of 30% and 20% respectively in the last three financial

years. Company and disbursed an increase of 29% and 26% respectively.

The primary focus of LICHF has been on retail client though it has tie-

up with corporate clients. LIC Housing is increasingly relying on floating rate

borrowing and lending which helps to protect margins in volatile interest rate

scenario. Currently the company maintains its loan book with 93% of the

outstanding individual loans offered at floating rate. The higher exposure to the

floating rate loans has enabled LICHF to maintain its Net interest margin

(NIM) by periodically passing on the effect of changes in its own borrowing

cost

to customers.LIC Housing Finance has been one of the fastest growing

NBFCs over the last five years mainly due to the strong economic growth seen

in India and the rising level of disposable incomes, which has fuelled the

demand for housing loans.

Currently, the Indian housing market is facing an acute demand-supply

mismatch with most of the shortage coming from economically weaker

sections and low-income groups. In order to capture a share of this huge

184


opportunity, the company has stepped up its promotional activities, which has

improved its share in housing loans from 5% to 7%.

Company Name

Equity (Rs

Cr) CMP (Rs) Div, Yld (%)

HDFC 284.45 1255.8 2

LIC HOUSING FINANCE 84.99 188.3 5.3

DEWAN HOUSING FINANCE 60.52 46.3 5.4

GIC HOUSING FINANCE 53.85 30.1 13.3

GRUH FINANCE 34.65 82.55 4.8

Source: calculated from annual reports of HDFC, LICHFL, GICHF, GRUH Finance and NHB

5.8 FINANCIAL CONDITION OF LICHFL

Financial analysis and planning are very general managerial activities.

Managers may attempt to analyse the historical record of a firm in order to

identity factor having a significant influence upon the wealth of the share

holders. But various plans aimed at increasing shareholder’s wealth are also

subject to analysis. For examples, managers may subject plans to change the

firm’s debt equity ratio or to invest in various capital projects to financial

analysis. Financial planning itself pertains to the process of establishing course

of action for the firm to guide future activity. Financial analysis and planning

rely heavily on standard accounting information normally available to the firm.

The balance sheet and income statement of the firm are paramount among the

useful types of accounting information. Financial analysis assists in identifying

the indicating weather a firm has enough cash to meet obligation; a reasonable

accounts receivable collection period; sufficient assets, investment; and an

adequate capital structure all of which are necessary if the firm is to achieve the

goal of maximizing shareholders wealth. Financial analysis can also be used to

assess a firm’s viability as an ongoing enterprise and to determine weather a

185


satisfactory return is being earned for the risk taken. The financial analysis of

LICHFL has been done basically following components:

Profitability position.

Capital structure.

Cost of operation.

Turnover position

Profitability Position:

Profitability is a measure of efficiency and control. Earning of more and

more profit with optimum use of available resources of business is called

profitability. Profitability expresses that efficiency and effectiveness of

business with which the business has been operated. all parties are interested in

profitability of business. Profits also help to pay interest and provide funds to

discharge debts. For the expansion and growth of business necessary funds can

be managed out of business. With the help of profitability ratios, creditors,

banks, and financial institutions can evaluate the interest paying capacity of the

firm. Profitability is the result of higher expenses or lower sales. To see the

profitability, I have seen profit before interest and dividend and tax and return

on capital employed, operating income, profit after tax.

186


Table 5.8.1Total Income of LICHFL

Particular 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99 1997-98 1996-97

Income from

operations

4680.08 3455.77 2880.17 2089.4 1547.13 1237.92 1023.34 957.58 977.59 857.84 744.62 656.25 571 494.5 421.2

Other income 188.64 13.39 23.17 75.52 28.43 30.91 26.27 27.79 35.56 23.8 0.93 0.82 0.53 0.29 0.19

Total 4868.72 3469.16 2903.34 2164.92 1575.56 1268.83 1049.61 985.37 1013.2 881.64 745.55 657.07 571.5 494.8 421.2

Growth in Total Income

%

40.34 19.49 34.11 37.41 24.17 20.89 6.52 -2.75 14.92 18.25 13.47 14.97 15.50 17.47 21.59

(Rs. In crores)Source: Computed from Annual Reports

Table (5.8.1) depicts the position of Income of the LICHFL. Income has been divided in to two parts. One is, Income from

Operation and another is other income. Total income in 1996-97 was 421.2 crore. It became 4680.08 in 2010-11. Income from

operations is increasing gradually but in the FY 03-04, operating income decreased from 977.59 to 957.58. Other income also

decreased from 35.56 to 27.79 in FY03-04. Total income shows much fluctuations during the study period. Total income decreased

in only financial year FY03- 04 from 1013.2 to 985.37 and rest of the period total income increased gradually.

