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HDFC Mudaraba Sukuk
Prospectus
PROSPECTUS TO THE ISSUE HDFC MUDARABAH SUKUK ISSUE NO.1
Public offer of 100,000 Sukuk of Maldivian Rufiyaa (MVR) 500 per sukuk, to the total value
of MVR 50,000,000 (fifty million), with a semi-annual profit share in the ratio 65:35
Issue date of the prospectus 04/08/2013
Opening date for
application/subscription
25/08/2013
Closing date for subscription 03/10/2013
ISSUER/OFFEROR
Housing Development Finance Corporation Plc HDFC Plc. [incorporated as a state owned enterprise on 28 January 2004 by a Presidential Decree under the Companies Act, Law No: 10/96
,registered as a public company on the 9th of February 2006 and privatized with the signing of a shareholders’ agreement for privatization
between the GOM (49%), IFC (18%), ADB (18%) and HDFC-Investments Ltd.-India (15%) on July 23, 2008 and incorporated in the Republic
of Maldives as a Privatized Company- Registration Number C-2009/021]
Issuer’s Contact Information:
Registered Address: 4th Floor, H.Mialani, Sosun Magu, Male', Rep. Of Maldives.
Telephone: 3338810 / 3315896 / 3315897 Fax: 3315138
Email: [email protected] SHARIAH ADVISOR
Aishath Muneeza
LEGAL COUNSEL
Mazlan & Murad Law Associates 1st
Floor G. Swan Lane, Dharmavantha Magu, Male’, 20-04, Maldives
BANKERS
Maldives Islamic Bank
Bank of Maldives
AUDITORS
KPMG H. Mialani, 2nd Floor, Sosun Magu, Male’, Maldives
Prospectus - HDFC MUDARABAH SUKUK Issue No. 01
Housing Development Finance Corporation Plc, Aug 2013 1
HDFC Plc. PROSPECTUS TO THE ISSUE
HDFC MUDARABAH SUKUK Issue no.1
Published: 04 August 2013
Housing Development Finance Corporation Plc
4th Floor, H. Mialani
Sosun Magu
Male’, Republic of Maldives
Tel: 3338810
Fax: 3315138
Email: [email protected]
www.hdfc.com.mv
Prospectus - HDFC MUDARABAH SUKUK Issue No. 01
2 Housing Development Finance Corporation Plc, Aug 2013
Contents 1. Introduction ......................................................................................................................... 4
1.1. Presentation of Financial Information .......................................................................... 4
1.2. Law & Exclusive Jurisdiction .......................................................................................... 4
1.3. Absolute Responsibility ................................................................................................. 4
2. Responsibility Statement ...................................................................................................... 5
...................................................................................................................................................... 5
3. Report by the directors to confirm due inquiry .................................................................... 6
4. Notice to investors ................................................................................................................ 7
5. About the prospectus ........................................................................................................... 7
6. Details of the Sukuk offered ................................................................................................. 8
7. Mudaraba Sukuk Structure ................................................................................................... 9
7.1. Terms & Conditions ....................................................................................................... 9
7.2. Representation and Warrants ....................................................................................... 9
7.3. Participation in Profits ................................................................................................. 10
7.4. Loss .............................................................................................................................. 10
7.5. Taxation ....................................................................................................................... 10
7.6. Management and Control ........................................................................................... 10
7.7. General Covenants of Mudarib ................................................................................... 11
7.8. Transfers ..................................................................................................................... 11
7.9. Limited Recourse ......................................................................................................... 11
7.10. Negative Pledge .................................................................................................... 12
7.11. Termination ........................................................................................................... 12
7.12. Meeting of Sukuk Holders ..................................................................................... 12
7.13. Force Majeure ...................................................................................................... 13
8. Eligible participants ............................................................................................................. 14
9. Procedure for application ................................................................................................... 15
9.1. Subscription List .......................................................................................................... 15
9.2. Mode of payment ........................................................................................................ 15
9.3. Dematerialized offering............................................................................................... 16
9.4. Allotment ..................................................................................................................... 16
9.5. Acceptance and refunds .............................................................................................. 16
9.6. Payment of Profit and Money at Redemption ............................................................ 16
9.7. Rejection of applications ............................................................................................. 17
9.8. Underwriting and issue costs ...................................................................................... 17
9.9. Paying Agent ................................................................................................................ 17
10. The Project ........................................................................................................................ 18
11. Security ............................................................................................................................. 19
12. Listing ................................................................................................................................ 19
13. Rights of the Sukuk holder ................................................................................................ 19
14. The Issuer .......................................................................................................................... 20
15. Managing Director’s Report .............................................................................................. 30
16. HDFC’s Corporate Governance ......................................................................................... 36
Prospectus - HDFC MUDARABAH SUKUK Issue No. 01
Housing Development Finance Corporation Plc, Aug 2013 3
17. Inspection of documents .................................................................................................. 36
18. Risk Factors ....................................................................................................................... 37
19. Material outstanding indebtedness in relation to the issue ............................................. 41
20. Litigation and disputes ...................................................................................................... 41
21. Details of shareholding in the company ........................................................................... 42
22. Staff Details ....................................................................................................................... 42
23. Disclosure of material contracts & conflict of interest of directors ................................. 43
24. Annexes ............................................................................................................................. 44
Annex - 1. Legal due diligence ..................................................................................... 44
24.1. .................................................................................................................................... 44
24.2. Annex - 2. Accountant’s report ............................................................................. 45
24.3. Annex - 3. Extract of Articles of Association ......................................................... 46
24.4. Annex - 4. Performance Guarantee Letter by HDFC ............................................. 47
24.5. Annex - 5. Audited financial statements for the year ended 31.12.2012 ............. 48
24.6. Annex - 6. Capital market development authority’s approval .............................. 49
24.7. Annex - 7. Registrar of the Companies’ approval ................................................. 50
24.8. Annex - 8. Extract of Corporate Governance Code ............................................... 51
24.9. Annex - 09. Declaration of Shariah Advisor .......................................................... 52
24.10. Annex -10. Endorsement of HDFC Shariah Committee ........................................ 53
24.11. Annex -11. Glossary .............................................................................................. 54
Prospectus - HDFC MUDARABAH SUKUK Issue No. 01
4 Housing Development Finance Corporation Plc, Aug 2013
1. Introduction We, at HDFC Plc. Maldives believe that safe and secure housing is the no.1 priority for the
progressive Maldivian society.
