MAIN CONTENTS OF THE ANNUAL REPORT

Highlights at a glance Letter to Shareowners Notice of Annual General Meeting Directors Report Management Discussion and Analysis Auditors Certificate on Corporate Governance Corporate Governance Report Investor Information Auditors Report Balance Sheet Statement of Profit and Loss Cash Flow Statement Significant Accounting Policies and Notes to the Financial Statements Auditors Report on Consolidated Financial Statements Consolidated Balance Sheet Consolidated Statement of Profit and Loss Consolidated Cash Flow Statement

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THE KEY FACTORS INFLUENCING THE COMPANYS FINANCIAL PERFORMANCE

The Housing Development Finance Corporation Limited (HDFC) was amongst the first toreceive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with itsregistered office in Mumbai, India. HDFC Bank commenced operations as a ScheduledCommercial Bank in January 1995.HDFC is India's premier housing finance company and enjoys an impeccable track record inIndia as well as in international markets. Since its inception in 1977, the Corporation hasmaintained a consistent and healthy growth in its operations to remain the market leader inmortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFChas developed significant expertise in retail mortgage loans to different market segments andalso has a large corporate client base for its housing related credit facilities. With itsexperience in the financial markets, a strong market reputation, large shareholder base andunique consumer franchise, HDFC was ideally positioned to promote a bank in the Indianenvironment.HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build soundcustomer franchises across distinct businesses so as to be the preferred provider of bankingservices for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the bank's risk appetite. The bank is committed to maintain thehighest level of ethical standards, professional integrity, corporate governance and regulatorycompliance. HDFC Bank's business philosophy is based on four core values OperationalExcellence, Customer Focus, Product Leadership and People. Capital Structure As on 31st March, 2009 the authorised share capital of HDFC Bank is Rs. 550 crore. The paidup capital as on the said date is Rs. 425,38,41,090/- ( 42,53,84,109 equity shares of Rs10/- each). The HDFC Group holds 19.38% of the Bank's equity and about 17.70 % of theequity is held by the ADS Depository (in respect of the bank's American Depository Shares(ADS) Issue). 27.69 % of the equity is held by Foreign Institutional Investors (FIIs) and theBank has about 5,48,774
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shareholders.The shares are listed on the Bombay Stock Exchange Limited and The National Stock Exchange of India Limited. The Bank's American Depository Shares ( ADS ) are listed on the

New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's GlobalDepository Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN NoUS40415F2002.On May 23, 2008, the amalgamation of Centurion Bank of Punjab with HDFC Bank wasformally approved by Reserve Bank of India to complete the statutory and regulatoryapproval process. As per the scheme of amalgamation, shareholders of CBoP received 1 shareof HDFC Bank for every 29 shares of CBoP.The merged entity will have a strong deposit base of around Rs. 1,22,000 crore and netadvances of around Rs. 89,000 crore. The balance sheet size of the combined entity would beover Rs. 1,63,000 crore. The amalgamation added significant value to HDFC Bank in termsof increased branch network, geographic reach, and customer base, and a bigger pool of skilled manpower.In a milestone transaction in the Indian banking industry, Times Bank Limited (another new private sector bank promoted by Bennett, Coleman & Co. / Times Group) was merged withHDFC Bank Ltd., effective February 26, 2000. This was the first merger of two private banksin the New Generation Private Sector Banks. As per the scheme of amalgamation approved by the shareholders of both banks and the Reserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank.

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over 1412 branches spread over 528 cities across India. All branches are linked on anonline real-time basis. Customers in over 500 locations are also serviced through TelephoneBanking. The Bank's expansion plans take into account the need to have a presence in allmajor industrial and commercial centres where its corporate customers are located as well asthe need to build a strong retail customer base for both deposits and loan products. Being aclearing/settlement bank to various leading stock exchanges, the Bank has branches in thecentres where the NSE/BSE have a strong and active member base.The Bank also has a network of about over 3295 networked
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ATMs across these cities.Moreover, HDFC Bank's ATM network can be accessed by all domestic and internationalVisa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Chargecardholders.

