It’s my pleasure to welcome you all to the 22^nd Annual General Meeting of LIC Housing Finance Limited. I am indeed honoured to share with you the fruits of the hard work and dedication, the team at LIC Housing Finance Limited had put in the year gone by. The year witnessed excellent business growth, increased profitability and continues to accomplish one milestone after another in its road map to annihilate defaults and NPA levels. I thank each and every one of you for reposing your faith in me and in my dedicated team.

India’s housing finance industry comprises of banks and housing finance companies. The average ticket size of loan as expected has grown by around 10-12 percent in 2010-11, primarily on account of rise in property prices. CRISIL Research estimates average ticket size to grow 9-10 percent during 2011-12, given the increase in area per unit and marginal decrease in loan-to-value (LTV) ratio. CRISIL Research estimates the long term forecast for finance penetration in urban areas to be 42 percent in 2014-15 on account of expansion of branch network and increasing property prices.

The housing finance outstanding portfolio is expected to record a 5 year CAGR of 17.2 percent on account of an estimated 14.9 percent annual growth in disbursements and stable pre-payment environment. Overall pre-payments are expected to fall with marginal increase in structural pre-payments and reduction in cyclical pre-payments as interest rates are likely to rise.

Population growth and changes in socio-demographic factors such as increasing trend towards urbanization and nuclearisation of families, alongwith increase in consumers’ affordability levels, would be the key factor impacting finance penetration and hence volume growth in the long term. Further, rise in property prices and improvement in loan to value ratios would increase the average ticket size of loans, supporting value growth in the next five years. It is estimated that housing finance disbursements would post a 5 year CAGR of 14.9 percent reaching Rs.2,88,900 crore in 2014-15 due to growth in underlying housing demand, rise in property prices and higher LTVs.

Over the last few years, the share of housing finance companies (HFC) has been increasing mainly due to their specialisation, better customer service, and increasing focus on urban centres which have higher average ticket size. The HFCs are expected to further raise their share in total disbursements, despite the introduction of competitive loan rates by banks. HFCs too have reduced interest rates to meet competitive pressures from banks.

An affordable housing project acts as a means to empower lower and middle income groups with a house / flat. In terms of advantages, besides putting a cap on rising property prices, these ‘affordable housing’ projects can also serve to bridge the shortage of dwelling units for middle and low-income bracket. Since most of the affordable housing projects target middle and low-income groups, the price is fixed in such a way as to woo them. The need to own a house is highest among the salaried, middle class, lower-middle class and newly married couples. In suburban Mumbai, developers / builders are targeting the middle and low-income groups, as the demand for affordable housing is highest in this segment. As several affordable housing projects are situated along peripheral areas of the city, there are advantages, especially in terms of lower land costs and other incremental expenses, which enable a developer to offer better space, better amenities and better value to the customer. Nevertheless, other factors such as demographics offered by the location, employment opportunities for people, connectivity, accessibility, etc. also play a part in making the projects a success.

Due to the volatility in the situations, housing demand could witness phases of spikes and slowing down, but these should be taken as runs of a cycle and the comfort point for any lender in the housing industry will be the genuineness of the demand, the urgency of the demand and the huge market potential. In fact the intention of the Union Government is to provide enticement for housing, therefore, there shall be no cause for cynicism so far as the business expectations are concerned.

A few achievements influencing the performance of your Company during the year are worth mentioning here:

1.During the year under review, the Company had sanctioned loans worth Rs.22602.92 crore and disbursed Rs.19912.39 crore. Individual loans constitute 89.49 percent of the total sanctions and 87.95 percent of the total disbursements. The total loan portfolio increased to Rs.51089.84 crore as against Rs.38081.38 crore in the previous year.

2.The Company continues to be rated as ‘AAA/Stable’ and ‘CAREAAA’ by the credit rating agencies namely CRISIL & CARE for the tenth consecutive year while Fixed Deposit program is rated as ‘FAAA/Stable’ from CRISIL for fourth consecutive year. It raised funds aggregating to Rs.18,873.87 crore through term loans from banks, issuance of Non-Convertible Debentures, Upper Tier II subordinate bonds, commercial paper, NHB refinance and public deposit. Efforts were made to re-price the existing borrowings either through negotiation or entering into Interest Rate Swap.

3.Existing lending rates were reviewed at regular quarterly intervals in view of the change in interest rate scenario, thereby insulating the stakeholders of risk of interest fluctuation and passing on the benefits as applicable to the customer.

4.The Capital Adequacy Ratio of the Company was 14.88 percent as against prescribed norms of 12 percent by National Housing Bank.

5.Apart from wide marketing network comprising Direct Selling Agents (DSAs), Home Loan Agents (HLAs) and Customer Relationship Associates (CRAs), wholly owned subsidiary, LICHFL Financial Services Limited also distributes the Company’s products.