Therefore, we wish to offer you an investment opportunity with us, and share in our mission to
make every Maldivian’s dream home, a reality through innovative housing finance products.
Housing Development Finance Corporation (HDFC) Plc. was established as a specialized Housing
Finance Company in the Maldives in 2004 under state ownership and privatized in July 2008 through
a Public Private Partnership with a joint foreign investment of 51% shares held by International
Finance Corporation (IFC) of the World Bank Group, Asian Development Bank (ADB) and HDFC
Investments of India. HDFC Plc. is the only specialized Housing Finance Institution in the Republic of
Maldives.
1.1. Presentation of Financial Information
The only sources of Company-specific financial information used in this Prospectus are audited
financial statements of the Company prepared in accordance with the Companies Act (10/96) and
International Financial Reporting Standards except for the financial years 31 December 2007 and 31
December 2008, which were prepared with a modification of the requirements of IAS 39 - Financial
Instrument: Recognition and measurement in respect of loan loss provisioning by MMA’s circular No-
GM-9/96 dated 25 April 1996 on Credit Risk Grading System and Loss Provision Requirements. The
financial statements for years ended December 31, 2004 to 2008 were audited by Ernst & Young
Chartered Accountants and by PricewaterhouseCoopers Chartered Accountants for years ended
December 31, 2009-2012.
1.2. Law & Exclusive Jurisdiction
This Prospectus and the Sukuk shall be governed by and construed in accordance with the laws and
regulations of the Maldives. Each of the parties hereto irrevocably agrees that the courts in the
Maldives shall have exclusive jurisdiction to hear and determine any suit, action or proceeding, and
to settle any disputes, which may arise out of or in connection with this Prospectus and the Sukuk,
and for such purposes irrevocably submits to the jurisdiction of such courts. However, before going
to the Court, the dispute shall be first taken to an arbitration proceeding.
1.3. Absolute Responsibility
Approval to issue these securities has been obtained from the Registrar of the Companies as required
by the companies Act (10/96) and the Securities Act (2/2006). Further HDFC has also obtained
consent from the Capital Market Development Authority (CMDA) to issue these securities.
However, neither the Registrar of the Companies nor the Capital Market Development Authority
takes any responsibility for the accuracy of any statement made thereof or for the financial
soundness of the Company or the value of securities concerned. HDFC Plc takes absolute
responsibility for the accuracy of the information disclosed in the document.
Prospectus - HDFC MUDARABAH SUKUK Issue No. 01
Housing Development Finance Corporation Plc, Aug 2013 5
2. Responsibility Statement
Prospectus - HDFC MUDARABAH SUKUK Issue No. 01
6 Housing Development Finance Corporation Plc, Aug 2013
3. Report by the directors to confirm due inquiry We, the undersigned as Directors of the Company hereby confirm performance of due inquiry in
relation to the interval between 31st December 2012 (the date to which the last accounts have been
made up) and 04 August 2013 (the date which prospectus is being issued) that:
a) The business of the Company has in our opinion been satisfactorily maintained;
b) There have not, in our opinion, arisen since the last Annual General Meeting of the Company any
circumstances adversely affecting the trading or the value of the assets of the Company or any of
its subsidiaries;
c) The current assets of the Company and of its subsidiaries appear in its books at values which are
believed to be realizable in the ordinary course of business;
d) There are no contingent liabilities by reason of any guarantees given by the Company or any its
subsidiaries; or
e) There are, since the last annual report, no changes in published reserves or any unusual factors
affecting the profit of the Company and its subsidiaries
Prospectus - HDFC MUDARABAH SUKUK Issue No. 01
Housing Development Finance Corporation Plc, Aug 2013 7
4. Notice to investors Invitation to Subscribe - The Board of Directors of Housing Development Finance Corporation Plc
(HDFC PLC) on 14 December 2012 passed a resolution approving the company to raise Rf 50 million
through a Sukuk Issuance to the public, financial institutions, public corporations, private entities
and other institutions.