Mr. Jagdish Capoor took over as the bank's Chairman in July 2001. Prior to this, Mr. Capoor was a Deputy Governor of the Reserve Bank of India.The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years,and before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia.The Bank's Board of Directors is composed of eminent individuals with a wealth of experience in public policy, administration, industry and commercial banking. Senior executives representing HDFC are also on the Board.Senior banking professionals with substantial experience in India and abroad head various businesses and functions and report to the Managing Director. Given the professionalexpertise of the management team and the overall focus on recruiting and retaining the besttalent in the industry, the bank believes that its people are a significant competitive strength.

HDFC Bank operates in a highly automated environment in terms of information technologyand communication systems. All the bank's branches have online connectivity, which enablesthe bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines(ATMs).The Bank has made substantial efforts and investments in acquiring the best technologyavailable internationally, to build the infrastructure for a world class bank. The Bank's business is supported by scalable and robust systems which ensure that our clients always getthe finest services we offer.The Bank has prioritised its engagement in technology and the internet as one of its key goalsand has already made significant progress in web-enabling its core businesses. In each of its businesses, the Bank has succeeded in leveraging its market position, expertise andtechnology to create a competitive advantage and build market share.

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DIRECTORS REPORT

The Members HDB Financial Services Limited

Your Directors have pleasure in presenting the Sixth Annual Report on the business and operations of your company together with the audited accounts for the Financial Year ended March 31, 2013.

Financial statement

Rs. In crs.
2012-13 2011-12 431.76 357.50 74.26 3.61 70.65 19.54 51.11

Total Income Total Expenditure Profit/(Loss) before Depreciation & Tax Less: Depreciation Profit before Tax Provision for Taxation Profit / (Loss) after Taxation

963.19 808.79 154.40 4.27 150.13 47.68 102.45

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The Company posted total income and net profit of ` 963.19 Crores and `102.45 Crores respectively for the financial year ended March 31, 2013 as against ` 431.76 Crores and ` 51.11 Crores respectively in the previous year. Loan disbursements during the year were ` 5922 Crores as against ` 3385 Crores in the previous year.

DIVIDEND

In order to conserve resources and in view of long term capital requirement, your directors do not recommend any dividend.

RATINGS

The Credit Analysis & Research Limited (CARE) and CRISIL Limited (CRISIL) have assigned ratings for the various facilities availed by the Company, details of which are given below:

Facility Bank facilities of ` 8000 crores

CARE CARE AAA

CRISIL CRISIL AAA/Stable CRISIL A1+

Short term debt programme including Commercial CARE A1+ paper of ` 400 crores Non-convertible debenture of ` 3000 crores Subordinate bond issue of ` 750 crores CARE AAA CARE AAA

CRISIL AAA/Stable CRISIL AAA/Stable

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EMPLOYEES STOCK OPTION SCHEME (ESOS)

The information pertaining to Employees Stock Option is given in the notes forming part of accounts.

CAPITAL ADEQUACY

Companys capital adequacy ratio as on March 31, 2013 was 18.34% as against the minimum regulatory requirement of 15% for non-deposit accepting NBFCs.

Short term debt programme including Commercial paper of ` 400 crores CARE A1+ CRISIL A1+ Non-convertible debenture of ` 3000 crores CARE AAA CRISIL AAA/Stable Subordinate bond issue of ` 750 crores CARE AAA CRISIL AAA/Stable EMPLOYEES STOCK OPTION SCHEME (ESOS) The information pertaining to Employees Stock Option is given in the notes forming part of accounts. CAPITAL ADEQUACY Companys capital adequacy ratio as on March 31, 2013 was 18.34% as against the minimum regulatory requirement of 15% for non-deposit accepting NBFCs.