The highest growth rate in total income was 40.34% in FY10-11 and lowest -2.74% in FY03-04. Since 2004-05 growth rate

had been increasing except FY 2008-09 and 20109-10. FY 1997-98, 98-99, 99-00, 02-03 and 03-04 show low growth rate over the

previous year.

187


Table 5.8.2

Profit before Interest, Depreciation and Tax (%)(Rs. In crores)

Particular 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99 1997-98 1996-97

Total Income 4868.72 3469.16 2903.34 2164.92 1575.56 1268.83 1049.61 985.37 1013.15 881.64 745.55 657.07 571.53 494.79 421.19

2.other Expenses 470.84 214.0 154.51 154.52 116.5 120.85 147.36 183.94 122.03 69.32 36.69 27.86 24.86 23.75 23.76

Profit before interest depreciation and tax (1-2) 4397.88 3255.2 2748.83 2010.4 1459.1 1148 902.25 801.43 891.12 812.32 708.86 629.21 546.67 471.04 397.43

Profit before interest, depreciation and tax (%) (comparison to Income)

90.3293 93.831 94.6782 92.863 92.606 90.475 85.9605 81.3329 87.9554 92.1374 95.079 95.76 95.6503 95.2 94.359

Rate of Growth in Profit before Interest, depreciation and tax (%)

35.10 28.41 36.73 37.79 27.10 27.24 12.58 -10.06 9.70 14.60 12.66 15.10 16.06 18.52 26.86

Source: Computed from Annual Reports

Over all if we analyse table (5.8.2) we find the position of Profit before Interest, depreciation and tax (PBIDT) it was highest

in 2010-11 while it has decreased during 2003-04 but its previous year and rest of the period it increased. During the year 1996-97

PBIDT was 397.4 crore and in 2010-11 it was4397.88crore.

In terms of percentage highest PBIDT was 95.76 % in 1999-00 and lowest was 81.33% in 2003-04. Remaining time it was

around 92%.

If we see the growth rate of PBIDT then its highest rate was 37.79% in 2007-08 and lowest rate was -10.06% in 2003-04. Its

trend during the period of 1996-2004 was decreasing but after 2004 its trend has changed and now it is regular. LICHFL made a great

recovery in PBIDT.

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Table 5.8.3

Rate of Growth in Gross profit (after interest but before depreciation and tax) %(Rs. In crores)

Particular 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99 1997-98 1996-97

1.Total Income 4868.72 3469.16 2903.34 2164.92 1575.56 1268.8 1049.61 985.37 1013.15 881.64 745.55 657.07 571.53 494.79 421.19

2.Interest Expenses 3097.71 2395.73 2016.61 1474.41 1101.46 854.61 677.12 610.48 658.8 627.79 550.88 486.91 415.04 356.85 305

3.Total Expenses (Before depreciation and tax) 3568.5 2609.7 2171.1 1628.93 1217.96 1002.6 842.01 794.42 780.91 697.14 587.57 514.77 439.9 380.6 328.76

Gross Profit (after Interest but before Depreciation and taxation)(1-3)

1300.22 859.46 732.24 535.99 357.6 266.21 207.6 190.95 232.24 184.5 157.98 142.3 131.63 114.19 92.43

Rate of Growth in Gross Profit (after Interest but before depreciation and tax) (%)

51.28 17.37 36.61 49.89 34.33 28.23 8.72 -17.78 25.88 16.79 11.02 8.11 15.27 23.54


Table (5.8.3) shows the growth rate in gross profit of the company during the study period. Gross profit of the company was

92.45 crores in 1996-97 which increased and became 1300.22 crores in 2010-11.It has smooth growth rate over the study period

except 2003-04 and 2009-10.