5. About the prospectus
This Issue Prospectus has been drawn up in accordance with the laws of Maldives.The main aim of
this Prospectus is to provide all the information necessary for the investors to make the right
decision regarding this Sukuk Issue. Each investor must study this Prospectus carefully in order to
decide whether it is appropriate to invest in it by taking into consideration all the factors relating to
the status and circumstance. It is solely the responsibility of the Issuer to include any essential and
accurate information or data in this Prospectus.
If any investor is in doubt about the contents of this document he/she should consult a person
licensed under the Securities Act who specializes in advising on the acquisition of shares and other
securities.
Prospectus - HDFC MUDARABAH SUKUK Issue No. 01
8 Housing Development Finance Corporation Plc, Aug 2013
6. Details of the Sukuk offered The following summary should be read in conjunction with, and is qualified in its entirety by the
detailed information elsewhere in the Prospectus. Prospective investors in this Sukuk should see
the section in the prospectus under “Risk Factors” that discusses certain factors that should be
considered in connection with an investment in the Sukuk.
1 Issuer: Housing Development Finance Corporation Plc.
2 Issue Price: MVR 500.00 per Sukuk
3 Issue Date: 04 August 2013
4 Subscription Opening: 25 August 2013, 0900hrs
5 Subscription Closing: 03 October 2013, 1100hrs
6 Settlement Date: Date of Subscription
7 Allotment: Before 05 business days from the closure of
subscription
8 Total Issue: MVR. 50,000,000.00 (100,000 Sukuk)
9 The Project: To fund shari’ah compliant mortgage housing finance
operations under HDFC Amna
10 Tenure / Maturity Date: Ten (10) years from the allotment date
11 Profit: Profit share semi-annually in the ratio of 65%:35%
out of Gross Profit
12 Profit Payment Dates: Every six months after the date of allotment, until the
Maturity Date
13 Next Business Day: The first day following a non-working day.
14 Type of Issue: Dematerialized
Prospectus - HDFC MUDARABAH SUKUK Issue No. 01
Housing Development Finance Corporation Plc, Aug 2013 9
7. Mudaraba Sukuk Structure
This Sukuk structure of this issuance is based on the Shariáh principle of Mudaraba (Money
Management). In the Mudarabah concept, one party will be providing the capital (the Rabb al Maal)
and the other party will be managing the capital (the Mudarib) in a proposed Shariáh compliant
project. For the purposes of this Sukuk, the Sukuk holders are collectively the providers of capital
(the Rabb al Maal) that purchase Sukuk certificate from the Issuer. HDFC Plc is the manager of the
capital (the Mudarib). The project managed by the Mudarib is known as the Mudaraba.
7.1. Terms & Conditions
All the relevant requirements and approvals from the regulatory authorities in the Republic of the
Maldives in relation to the issue of this Sukuk have been obtained. Each Sukuk Certificate evidences
an undivided ownership interest in the investment made, subject to these terms and has a limited
recourse obligation of the Issuer. Each Sukuk Certificate ranks pari passu, without any preference or
priority, with all other Sukuk Certificates. Proceeds from the Mudaraba are the sole source of
payments to Sukuk holders pursuant to the Certificates. The Sukuk Certificates do not represent an
interest in the Issuer or any of its affiliates. A meeting with the Sukuk holders can be convened at
the discretion of the Issuer to discuss matters regarding the Mudaraba.
By purchasing Sukuk certificates, the investors/Sukuk holders agree to accept and abide by the
following terms and conditions:
7.2. Representation and Warrants
The Mudarib hereby represents and warrants to the Rabb al Mal, as follows:
a) The Mudarib possesses all necessary powers and licenses to conduct its present business and the
Project.
b) The Mudarib Information provided under ‘The Issuer’ (section 14) is true and correct.
c) The Mudarib is experienced and knowledgeable in all business matters relating to the Project.
STEP 3: AS THE MANAGER/MUDARIB,
USE THE MONEY IN PROVIDING ISLAMIC
HOME FINANCING FACILITY TO ITS
CUSTOMERS
STEP 2: HDFC ISSUES SUKUK
MUDARABAH CERTIFICATE FOR A
MATUARITY PERIOD OF TEN YEARS
(PROFIT RATIO: 65%: 35%)
SUKUK HOLDER
RABB AL MAAL- THE
CAPITAL PROVIDERS
STEP 1- SUKUK HOLDERS BUY
SUKUK CERTIFICATES (MINIMUM
MVR 500)
SHARIAH COMPLIANT
HOME FINANCING
SCHEME UNDER HDFC
AMNA
HDFC PLC
(ISSUER/ORIGINATOR)
MUDARIB-MANAGER
STEP 4- PERIODIC PAYMENTS (BI-ANUALLY) ARE MADE TO THE
SUKUK HOLDERS BASED ON THE PRE-AGREED PROFIT SHARING
RATIO: i.e. 65% OF THE PROFIT TO THE SUKUK HOLDERS & 35%
OF THE PROFIT TO THE MUDARIB FOR HIS WORKMUDARIB
Prospectus - HDFC MUDARABAH SUKUK Issue No. 01
10 Housing Development Finance Corporation Plc, Aug 2013
d) The Mudarib has prepared with all due care the information provided under ‘The Project’ on his
experience and knowledge and has completed all reasonable investigation to assure that such are
true and correct and disclose all factors relevant to the Rabb al Mal’s evaluation of the Project.