MANAGEMENT DISCUSSIONS AND ANALYSIS REPORT Macro Economic and Industry Developments The economic slowdown persisting for last couple of years continued in the year 2012. The economic environment remained subdued for large part of year. Gross Domestic Product (GDP) growth is expected to decline to 5% for the FY 2012-2013 against 6.2% for the previous year. Against the backdrop of high current account deficit (estimated at around 4.2%) and sustained inflation (estimated at over 7%), the Reserve Bank of India has worked towards easing monetary and liquidity conditions in a calibrated manner. This is yet to translate to lower interest rates due to continuing liquidity concerns.

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The government had projected a fiscal deficit target of 5.1% of GDP. Revenues were under pressure due to a number of factors including weak economic growth, higher subsidy bill and low receipts from disinvestment initiatives. Government of India has taken a number of steps towards fiscal consolidation such as gradual increase in fuel prices, targeted subsidy through direct cash transfers and allowing Foreign Direct Investment in select sectors. Improvement in investment climate is a pre-requisite for economic recovery. Several measures are expected to be announced that will boost investment, reduce inflation and fiscal deficit.

The economic environment prevailing in the country affected the NBFC sector also. Rainfall has been below normal, particularly in the key months of June and July. This affected sowing and resulted in a lower growth rate of agriculture and allied sectors. Global economic slowdown, depressed sentiments, high interest rates, moderation in credit growth and a deceleration in growth of investment also contributed to the reduction in growth of industrial sector. Lower growth in agriculture, industrial and mining sector has had an adverse impact on the growth of commercial vehicle and equipment segment.

Reserve Bank of Indias initiatives of reducing the CRR and Repo rate in the second half of the financial year will certainly help in reducing the liquidity pressure and softening the interest rates and thereby reducing the borrowing cost. The various pro active steps envisaged by the Government will also enable the NBFCs to achieve higher credit growth

Source: Industry reports

Opportunities

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Government has announced a number of policy measures to kickstart investments. This includes an investment allowance for manufacturing companies, policy measures for creating affordable housing and addressing requirements of agriculture sector through measures other than price supports. Steps are being taken to address requirements of mining and power generation sectors which will remove supply bottlenecks to a number of sectors. Deepening of financial markets especially the corporate bonds market and attracting foreign long term investment flows for infrastructure projects are likely to happen in future.

Improvement in connectivity to rural areas will result in robustness of demand from semi urban and rural areas. With the governments initiative to boost infrastructure projects, NBFCs can also look for growth in asset financing.

Threats

Growth of the companys asset book, quality of assets and ability to raise funds depends significantly on the economy. Unfavorable events in the Indian economy can affect consumer sentiment and in turn impact consumer decision to purchase financial products. Competition from a broad range of financial services providers and changes in Government policy / regulatory framework could impact the companys operations.

Operations

Loans The Company offers a range of loan products both in the secured and unsecured categories that fulfills the financial needs of its target segments.

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Unsecured loans The Loans are in the range of ` 100,000 to ` 2,000,000. These loans are offered as term loans with a maximum tenure of 48 months. Interest rates on these loans are higher than the rates on secured loans.

Secured loans - Secured loans are offered to customers to address the larger loan requirements or longer

repayment requirements. Secured loans are in the range of ` 100,000 to ` 50,000,000. These loans are offered as term loans with the maximum tenure at 180 months. These loans are normally offered on a floating rate basis.

The company provides loan against the following collaterals as security for the loans:

Commercial / Residential property

Cars / Automobiles

Shares

Marketable Securities such as Bonds

Gold Jewellery

Commercial Vehicle Loans - The Company provides loans for purchase of new and used commercial vehicles.
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Construction Equipment - The Company provides facilities for purchase of new and used construction equipments.

Fee Based Products

Insurance Services

The Company is a corporate agent for HDFC Standard Life Insurance Company Limited and HDFC Ergo General Insurance Company Limited. The Company sells life and general insurance bundled with its loan as a value-add as well as a standalone product.