6.The Company with a view to increase the liquidity of the shares in the stock market and to make it more affordable to the retail investors at large and also to have better comparability with share prices of other companies, the Company after taking members’ consent through postal ballot, sub-divided the nominal face value of existing equity share of Rs.10/- each into 5 equity shares of Rs.2/- each.

7.The Company is monitoring recovery of dues from customers very closely. The Company makes regular follow up for recovery of the outstanding dues from the defaulting customers. During the last year, the Company had resorted to taking action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and had sold 279 properties for Rs.17.13 crore. In addition, it could collect Rs.48.16 crore from 2904 accounts after issuance of notice under the SARFAESI Act. Company has been effective in reducing NPAs through this route and generate considerable amount in adding to the income.

The Company has reduced the gross NPA during the year to Rs.241.96 crore from Rs.263.15 crore in the last year. The gross NPA ratio has come down to 0.47 percent from 0.69 percent and net NPA ratio has also come down to 0.03 percent from 0.12 percent.

In view of the fierce competition in the housing finance market, the main concern of your Company is to protect the interest of all the stakeholders and also strengthen its brand image of being a professionally managed and leading housing finance company. Your Company has intensified focus on all critical areas such as cost of funds, market share, reduction of NPA, training of front-end officials in sales and servicing areas, upgradation of information technology and simplification / rationalization of procedures. As a result, the Company has been able to show an excellent performance in profit growth and improved its market share despite aggressive marketing by the competitors.

Ø The Company generated a total Income of Rs.4868.72 crore during F. Y. 2010-11, out of which, Income from housing operations comprised Rs.4680.08 crore.

Ø The Profit before Tax amounted to Rs.1294.16 crore registering an increase of 42.02 percent over the previous year and the Profit after Tax was at Rs.974.49 crore indicating a growth of 47.16 percent over last year.

Ø Considering the excellent performance during the financial year 2010-11 the Board of Directors have recommended a dividend of 175 percent i.e. Rs.3.5 per equity share of Rs.2/- each. The Net Worth of your Company stands at Rs.4169.11 crore, showing a growth of 23.07 percent over the preceding year. The Book Value of Share as on 31st March, 2011 stood at Rs.87.83 while the Earning Per Share has increased from Rs.14.69 to Rs.20.53.

Ø Market capitalization of the Company were subject to the sharp movements of share price at the Stock Exchange and as on 31.03.2011 it was Rs.10701.28 crore on the basis of the closing share price of Rs.225.45 at BSE.

Homes are evolving and so is consumer’s aspiration. Having seen the world, literally Indians are finally realizing that homes can be developed to be more than just a roof to sleep under. While a home is all about the things that stimulate happiness and contentment such as family, love, care, leisure and play, the core concept of home has far evolved from being a basic ‘need’ to being ‘desired’.

As an industry observer, it is my belief that the healthy growth that the industry has witnessed during the last year is likely to continue in the current year also. As Chairman of your Company let me assure you that your Company is in good hands and will continue to capitalize on the growing opportunities in the market place and will continue to deliver superior value to all its stakeholders. Being in the business of lending, we have adopted observance of rules and financial discipline as one of our avowed objectives. Your Company has also been adhering to the tenets of good Corporate Governance since its very inception. It has also strictly complied with the various guidelines issued by different statutory authorities.

To meet the challenge of growing competition and to cash in on the opportunities, your Company will continue to implement the strategies adopted and also modify the same depending on market demands and also identify and explore new areas for growth both in retail and non-retail segment. The Company will also explore possibilities of raising fund at moderate rate and also alert and sensitive to the rising rates of interest and has been taking timely decisions to maintain / increase the margin for better profitability.

I am very optimistic about the future of Housing industry and growth of mortgages in this country. In such an environment the performance of the Company is expected to be encouraging.

Today’s business environment is daunting, to say the least. The global economy is confronting debt problems in European countries. However, India being a safe investment option, long term investments like pension funds will come into realty sector. With the economy expected to grow by 8.5 percent to 9 percent and an average increase of 20 percent in salary levels being projected by HR surveys for 2011, the realty sector is expected to do much better than it did in 2010.

But I am confident that the Company would ensure not only consolidation of the gains achieved in the past years but also ensure further growth and increased profitability. The Company is capable of delivering enhanced value to all the stakeholders in general and those who own this company in particular. With prudent strategies and concrete action plan, involvement of all staff and marketing personnel, timely and effective managerial interventions, guidance of the Members of Board and the patronage of our valued Customers and Shareholders, the Company will be in a position to scale greater heights in its all round performance both quantitatively and qualitatively.

I wish the Company and all its Shareholders a very happy and prosperous year of performance and relationship ahead.

D. K. Mehrotra

CHAIRMAN

Place: Mumbai

Date: 20th July, 2011