e) The Mudarib Financials are true and correct according to generally accepted accounting principles
consistently applied accurately representing the Mudarib’s financial status on the dates and the
profit and loss for the periods indicated, and no liabilities, fixed or contingent exist at the indicated
dates other than as appear in the Mudarib Financials;
f) All transactions for the purpose of which this sukuk proceed will be utilised are Shariah-compliant
transactions; and
g) All regulatory, governmental and corporate approvals and consents (including exchange control
approvals) for the due execution and delivery of, and performance of the work intend to carry out.
7.3. Participation in Profits
(a) The participation by Sukuk holders in the profit generated by the Mudaraba will be in accordance
with the following ratio:
i. 35% of the profit will be for Management Services and payable to the Mudarib.
ii. 65% of the profit will be payable to the Rabb al Mal collectively.
(b) Profit will be distributed out of the gross profit generated from the sukuk fund.
(d)The profits generated by the Mudaraba will be paid by the Mudarib to Rabb al Maal collectively
twice every calendar year; until the earlier of the Termination Date and the Maturity Date.
7.4. Loss
(a) 100% of any losses in the Project will be borne by the Rabb al Mal except in case of negligence,
breach of obligation or wilful default by the Mudarib.
(b) The Mudarib will receive no compensation for his Management Services, and will be liable for any
loss in the Project if it is proven that he has breached his obligations or is proven to be failing in
the discharge of his obligations under these terms.
(c) In the event of the Project showing losses during the continuity of this Sukuk issuance, the
Mudarib shall forthwith give notice of such losses to the Rabb al Mal together with all accounts
and details pertaining thereto and such other information and records as may be required by the
Rabb al Mal.
7.5. Taxation
On behalf of the Project, the Mudarib shall be liable for and shall punctually and regularly pay all
taxes, duties and other charges relating to the Project’s business and operations.
7.6. Management and Control
The complete management and control of the Project is exclusively vested in the Mudarib and the
Mudarib shall be solely responsible for the management and control of the Project.
Prospectus - HDFC MUDARABAH SUKUK Issue No. 01
Housing Development Finance Corporation Plc, Aug 2013 11
7.7. General Covenants of Mudarib
The Mudarib covenants to the the Rabb al Mal that the Mudarib shall:
a) promptly give notice to the Rabb al Mal of any change in the information disclosed in the
section ‘The Issuer’.
b) undertake the Management Services such as providing Islamic financing facilities to third
parties with due care and all reasonable commercial diligence expected of an experienced
businessman to ensure the success of the Project according to the description of The
Project.
c) utilize the Project assets exclusively for purposes of the Project
d) collect all receivables from third parties arising from the Project or the transfer of Project
assets or other documents requiring payment from third parties directly to the Account
e) maintain all Project assets in the name of the Mudarib, but physically segregated from other
assets of the Mudarib and free and clear of all liens and encumbrances except those in
favour of the Rabb al Mal.
f) maintain true and correct books of account relating to the Project together with all invoices,
records contracts and all other documentation.
g) supply to the Rabb al Mal any information, material or document relating to the Project or
to Mudarib’s financial status, and grant access to the Rabb al Mal or its agents to all books
and relating to the Project and to the Mudarib’s financial statements.
h) immediately disclose in writing to material or document the Rabb al Mal any business
factors of which the Mudarib becomes aware and which might adversely affect the success
of the Project.
i) not effect directly or indirectly any transaction on behalf of the Project in which the Mudarib
or any shareholder of the Mudarib, if a corporation, is interested directly or indirectly
without consent of the Rabb al Mal.
j) under its sole responsibility, conduct the Project in conformity with all applicable civil and
criminal laws.
k) conduct the Project without violation of the principles of the Islamic Shariah.
7.8. Transfers
The Issuer makes no representation that the Sukuk may at any time lawfully be sold in compliance
with any applicable registration or other requirements in any jurisdiction, or pursuant to any
exemption available thereunder, or assumes any responsibility for facilitating any such sale. Persons
into whose possession this Prospectus or any Sukuk may come must inform themselves about, and
observe, any applicable restrictions on the distribution of this Prospectus and the offering and sale
of the Sukuk.
7.9. Limited Recourse
By subscribing for or acquiring the Sukuk, Sukuk holders acknowledge that they will have no
recourse to any of the assets of the Issuer (other than the Mudaraba) to the extent that the Issuer
fulfils all of its obligations under Sukuk. The net proceeds of the realisation of the Mudaraba may not
be sufficient to make all payments due in respect of the Sukuk. If, following the distribution of such
proceeds, there remains a shortfall in payments due under the Sukuk, no Sukuk holder will have any
claim against the Issuer to the extent the Mudaraba has been exhausted.