BPO Services Business

BPO services - The Company has a contract with HDFC Bank to run collections call centres and collect

overdue from borrowers. The Company has set up call centres across the country with a capacity of over 1700 seats. These centres provide collection services for the entire gamut of retail lending products of HDFC Bank. The company offers end to end collection services in over 200 locations through its calling and field support teams.

The company is in the process of expanding capacity for this business and is adding 700 seats to cater to the expected increase in business.

Infrastructure
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The Company has 230 branches in 184 cities thus creating the right distribution network to sell its products and services. The company has its data centre at Bangalore and centralized operations at Hyderabad and Chennai. The Business Process Outsourcing (BPO) vertical of the Company now operates from 6 collection centres with a capacity of over 1700 work stations.

Internal Control Systems

In the opinion of the Management, the company has adequate systems and procedures to provide assurance of recording transactions in all material respects.

The company has appointed M/s. Contractor, Nayak & Kishnadwala, Chartered Accountants to conduct an internal audit covering all areas of operations and the reports are placed before the Audit Committee of the Board.

OUTLOOK

The markets will continue to grow and mature leading to differentiation of products and services. Each financial intermediary will have to find its niche in order to add value to consumers. The company is cautiously optimistic in its outlook for the year 2013-14.

FIXED DEPOSITS

The company is a non deposit taking company (NBFC-ND-SI). The Company has not accepted any fixed deposit

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during the period under review. The company has passed a resolution for non acceptance of deposits from public.

INCREASE IN PAID UP SHARE CAPITAL

During the period under review, the paid up capital of the company increased to ` 410.77 Crores from ` 410.60 Crores. The company allotted 160150 shares to employees whose shares had vested and option exercised by the employees during the year.

ISSUE OF DEBENTURES AND SUBODINATE BONDS

During the year, HDB raised ` 1356 Crores by issue of secured Non-Convertible Debentures (NCD) on private placement basis. The NCDs are rated AAA by CARE and CRISIL, indicating highest degree of safety with regard to timely servicing of financial obligations. The NCDs are issued with maturity period ranging from 2 to 5 years. The Interest payable thereon would be annual and/or on maturity and no interest was due as on March 31, 2013. The company has not received any grievances from the debenture holders. The company has appointed IDBI Trusteeship Services Limited as trustees for the debentures. The assets of the company which are available by way of security are sufficient to discharge the claims of the debenture holders as and when they become due.

During the year company has issued subordinate bonds (Tier II Capital) of ` 600 Crores on private placement basis. The subordinate bonds are rated AAA by CARE and CRISIL indicating highest degree of safety with regard to timely servicing of financial obligations. The subordinate bonds are issued with a maturity period upto 10 years. The Interest payable thereon would be annual and no interest was due as on March 31, 2013. The
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company has not received any grievances from the subordinate bond holders. The company has appointed IDBI Trusteeship Services Limited as trustees for the subordinate bonds.

INTERNAL AUDIT AND COMPLIANCE

The Company conducts its internal audit and compliance functions within the parameters of regulatory framework which is well commensurate with the size, scale and complexity of operations. The internal controls and compliance functions are evolved, installed, reviewed, and upgraded periodically. The internal audit function is being carried out by an external firm of chartered accountants and their reports are placed on quarterly basis to the Audit committee. The Audit Committee reviews the performance of the audit and compliance functions, the effectiveness of controls and compliance with regulatory guidelines and gives such directions to the Management as necessary / considered appropriate. The company has framed a compliance policy to effectively monitor and supervise the compliance function in accordance with the statutory requirements.

RISK MANAGEMENT AND PORTFOLIO QUALITY

The Company recognizes the importance of risk management and has accordingly invested in appropriate processes, people and a management structure. The function is supervised by the Risk Committee. Risk Committee reviews the asset quality at frequent intervals. Product policy programmes are duly approved before any new product launches and are reviewed regularly. The asset quality of the company continues to remain healthy. The ratio of gross non-performing assets to gross advances and net non performing assets to total assets stood at 0.44% and 0.25% respectively as of March 31, 2013. The specific loan loss provisions that the company has made for its non-

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performing assets continue to be more conservative than those as prescribed by regulators.