In terms of percentage negative growth rate was -17.79% during 2003-04 but after that company made a great recovery and

next year growth rate became 8.72%. Growth rate of Gross profit was 23.52% in 1997-98 which increased and became 28.33% in 05-

06, 34.33 in 2006-07 and 49.89% in 2007-08. After this period it decreased upto 17.37 for the FY 2009-10 but in FY 10-11.

Company scored growth rate more than 50%.

189


Rate of Growth in Profit before Interest, depreciation and tax (%)

2010

-11

2009

-10

2008

-09

2007

-08

2006

-07

2005

-06

2004

-05

2003

-04

2002

-03

2001

-02

2000

-01

1999

-00

1998

-99

1997

-98

1996

-97

-20

-10

0

10

20

30

40 35.1

28.41

36.7337.79

27.1 27.24

12.58

-10.06

9.7

14.6 12.66 15.1 16.06

18.52

26.86

Series1

Fig. No. 5.1

190


Table 5.8.4Rate of Growth in Net Profit (%)

(Rs. In crores)Particular 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-

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

1998-99 1997-98 1996-97

1.Gross Profit (after Interest but before Depreciation and

taxation)1300.22 859.46 732.24 535.99 357.6 266.21 207.6 190.95 232.29 184.53 157.98 142.3 131.6 114.2 92.45

2. Depreciation 6.24 6.37 4.99 3.69 3.82 4.46 3.30 2.71 1.66 1.32 1.16 - - - -3. TAX 319.67 249.09 194.8 145.11 74.64 53.17 60.58 59.77 59.18 36.5 35.3 - - - -

Net Profit 1-(2+3) 974.31 604 532.45 387.19 279.14 208.58 143.7 128.47 171.45 146.71 121.52 109.1 101.1 87.73 63.38Rate of Growth in Net

profit % 61.31 13.44 37.52 38.71 33.83 45.13 11.87 -25.07 16.86 20.73 11.40 7.89 15.24 38.42 22.69Source: Computed from Annual Reports

When depreciation and tax, deducted from gross profit, net profit remains. Net profit shows the company’s real picture.

LICHFL’s Net profit has been shown in table (5.8.4) it was 63.38 crores in 1996-97 and 171.45 crores was in 2002-03 but next year it

decreased and reached 128.47 crores. LIC HFL made effort and it became 974.31 crore in 2010-11. During the year 2003-04 rate of

growth in Net profit was -25.07% apart from this remaining period growth rate was in positive figures with the highest 61.31% for

2010-11 and lowest positive growth rate was 7.85% during 1999-00. Depreciation of the company was highest 6.37% in 2009-10 and

lowest was 1.16% in 2000-01. Tax expenses of the company are increasing it was 35.3 crores in 2000-01 and 319.67 crores in2010-11.

Overall the net profit of the company is increasing and financial condition of the company is solid.

Capital structure

Normally the ordinary shareholders, debenture holders, financial institutions and other long-term creditors take interest in

capital structure position of the company and equity capital which are the most important aspects in the capital structure. Below table

exhibits the exact picture of equity paid-up capital of the company.

191


2010-11

2009-10

2008-09

2007-08

2006-07

2005-06

2004-05

2003-04

2002-03

2001-02

2000-01

1999-00

1998-99

1997-98

1996-97

-30

-20

-10

0

10

20

30

40

50

60

7061.31

13.44

37.52 38.7133.83

45.13

11.87

-25.07

16.8620.73

11.47.89

15.24

38.42

22.69

Rate of Growth in Net profit %

Rate of Growth in Net profit %

Fig. No. 5.2

192


Table 5.8.5

Equity Paid –up capital(Rs. In crores)

Particular 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99 1997-98 1996-97

Equity Paid up capital 94.99 94.99 84.99 84.99 84.99 84.99 84.99 74.99 74.99 74.99 74.99 74.99 74.99 74.99 74.99


Above table (5.8.5) has been prepared to analyse the Equity paid-up capital of the company. It was 94.99 crores for the year 2009-10

and 2010-11. It was 84.99 crore during FY 03-04 to 07-08 and 74.99 crore from 1996-97 to 2003-04.