Prospectus - HDFC MUDARABAH SUKUK Issue No. 01
12 Housing Development Finance Corporation Plc, Aug 2013
7.10. Negative Pledge
For so long as any payment remains outstanding under any Sukuk, the Issuer undertakes not to
create or have outstanding any mortgage, charge, lien, pledge or other security interest upon the
whole or any part of the Mudaraba.
In the event of non-payment of profit or principal due on the sukuk, the sukuk holders are entitled to
declare any payment obligation under the sukuk immediately due and payable and such payments
due shall be made to the sukuk holders not less than 10 days. HDFC (issuer) will cancel and will not
resell the sukuk which are redeemed or purchased by the issuer or its subsidiaries or agents of the
issuer.
7.11. Termination
(a) Subject to other provisions of these terms, it is agreed that upon full payment on
Termination Date or earlier, if proceeds have been received, the Mudaraba shall be
redeemed.
(b) The occurrence of an event of default would entitle the Sukuk holders to declare the
Sukuk immediately due and payable without any provision for period of grace, while
provision for remedy may be negotiated to the extent appropriate.
(c) An event of default here means:
(d) (i) default is made in the payment of any Periodic Distribution Amount on the due
date for payment thereof and, in the case of any Periodic Distribution Amount
only, such default continues for a period of a two weeks without any lawful
justification; (ii) the Issuer is (or is deemed by law our a court to be) insolvent or
bankrupt or unable to pay its debts or a moratorium is agreed or declared or comes into
effect in respect of all or any part of the debts of the Issuer;
(iii) it is or will become unlawful for the Issuer to perform or comply with any one or
more of its obligations under the Sukuk;
(e) While the amount invested by the Rabb al Mal must be repaid on the due date,
mentioned above, the accounts of the Mudarabah will be drawn up within 15 days
thereof and the agreed share the Rabb al Mal’s profit will be promptly paid.
7.12. Meeting of Sukuk Holders
The Sukuk holders may convene meetings of Sukukholders to consider any matter affecting their
interests, including the sanctioning by Extraordinary Resolution of a modification of the Mudaraba
Sukuk, these Conditions which is also approved by the Issuer. Such a meeting may be convened by
the Issuer and shall be convened by the Issuer upon the request in writing of Sukukholders holding
not less than one-tenth of the aggregate Nominal Amount of such of the Mudaraba Sukuk as are
current as of such date. The quorum at any meeting convened to vote on an Extraordinary
Resolution will be two or more Persons holding or representing at least half of the aggregate
Nominal Amount of such of the Mudaraba Sukuk as are current as of such date or, at any adjourned
meeting, one-quarter of the aggregate Nominal Amount of such of the Mudaraba Sukuk as are
current as of such date.
An Extraordinary Resolution requires the affirmative vote of at least one more Sukukholder than half
of those represented in the relevant meeting in order for it to be passed. Any Extraordinary
Resolution duly passed at any such meeting shall be binding on all Sukukholders, whether present or
not.
Prospectus - HDFC MUDARABAH SUKUK Issue No. 01
Housing Development Finance Corporation Plc, Aug 2013 13
7.13. Force Majeure
(a) Any delays in or failure by a Party hereto in the performance of the obligations hereunder if and
to the extent it is caused by the occurrences or circumstances beyond such Party’s reasonable
control, including but not limited to, acts of God, fire, strikes or other labour disturbances, riots,
civil commotion, war (declared or not) sabotage, any other causes, similar to those herein
specified which cannot be controlled by such Party.
(b) The Party affected by such events shall promptly inform the other Party of the occurrence of such
events and shall furnish proof of details of the occurrence and reasons for its non-performance
of whole or part of these terms agreed. The Parties shall consult each other to decide whether
to terminate these conditions or to discharge part of the obligations of the affected Party or
extend its obligations on a best effort and on an arm’s length basis.
Prospectus - HDFC MUDARABAH SUKUK Issue No. 01
14 Housing Development Finance Corporation Plc, Aug 2013
8. Eligible participants This issue is open to any individual or corporate legal entity that is permitted to transact on the
Maldives Stock Exchange according to the laws of the Maldives. This would include Public Limited
Liability Companies, Commercial Banks, Pension Authority, Public Corporations and Insurance
Companies.
All supporting documents accompanied with the application should be valid; this includes copies of
national identity cards, passport copies, birth certificates and any other documents validating the
name and date of birth of the applicant.
For Individuals:
A copy of the National Identity Card (only for Maldivians), or Bio-data Pages of current Passport (only
for foreigners)
For Legal Entities:
• A copy of the Certificate of Registration.
• A board resolution/similar document authorizing the investment in HDFC MUDARABAH
SUKUK- Issue No. 1 and the opening and operation of an account with MSD.