RBI GUIDELINES

The company has complied with all the applicable regulations of the Reserve Bank of India.

HUMAN RESOURCES

People remain the most valuable asset of your company. Your company continued to build on its capabilities in getting the right talent to support different products and geographies and is taking effective steps to retain talent. The total number of employees was 6404 as on March 31, 2013. During the year, the company put in new training programs for employees with focus on skill development and customer service.

. DIRECTORS

RESPONSIBILITY STATEMENT

The Board of Directors hereby state that:

1.

In preparation of the annual accounts, the applicable accounting standards have been

followed along with proper explanation relating to material departures.

2.

Appropriate accounting policies have been selected and applied consistently and

judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period.

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3.

Proper and sufficient care has been taken for the maintenance of adequate accounting

records in accordance with the provisions of the Companys Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

4.

The annual accounts have been prepared on a going concern basis.

DIRECTORS

During the period under review Mr. Anil Jaggia was appointed as director and Mr. G. Ramesh was appointed as Managing Director of the company.

Mr. Pralay Mondal resigned as director of the company. Your directors would like to place on record their appreciation of the contribution made by Mr. Pralay Mondal during his tenure as director of the company.

Pursuant to provisions of the Companies Act, 1956 and Articles of Association of the company, Mr. G. Subramanian will retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

AUDITORS

M/s Haribhakti & Co., Chartered Accountants, have been our statutory auditors since inception of the company. They will retire at the conclusion of the forthcoming Annual General Meeting and are eligible for re-appointment. However, they are not seeking re-appointment. The Company has also received a letter from BSR & Co., Chartered accountants seeking appointment
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at the ensuing General Meeting. Members are requested to consider their appointment on remuneration to be decided by the audit committee of the Board.

Annexure I

Information under section 217(2A) of the Companies Act,1956, read with the Companies (Particulars of Employees) Rules, 1975 and forming part of the directors report for the year ended March 31, 2013.

Employed throughout the year and in receipt of remuneration of not less than ` 6,000,000/- per annum

Sr. Name of the No Employee 1 2 Ramesh G Rohit Patwardhan

Designation

Date of joining

Qualificatio Experienc Age Total (`) n e 43 39

Last Employment

Managing Director Head - Risk

03/09/07 PDGM, IIM 21 10/12/07 PGDM, SIM 16 (Lucknow)

11,241,155 Enam 7,129,239 Ltd. Citi Bank

AMC

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Sarabjeet Singh Business Head 22/02/08 PGDM, - North & East IMT,

17

41

6,097,748 GE Money

Ghaziabad There were no employees who were employed for part of the year and drawing remuneration of more than ` 500,000 per month

1.

Gross remuneration comprises salary, medical reimbursement, leave travel concession,

housing, companys contribution to provident fund, pension and gratuity fund, monetary value of other perquisites computed on the basis of the Income Tax Act and Rules, leave encashment and performance bonus.

2. All appointments were made in accordance with the terms and conditions as per company rules.

3. None of the above employee is a relative of any director of the Company.

CORPORATE GOVERANCE REPORT 1. Companys philosophy on Corporate Governance The Companys philosophy of Corporate Governance is aimed at assisting the management of the Company in the efficient conduct of its business and meeting its obligations to stakeholders and is guided by a strong emphasis on transparency, accountability and integrity. 2. Board of Directors i. Composition and size of the Board The present strength of Board of Directors is 4 directors. The Board comprises of one executive and three non-executive directors. The non-executive directors bring
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independent judgment in the Boards deliberations and decisions. The directors of the company have wide experience in the field of finance, banking and Information T ec h n ol o g y. The details of the directors as at March 31, 2013 including the details of their other board directorship and their shareholdings are given below: Name of the Director Executive/NonExecutive/ Independent/Promote r Non-executive Director Non-executive Director Non-executive Director Executive Director No. of Directorship No. of shares held in the Company 100,000 164,183 N il 152,500