Table 5.8.6

Net worth (Total Shareholder Fund) Share capital + Reserves and Surplus(Rs. In crores)

Particular 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99 1997-98 1996-97


Reserve and Surplus 4074.11 3292.68 2149.1 1746.66 1458.84 1260.51 1110.05 886.33 786.12 663.65 565.13 493.95 410.72 334.15 269.15

Total 4169.1 3387.67 2234.09 1831.65 1543.83 1345.5 1195.04 961.32 861.11 738.64 640.12 568.94 485.71 409.14 344.14


193


Overall analysis of the data in table (5.8.6) shows that Net worth was increasing every year during the study period. If we

compare it with the equity capital figures we find that net worth figure are more-sound and indicate towards the sound Reserves and

Surplus position of the company. Reserves and surplus of the company were increasing every year it was 269.15 crores in 1996-97,

565.13 crores in 2000-01, 1110.1 crores in 2004-05 and 4074.11 crores in 2010-11. The total Net worth of the company was also

increasing year by year it was 344.14 crores in 1996-97, 640.12 crores in 2000-01, 1195.1 crores in 2004-05 and 4169.1 crores in

2010-11.

Table 5.8.7

Rate of Growth in Net worth (%)(Rs. In crores)

Particular 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99 1997-98 1996-97


Reserve and Surplus 4074.11 3292.68 2149.1 1746.66 1458.84 1260.51 1110.05 886.33 786.12 663.65 565.13 493.95 410.72 334.15 269.15

Total 4169.1 3387.67 2234.09 1831.65 1543.83 1345.5 1195.04 961.32 861.11 738.64 640.12 568.94 485.71 409.14 344.14

Rate of Growth in Net Worth (%) 23.07 51.64 21.97 18.64 14.74 12.59 24.31 11.64 16.58 15.39 12.51 17.14 18.71 18.89 14.29


Table (5.8.7) represents the clear picture of rate of growth in Net worth during the period of 1996-2011. LICHFL has steady

growth rate between 11.64 % and 51.64% over the period. In 1996-97 growth rate was 14.29% but in 2003-04 it decreased upto

11.64% after that company make a good progress and it touched the highest figure 51.64% in 2009-10 and growth rate was 23.07% in

2010-11. In last three financial years company’s Net worth growth rate is not consistent.

194


2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99 1997-98 1996-97

23.07

51.64

21.97

18.64

14.7412.59

24.31

11.64

16.58 15.3912.51

17.1418.71 18.89

14.29

Rate of Growth in Net Worth (%)Rate of Growth in Net Worth (%)

Fig No. 5.3

195


Table 5.8.8

Share Holding pattern Particular 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99 1997-

981996-

97

Percentage of Promoter company

(LIC of India) shareholding

36.54 36.54 36.54 40.5 40.78 39.08 34.69 38.5 38.5 38.43 38.43 38.43 _ _ _

Percentage of Public shareholding 63.46 63.46 63.46 59.5 59.22 60.92 65.31 61.5 61.5 61.57 61.57 61.57 _ _ _

Total 100 100 100 100 100 100 100 100 100 100 100 100 _ _ _


Table (5.8.8) shows the share holding pattern of the company, Life Insurance Corporation of India (LIC of India) is a promoter

company of LICHFL, it holds nearby 37% share and its part is decreasing. Part of the promoter company in shareholding was 38.43%

in 1999-00 which remained stable up to next three years but in 2004-05 part of the promoter company decreased from 38.5% to

34.69%. In next financial years promoter company again increased own part and it was stable at 36.54% since 2008-09. Public share

holding in company is near by 64% which is stable since last three years.

196


Table 5.8.9

Earning Per share(Rs. In Rupees)

Particular 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-2000 1998-99 1997-98 1996-97

Basic and Diluted

Earning per Share (Face value of

rs. 10) (Rs.) *

102.65 73.46 62.59 45.59 32.87 24.56 17.84 22.35 23.88 19.66 16.16 _ _ _ _

Source: Computed from Annual Reports* The Earnings Per Share have been computed in accordance with the Accounting Standard on 'Earning Per Share' (AS 20) issued by the 'Institute of Chartered Accountants of India'.

LICHFL is a second largest company in the field of housing finance its financial position is strong and management is quite

good so company is performing in a good way in share market. Its Earning per share was positive during the whole study period.