• Securities Account on behalf of the entity and authorizing the subscription of shares
• A copy of the Memorandum & Articles of Association and bylaws that govern the operations
of the entity, if any
• A copy of the National Identity Card of the authorized signatories
Prospectus - HDFC MUDARABAH SUKUK Issue No. 01
Housing Development Finance Corporation Plc, Aug 2013 15
9. Procedure for application
Applications must be made on the Application Form supplied with this Prospectus. Application can
be also be downloaded from our website http://www.hdfc.com.mv. Applicants using downloaded
forms are requested to inspect the Prospectus, which is on the company website or a hard copy will
be available at HDFC PLC’s Office. All the Application should be submitted directly to HDFC PLC at
the following address;
Housing Development Finance Corporation Plc
4th
Floor, H. Mialani
Sosun Magu
Male’, Republic of Maldives
9.1. Subscription List
The subscription list will open at 9:00 hours on 25 August 2013 and remain open for 30 market days
and close at 11:00 hours on 03 October 2013. HDFC reserves the right to close the issue prior to the
closing date in the event of an oversubscription following due notice to the public.
Duly completed Application Forms will be accepted by HDFC PLC at its office of business. The
Prospectus and Application Forms will be made available 14 (fourteen) market days prior to the
opening of the subscription list.
9.2. Mode of payment
i. Each application should accompany a check/cash/pay-in-slip for the full payment of the
sukuk applied. The amount payable should be calculated as per the following formula:
� = ��
Where V = full payment of sukuk applied
S = price per Sukuk (i.e. MVR 500)
n = number of sukuk applied
ii. Payments should be made by check, crossed as “Account Payee Only” and made payable to
HDFC Bond -2 or cash to HDFC Bond -2 (7701-143666-102, Bank of Maldives), where the pay-
in slip should be attached to the application form sent to HDFC head office.
iii. All such subscription payments will be deposited to HDFC - Sukuk 1 account on the
‘Subscription Closing’ date and HDFC Plc has all the rights to reject the application if a check
is not honored on its first presentation.
iv. An acknowledgement receipt will be issued for the checks/cash/pay-in-slip received and
Application Forms accepted.
v. Application Forms and the accompanying checks and cash payments which are incomplete in
any way and/or not in accordance with the terms, conditions and instructions set out in this
Prospectus, and application forms which are illegible will be rejected.
Prospectus - HDFC MUDARABAH SUKUK Issue No. 01
16 Housing Development Finance Corporation Plc, Aug 2013
9.3. Dematerialized offering
This offering of Sukuk will be carried out in a dematerialized environment. This means that the
sukuk certificates issued by HDFC Plc will be deposited with the Maldives Securities Depository
(MSD). A record of each sukuk holder and sukuk held shall be maintained by MSD, and statements
shall be issued upon request from time to time to evidence the holding. An MSD account opening
form is enclosed with each sukuk application form, and must be perfected by every applicant
subscribing to the Sukuk Issue.
9.4. Allotment
The sukuk will be allotted within 05(five) business days from the ‘Subscription Closing’ date. All the
applications shall be considered for allotment in order of first come first serve basis.
9.5. Acceptance and refunds
Where an application is not accepted in full or in part, the balance of the application money, shall be
refunded to the applicant within 10 (ten) working days from the closure of the issue. The HDFC PLC
reserves the right to accept subscriptions in full or in part from any subscriber.
9.6. Payment of Profit and Money at Redemption
a. The Sukuk Holder, whose ownership of the Sukuk is registered with the MSD, will receive half
yearly profit shared in accordance with pre-agreed profit sharing ratio.
b. Redemption money and profit will only be deposited to the bank account given in the
application form. The bank account should be in his/her/entity’s name and should be in a local
bank in Maldives Rufiyaa (MVR). This account must be live and operational all the time during
the tenor of the sukuk.
c. After the sukuk allotment, MSD should be contacted for any update to the particulars provided
earlier.
d. If any Sukukholder fails to update his/her particulars or refuses to claim and receive payment
of the redemption money payable to such Sukuk holder, the amount due to such Sukuk holder
shall be deposited by the Paying Agent to a separate bank account at the end of thirty days
after the date of maturity and shall be paid to the holder of such Sukuk when a claim is lodged
no later than six months from the date of final maturity.
e. No sukuk, partly or in full, may be redeemed prematurely.
Prospectus - HDFC MUDARABAH SUKUK Issue No. 01
Housing Development Finance Corporation Plc, Aug 2013 17
9.7. Rejection of applications
• Incomplete applications will be rejected at HDFC’s absolute discretion.
• Late Applications (delivered after the closure of the Subscription Period) will be
rejected.
• Applications considered as ‘oversubscription’ will be rejected and refunded within 10
working days following the closure of the issue.
The Management and Board of Directors reserve the right to refuse or accept any
application owing to a valid reason.
9.8. Underwriting and issue costs
No underwriter has been appointed for this series of sukuk issue.
All expenses and fees attributable to this series of sukuk issue, including legal fees, authority fees,
advisory charges, Paying Agent fees and bank charges will be borne by the Issuer.
9.9. Paying Agent
Maldives Securities Depository Company Pvt. Ltd. will be appointed as the Paying Agent whose
address is given below;
Maldives Securities Depository Company Pvt Ltd
H. Gadhamoo Building, 3rd Floor, Boduthakurufaanu Magu,
Male’, Maldives.