Mr. G. Subramanian Mr. Kaizad Bharucha Mr. Anil Jaggia Mr. G. Ramesh

3 2 Nil Nil

ii. Directors with materially significant related party transactions, pecuniary or business relationship with the Co mp any. There have been no materially significant related party transactions, pecuniary transactions or relationships between the company and its directors that may have potential conflict with the interest of the company at large. iii. Board, Committee Meetings & Attendance The details of attendance of the directors at the Board, Committee and Annual General Meeting are given as below
Name of Directors and Number of meetings attended Type of meeting No of meetings held 4 4 4 3 1 13 1 4 Mr. G. Kaizad Subramanian 4 4 4 3 1 12 1 4 Mr. Bharucha 4 2 4 2 NA 10 NA 4 Mr. Anil Jaggia 4 4 NA NA NA NA 0 NA Mr. G. Ramesh 2 NA 2 2 NA 10 NA 2 Mr. Pralay Mondal 0 0 0 0 1 2 1 0

Board Audit Committee Asset-Liability Management Committee Bond Allotment Compensation Committee Debenture Allotment Committee Nomination Committee Risk Committee

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Share Allotment Committee Attendance at last AGM Attendance at EGM

2 1 1

2 Yes Yes

1 No No

NA No No

1 Yes Yes

0 No No

No sitting fees were paid to any of the directors of the Company

3.

General Body meetings (2012-13)

Meeting AGM

Date and Time 14/06/2012 12 noon

Venue Ellisbridge Township Scheme No.3, Navrangpura, Ahmedabad - 380009

Resolutions passed

HDFBank House, Final Plot No.287, i. To consider and adopt the audited Balance Sheet as on 31st March 2012 and Profit and Loss Account for the year ended on that date and reports of the directors and auditors ii. Declaration of dividend, if any

iii. Re-Appointment of Mr. Kaizad Bharucha as Director iv. To re-appoint M/s. Haribhakti & Co., Chartered Accountants as Statutory Auditor v. Appointment of Mr. Anil Jaggia as a Director of the Company vi. Appointment of Mr. G. Subramanian as non-executive Chairman of the Company

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EGM

30/08/2012 11.00 a.m.

Madhusudan Estate, Ground Floor, iAppointment of Mr. G. Ramesh as a Pandurang Budhkar Marg, Lower Director of the Company Parel (West), Mumbai 400 013 ii. Appointment of Mr. G. Ramesh as Managing Director of the Company

4.

Shareholding pattern as at 31.03.2013

Name of Shareholders HDFC Bank Ltd Others Total (Issued & Paid-up Shares)

Shares held 400,000,000 10,765,750 410,765,750

% 97.38% 2.62% 100.00%

AUDITORS REPORT

To the members of HDB Financial Services Limited Report on the Financial Statements We have audited the accompanying financial statements of HDB Financial Services Limited (the Company), which comprise the Balance Sheet as on March 31, 2013, the Statement of

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Profit and Loss and Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information. Managements Responsibility for the Financial Statements Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 (the Act). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards required that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements were free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Companys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion
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In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the Balance Sheet, of the state of affairs of the Company as on March 31, 2013; (b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and (c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. Report on Other Legal and Regulatory Requirements 1. As required by the Companies (Auditors Report) Order, 2003 (the Order) issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the Order. 2. As required by section 227(3) of the Act, we report that: a. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; b. In our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books; c. The Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in Agreement with the books of account; d. In our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956; e. On the basis of written representations received from the directors as on March 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act,1956.