Earning per share was16.16 rupees in 2000-01, 23.88 rupees in 2002-03 but in 2004-05 due to recession its earning decreased

upto17.84 rupees. In next years company made good performance and in 2010-11 gained per share earning 102.65rupees which is the

highest rate among the study period.

197


Table 5.8.10

Operating and Administrative Expenses(Rs. In crores)

Particular2010-11

2009-10

2008-09

2007-08

2006-07

2005-06

2004-05

2003-04

2002-03

2001-02

2000-01

1999-00

1998-99

1997-98 1996-97

Operating and Administrative charges 470.84 214.0 154.51 154.5

2 116.5 120.85 147.36 183.94 122.03 69.32 36.69 27.86 24.86 23.75 23.76


Table (5.8.10) indicates the position of Operating expenses of LICHFL which indicates company’s operational efficiency and

cost effectiveness. Due to increasing business and competition, company’s operating cost is increasing. 23.76 crore rupees

expenditure was in 1996-97 after that it increased gradually; it was 183.94 crore for the year 2003-04 thereafter company made good

cost management, controlled its fast growing expenditures and slow downed operating and administrative expense result company

decreased expenses up to116.5 crores in 2006-07 which extended upto 470.84 crore rupees in 2010-11. If we see overall position of

operation and administrative expenses it shows the upward trend.

198


Table 5.8.11Operating, Administrative and interest charges (Expenditure)

(Rs. In crores)Particular 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99 1997-98 1996-97Operating and Administrative charges 470.84 214.0 154.51 154.52 116.5 120.85 147.36 183.94 122.03 69.32 36.69 27.86 24.86 23.75 23.76

Interest Expenses 3097.7 2395.71 2016.6 1474.41 1101.46 854.61 677.12 610.48 658.8 627.79 550.88 486.91 415.04 356.85 305

Total Expenses before depreciation and tax 3568.54 2609.7 2171.11 1628.93 1217.96 1002.62 842.01 794.42 780.91 697.14 587.57 514.77 439.9 380.6 328.76

Rate of growth in operating, administrative and interest charges (%)

36.74 20.2 33.29 33.73 21.48 19.07 5.99 1.73 12.02 18.65 14.14 17.01 15.58 15.77


To know the relation between ‘Growth rate in total income’ and ‘Growth rate in expenditure’ Karl Pearson’s correlation

coefficient test has been applied as a statistical tool and found that calculated value of ‘r’ is +0.987 which clearly indicate that there is

a positive high degree of correlation between income and expenditure of the company means as the income of the increase or

decrease in respect expenditure also increase or decrease.

Table (5.8.11) exhibits the overall position of interest and financial charges of LICHFL during the period of 1996 to 2011.

Data depicts that interest and financial charges in 2010-11were ten times more than 1996 just in period of 14 years, it was increasing

every year. Table clearly indicates the upward trend in the operating expenses, even interest rate is decreasing due to interest war

among the housing finance agencies since last ten years. LICHFL interest charges increased more than10 times during the study

period it was 305 crores rupees in 1996-97 and became 3097.7 crore rupees for the year 2010-11. Growth rate of expenses has

become more than double during the period. The lowest growth rate in expenses over the previous year was 1.73% in 2003-04 and

the highest 36.74% in 2010-11. Overall operating, administrative and interest charges shows the upward trend.

199


Table 5.8.12

Rate of Growth in Sales (%)(Rs. In crores)

Particular 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99 1997-98 1996-97

Total Income 4868.72 3469.16 2903.34 2164.92 1575.56 1268.83 1049.61 985.37 1013.15 881.64 745.55 657.07 571.53 494.79 421.19

Growth in Total Sales % 40.34 19.49 34.11 37.41 24.17 20.89 6.52 -2.74 14.92 18.25 15.93 14.98 15.51 17.47 21.59Source: Computed from Annual Reports

Turnover position of the company is increasing gradually total sales was 421.19 crore rupees in 1996-97 that has become

4868.72 crore rupees in 2010-11. It shows more than 11 times increment. In term of percentage growth rate was negative only in

2003-04 and lowest positive growth rate was 6.52 % in 2004-05. The highest growth rate in sales over the previous year was 40.34%

for the year 2010-11. Overall performance of company in sales shows the upward trend. Although competition in the housing finance

sector is increasing day by day thereafter LICHFL gained good progress in total sales.