T: (+960) 3307878, F: (+960) 3305034, email: [email protected]
W: www.mse.com.mv
W: www.msd.com.mv
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18 Housing Development Finance Corporation Plc, Aug 2013
10. The Project The funds raised by the issue of sukuk will be utilized to give Shariah compliant mortgage
financing facilities under the HDFC Islamic window HDFC AMNA and no amount of the
proceeds will be utilized for any other purpose other than what is stated in the
prospectus. More information about this operation can be obtained through the
following link: <http://www.hdfc.com.mv/hdfc_amna.html>.
HDFC Amna was launched in May 2012 in a ceremony held at Nasandura Palace Hotel,
Maldives. “Amna” is an Arabic word which refers to “security”. Amna is stated in al Quran
to connote peaceful, protected and secure. HDFC Amna is neither a separate company
detached from HDFC nor a subsidiary of HDFC. HDFC Amna is simply and solely an Islamic
window of HDFC offering Islamic home financing facilities to the customers under the
existing license of HDFC to offer home financing products to Maldivians in an affordable
manner.
This Islamic window can be defined as a department of a conventional financial institution
offering Islamic financial services. Hence, HDFC Amna will operate as a department of
HDFC. HDFC Amna will observe the following standards to achieve Shari'ah compliance:
• Complete Segregation of Funds
• Shari’ah Supervisory Board (Shari’ah Committee)
• Products fully based on Islamic Concepts including the contracts
• Management in accordance with Islamic principles
HDFC – Amna has started its operation in December 2012. As at the ended of first quarter
2013, HDFC Amna has a housing portfolio of MVR24 million.
The Sukuk Issue is part of HDFC PLC’s intention to leverage its capital base with a diversified
portfolio of Shariah compliant debt instruments that would include local investors as well.
Another objective of issuing sukuk to the public by HDFC is to create a secured low-risk long-
term Shariah compliant investment avenue for the local takaful /insurance companies,
pension authority, government corporations, companies and the members of public. HDFC
has embraced principles of sustainable and responsible finance in all aspects of operations.
HDFC Sukuk with a listing in the Maldives Stock Exchange will increase vibrancy in the market
by giving opportunities for varying investors to take part in the national housing development
endeavor.
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Housing Development Finance Corporation Plc, Aug 2013 19
11. Security Performance guarantee from HDFC Plc. is given to this offer in Annex 5
12. Listing The Sukuk offered under this prospectus will be eligible for trading in the Maldives Stock
Exchange. Application for listing has been made.
13. Rights of the Sukuk holder The Sukuk Holder will be entitled to a half yearly profit in accordance with the terms given
in this prospectus. In the event the Sukuk Holder needs liquidity before the Sukuk’s date
of maturity, the Sukuk will be eligible for trading in the Maldives Stock Exchange and the
holder has the right to transfer ownership through secondary market.
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20 Housing Development Finance Corporation Plc, Aug 2013
14. The Issuer
Housing Development Finance Corporation Plc.
Our Vision
Our vision is to provide decent and affordable homes in a safe and healthy
environment, and work towards uplifting the living standards of all
Maldivians by becoming the market leader for financial services in the
Maldives.
Our Mission
Our mission is to offer financial and social strength to all Maldivians by
providing home finance and other savings and investment products managed
professionally and profitably to the highest International Standards and to
the complete satisfaction of all stakeholders.
Our Pledge
HDFC would strive hard and explore all avenues to:
• Provide a solution to every single customer.
• Process home-finance applications to the highest professional standard
to give a speedy and effective service.
• Manage all aspects of customer relationship with due care,
communication and sensitivity to ensure 100% home-finance
performance.
• To conduct all affairs as a responsible corporate citizen with good
governance, accountability and transparency.
Company Overview
• Housing Development Finance Corporation (HDFC) Limited was incorporated as a
state owned enterprise on 28 January 2004 by a Presidential Decree under the
Companies Act, Law No: 10/96. The commercial operations commenced on March
29, 2004. HDFC was established with technical assistance from the World Bank, and
initially all shares were held by the Government of Maldives (GOM).
• HDFC Plc. was registered as a public company on the 9th of February 2006.
• The HDFC Plc. was privatized with the signing of a shareholders’ agreement for
privatization between the GOM, IFC, ADB and HDFC-Investments Ltd.-India on July
23, 2008. This Public Private Partnership has a joint foreign investment in 51%
shares by International Finance Corporation (IFC) of the World Bank Group, Asian
Development Bank (ADB) and HDFC Investments Ltd of India. The structure of the
shareholding in the privatized HDFC Plc. is given in clause 21 (Detail of shareholding
in the company).
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Housing Development Finance Corporation Plc, Aug 2013 21
• The July 2008 initiative to restructure the capital and recommence the business of
HDFC Plc. became effective on February 10, 2009 with the first equity disbursement
by the International Shareholders. IFC and ADB’s commitment extended to a multi-
lateral funding facility with seven-year tenure. HDFC Ltd of India, with over thirty
years of experience in mortgage finance, is the technical partner of HDFC Plc. with
assistance from IFC’s Advisory Service Performance Based Grant (ASPBG).
• In March 2013, the company has issued a listed bond of MVR 51.97 million at an
interest rate of 7.5.p.a. Eight individuals and one institution invested with this
bonds issue.