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BALANCESHEET

Particulars I. EQUITY AND LIABILITIES 1 Shareholders funds (a) Share capital (b) Reserves and surplus (A) 2 Non-current liabilities (a) Long-term borrowings (b) Other long term liabilities (c) Long-term provisions (B) 3 Current liabilities (a) Short-term borrowings (b) Trade payables (c) Other current liabilities (d) Short-term provisions (C) TOTAL(A+B+ C) II. ASSETS 1 Non-current assets (a) Fixed assets (i) Tangible assets (ii) Intangible assets (iii) Capital work-inprogress (b) Non-current investments (c) Deferred tax assets (net) (d) Long - term loans & advance : - Receivables under financing activity - Others (D) 2 Current assets (a) Current investments (b) Trade receivables (c) Cash and cash equivalents (d) Short-term loans and advances - Receivables under financing activity - Others (e) Other current assets (E) TOTAL (D+E) Significant Accounting Policies Notes to Accounts form an integral part of Financial Statements

Note No. 2 3

As at March 31, 2013 410.77 462.76 873.53 5,055.37 42.24 59.94 5,157.55 150.00 17.81 2,027.00 186.44 2,381.25 8,412.32

As at March 31, 2012 410.61 360.17 770.78 1,784.75 13.06 32.35 1,830.16 50.00 11.17 1,327.45 78.53 1,467.14 4,068.08

4 5 6

7 8 9 6

10

11 12 13 14

19.52 0.62 2.55 32.87 6,203.95 4.83 6,264.35 11.95 11.56 1,999.72 116.32 8.42 2,147.97 8,412.32

11.57 0.17 0.11 3.50 14.17 3,081.24 3.67 3,114.42 4.84 17.64 884.80 45.52 0.86 953.66 4,068.08

15 16 14 17

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PROFIT AND LOSS A/C

Particulars I. II. III. IV. Revenue from operations Other income Total Revenue (I + II) Expenses: Employee benefits expense Finance costs Depreciation and amortization expense Administrative & other expenses Provisions & write offs Contingent provision against Standard assets Total expenses V. Profit before tax (III-IV) a. Current tax b. Deferred tax VI. Tax expense:

Note No. 18 19

For the year March 31, 2013 961.75 1.43 963.19 160.61 511.40 4.27 74.24 52.26 10.28 813.05 150.13 66.4 8 (18.70 47.68 ) (0.10)

For the year March 31, 2012 431.13 0.63 431.76 100.34 169.69 3.61 47.55 33.09 6.84 361.12 70.65 33.52 (14.17) 0.19 19.54 51.11

20 21 11 22 23

102.45

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expense/(credit) c. Income tax for earlier years Total tax expense VII. Profit after tax for the year VIII. Earnings per equity share: (1) Basic (2) Diluted Face value per share (`) Significant Accounting Policies Notes to Accounts form an integral part of Financial Statements 1 24 2.49 2.49 10 1.25 1.25 10

NOTES TO ACCOUNTS:

Note 1: a. Overview

HDB Financial Services Ltd. (the Company), incorporated in Ahmedabad, India is a non deposit taking Non Banking Financial Corporation (NBFC) as defined under section 45 -IA of the Reserve Bank of India (RBI) Act, 1934 and is en gaged in the business of financing, collection & insurance services.

b.

Basis of preparation

The financial statements have been prepared and presented under the historical cost convention and accrual basis of accounting, unless otherwise stated, and in accordance with the generally accepted accounting principles in India (Indian GAAP) and conform to the statutory
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requirements, circulars and guidelines issued by the RBI from time to time to the extent that they have an impact on the financial statements and current practices prevailing in India. The financial statements comply in all material respects with the Accounting Standards (AS) notified by the Companies (Accounting Standards) Rules, 2006 and relevant provisions of the Companies Act, 1956 (the Act), to the extent applicable.

c.

Use of Estimates

The preparation of financial statements in conformity with the Indian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. The estimates and assumptions used in the accompanying financial statements are based upon managements evaluation of the relevant facts and circumstances as of the date of financial statements. Actual results could differ from these estimates. Any revisions to accounting estimates are recognized prospectively in the current and future periods.

d.

Significant Accounting Policies

i.