200


2010

-11

2009

-10

2008

-09

2007

-08

2006

-07

2005

-06

2004

-05

2003

-04

2002

-03

2001

-02

2000

-01

1999

-00

1998

-99

1997

-98

1996

-97

-5

0

5

10

15

20

25

30

35

40

4540.34

19.49

34.1137.41

24.1720.89

6.52

14.9218.25

15.93 14.98 15.5117.47

21.59

Growth in Total Sales %

Fig No. 5.4

201


5.9 LICHFL IN GWALIOR REGION :

Gwalior is a central hub of commerce and education. In the search of job

or to establish business many person migrate from rural areas and also willing

of reside in the city it increase the requirement of houses. To fulfill this

requirement LICHFL established its Area office in FY 1994-95 in Gwalior

which is situated at City Centre in ‘Prakash bulding’. Office is furnished with

furniture and computer equipments. It is providing loan to the needy person of

the Gwalior region comprises Gwalior, Datia, Dabra, Bhind, Morena, Sheopur,

Guna and Shibpuri since establishment. There are four permanent and 10

contract basis employee are working in the branch. Back office is in Bhopal

and regional office is in Lucknow.

Sanctioning of loan

Branch office does not have the power to sanction the loan. Loan

application and case file is prepared by the branch, after completing all

formalities case file in hard copy in original has been sent to the Back office to

sanction the loan. This procedure takes 10-12 days depends on loan amount

and title of the property thereafter receiving sanction permission, Areas office

disburses loan by account payee cheque. Disbursement process is done by the

Area office according to the company rules.

Sanctions and disbursements of the Area office, Gwalior

During interview with the officials of LICHFL, Area office, Gwalior, it

has been found that nearby 16.5% of total loan application rejected because of

many reasons. The first and main reason was location of the property, if it is

found that property is situated in remote areas or undeveloped areas company

does not accept it as mortgage. Second reason was weak repayment capacity of

the borrower, Third one was lack of document, if borrower does not provide all

the required document with in time limit company rejects the loan application.

Other reasons were loan amount and disputed land titles etc.

202


Table 5.9.1Sanctioned and Disbursed loan

S.No. Year Sanctioned loan Disbursed loan % loan disbursed to sanctioned

2 2006-07 25.5 20.9 81.963 2007-08 37.6 32.1 85.374 2008-09 45.3 39.1 86.315 2009-10 54.8 46.5 84.856 2010-11 62.8 55 87.58

Source: Questionnaire and interview

Table5.9.1 discloses that branch’s sanctions and disbursed loans are

increasing year by year. Sanctioned loan was 25.5 crore rupess in 2006-07

which became 62.8 crore rupees in 2010-11. Disbursed loans are also shows

the same trend which increased 20.9 crore rupees to 55 crore rupees during

2006-2011. Percent of disbursed to sanctions were more than 82% just close to

company’s average 86.41%.

Status of loan application

Table 5.9.2Status of loan application

S. No. Year

Received application

(No)

Accepted application

(No)

Percentage of Accepted application

Reject application

(No)

Percentage of rejected application

1 2005-06 525 418 79.62 107 20.382 2006-07 655 535 81.68 120 18.323 2007-08 742 602 81.13 140 18.874 2008-09 780 657 84.23 123 15.775 2009-10 890 753 84.61 137 15.396 2010-11 927 788 85.01 139 14.99

Source: Questionnaire and interview

Table 5.9.1 shows the status of loan application at Gwalior branch. In

2005-06, 525 application received out of them 418 had been accepted and

remain 107 rejected. In term of percent 80% accepted. In 2006-07 total

received application were 655 out of them 535 i.e. 81.68% accepted. In 2010-

11 total received application were 927 out of them 139 rejected by company.

Acceptance percent is near by 82.5%.

203


204

i Mohsur, LIC and Housing, Vora and Co., publishers, Pvt. Ltd. Ombay-2ii K. V. Verghese, Housing Problem in India, Economic and social aspects, Eureka

Publications, New Delhi.iii LIC Annual report 2007-08iv www.lic.co.inv LIC Annual report 2008-09

148-189,191,193-194,196-200,202-204

190,192,195,201