Advances

Advances are classified as standard, sub - standard and non - performing assets as per the company policy approved by the Board which are more stringent than the relevant RBI guidelines. Interest on non-performing advances is transferred to an interest suspense account and not recognized in the Statement of Profit and Loss until received. ii. Fixed Assets and Depreciation

Tangible Fixed asset

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Fixed assets are stated at cost less accumulated depreciation and impairment, if any. Cost includes cost of purchase and all other expenditure in relation to site preparation, installation costs and professional fees incurred on the asset before it is ready for intended use. Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benefit / functioning capability from / of such assets. Depreciation is charged over the estimated useful life of the fixed asset on a straight-line basis. The rates of depreciation for certain key fixed assets used in arriving at the charge for the year are as under: Improvements to lease hold premises are charged off over the primary period of lease

or its useful life, whichever is shorter. Office equipment at 16.21% per annum. Computers at 33.33% per annum. Immovable Property @ 1.63% per annum Motors cars @ 20% per annum Furniture & fixtures @ 9.5% per annum Items costing less than Rs 5,000/- are fully depreciated in the year of purchase. All other assets are depreciated as per the rates specified in Schedule XIV of the

Companies Act, 1956. For assets purchased and sold during the year, depreciation is being provided on pro rata basis by the Company. Intangible asset Software and System development expenditure are capitalised at cost of acquisition including cost attributable to bring the same in working condition & the depreciation is charged @ 33.33% per annum on straight-line basis. Any expenses on such software for support and maintenance payable annually are charged to statement of Profit & Loss.
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iii.

Impairment of Assets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset or the cash generating unit (CGU). If such recoverable amount of the asset or the recoverable amount of the CGU to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit and Loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the revised recoverable amount, subject to maximum of the depreciated historical cost. iv. Investments

Investments are expected to mature after twelve months are taken as non current/ long term investment & are stated at cost. Provisions are made only in case of diminution, which are not temporary in nature, in the value of Investment. Investments maturing within three months from the date of acquisition are classified as cash equivalents if they are readily convertible into cash. All other investment are taken as Current investments/short term and are valued at lower of cost and net realizable value. v. Employee Benefits

Short term employee benefits Short term employees benefits are recognized as an expense at the undiscounted amounts in the Statement of Profit and Loss for the year in which the related services are rendered. Long term employee benefits a) Gratuity

The Company provides for gratuity to all employees. The benefit is in the form of lump sum payments to vested employees on resignation, retirement, on death while in employment or on termination of employment of an amount equivalent to 15 days basic salary payable for each
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completed year of service. Vesting occurs upon completion of five years of service. The Company makes annual contributions to funds administered by trustees and managed by insurance companies for amounts notified by the said insurance companies. The defined gratuity benefit plans are valued by an independent external actuary as at the balance sheet date using the projected unit credit method to determine the present value of defined benefit obligation and the related service costs. Under this method, the determination is based on actuarial calculations, which include assumptions about demographics, early retirement, salary increases and interest rates. Actuarial gain or loss is recognized in the Statement of Profit and Loss. b) Provident fund

In accordance with the applicable law, all employees of the Company are entitled to receive benefits under the provident fund. The Company contributes an amount, on a monthly basis, at a determined rate (currently 12% of employees basic salary) to the Pension Scheme administered by the Regional Provident Fund Commissioner (RPFC) and the Company has no liability for future provident fund benefits other than its annual contribution. Since it is a defined contribution plan, the contributions are accounted for on an accrual basis and recognized in the Statement of Profit and Loss. c) Compensated Absences

The Company does not have a policy of encashment of unavailed leaves for its employees. The Company provides for compensated absences in accordance with AS 15 (revised 2005) Employee Benefits. The provision is based on an independent external actuarial valuation at the balance sheet date. vi. Lease Accounting

Lease payments for assets taken on operating lease are recognized in the Statement of Profit and Loss over the lease term in accordance with AS 19, Leases, issued by the Institute of Chartered Accountants of India. vii. Revenue Recognition Interest income is recognized in the profit or loss account on an accrual basis. In case of

Non Performing Assets interest income is recognised upon realisation as per the RBI Guidelines. Interest accrued and not realised before the classification of the asset as an NPA is reversed
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