Having restructured its capital, and with new lines of long-term credit, Housing
Development Finance Corporation Plc., Maldives (HDFC) re-entered the market for
mortgage home-finance for housing needs of individuals and families. HDFC is unique as
the only specialized housing finance institution in the Maldives. With six commercial
banks operating in the mortgage housing home-finance market, HDFC’s competitive
long repayment terms and income-pooled home-finance enabled the achievement of a
30% market share by the end of 2010 when the industry home-finance portfolio stood
at Rf. 1 billion. The demand for home-finance continue at a rate of growth that
outstrips the supply of matching funds, and long-term sukuk denominated in MVR is
seen as the way forward to create sustainable housing finance in the Maldives.
The GOM’s policy of improving the infrastructure in focus islands to facilitate economic
development through zonal investment opportunities for Public, Private, Partnership
(PPP) ventures is viewed as a positive factor in going forward with the development of
housing finance. Such an approach would assist sustainable growth in home ownership
based on mortgage security over properties that will appreciate in value to satisfy the
fair value criterion in debt provisioning and managing credit risk. This is very important
as a market characteristic, especially in the light of the financial crisis faced by
developed economies of the world.
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22 Housing Development Finance Corporation Plc, Aug 2013
HDFC Plc’s Board Advisory Committees and Senior Management
Board of Directors*
Nominee Directors
Ms. Renu Sud Karnad HDFC Investments Ltd. (India)- Chairperson 2009
Mr. Sanjaya Gupta ADB – Chairman 2011 and 2012
Mr. Ismail Ali Manik GOM - Chairman - 2013
Ms. Fareeha Shareef GOM
Alternate Directors
Mr. Conrad D'Souza HDFC Investment Ltd (India)
Ms. Christine Engstrom ADB
Mr. Hamid Sodique GOM
Managing Director
Dr. A. D. Priyanka Baddevithana
Company Secretary
Mr. Adam Athif
Audit and Management Committee
Mr. Conrad D’Souza Alternate Director- HDFC Investment Ltd. - India
Mr. Ismail Ali Manik Director -GOM
Mr. Sanjaya Gupta Director- ADB
Nomination and Remuneration Committee
Mr. Ismail Ali Manik Director - GOM
Ms. Fareeha Shareef Director - GOM
Dr. A.D. Priyanka Baddevithana Managing Director
*Only the Managing Director holds a qualifying share in the stock of HDFC. The Chairman and Board Directors
function in a non-executive capacity.
Shari-ah Committee
Dr. Ibrahim Zakariyya Moosa - Chairman
Dr. Rusni Hassan - Member
Ms. Aishath Muneeza - Member
Senior Management
Dr. A. D. P. Baddevithana - Managing Director
Mr. Ali Shareef - Chief Financial Officer
Mr. Ibrahim Didi - Deputy General Manager & Head of Accounts
Mr. Mohamed Shaafiee - Chief Technology Officer
Ms. Aishath Rasheeda - Senior Manager - Credit
Mr. Adam Athif - Senior Manager – Administration and HRD
Mr. Mohamed Fathy - Senior Manager - IT
Mr. Mohamed Shafeeq - Senior Manager - Business Development & CRM
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Housing Development Finance Corporation Plc, Aug 2013 23
Profile of HDFC Plc’s Board
The Directors’ Board comprises of five nominee and alternate directors appointed by
GOM, ADB and HDFC Investments- India. The chairman to the Board of Directors is
appointed on rotation, and with a non-voting managing director responsible for
policy implementation and on-going operations. All directors possess a wide range
of talents, skills and experience with proven track records in the field of housing
finance and business administration.
Nominee Directors -
Ms Renu Sud Karnad, 58, is a nominee Director of HDFC Investments Ltd., India,
from the inception of the privatization of HDFC Plc in 2009 and does not hold any
shares in any company in the Maldives that has a conflict of interest with HDFC Plc.
She is the Joint Managing Director at Housing Development Finance Corp. Ltd. in
India, and Home Finance Services India Private Limited. She joined the firm in 1978
and has been its Executive Director since 2000. Ms. Karnad has been Director of ICI
India Limited since August, 2003, HDFC Bank Ltd. since July, 2002 and Motor
Industries Co. Ltd. since April, 2007. She serves as Director of HDFC Asset
Management Co. Ltd., Indraprastha Medical Corp. Ltd., Gruh Finance Ltd., HDFC
Realty Ltd., Ascendas Limited, Credit Information Bureau (India) Ltd. (CIBIL),
Feedback Ventures Ltd., HDFC Chubb General Insurance Ltd., and Mother Dairy
Fruits & Vegetables Limited. She is a Member of the Board of Advisors at Swiss
Technology Venture Capital Fund. Ms. Karnad also holds Pravin Fellowship from
Woodrow Wilson School of International Affairs, Princeton, NJ. She is a Law
Graduate and also holds a Masters degree in Economics from Delhi University. Over
the years, Ms. Karnad has had to her credit, numerous awards and accolades. She
was featured in Business Today magazine’s list of “Most Powerful Women in Indian
Business’ many years, and was among the list of “25 top non-banking women in
finance” by U.S. Banker magazine in 2008 and was chosen as the “Best Woman
Corporate Leader” by Business & Economy magazine for the year 2007-2008. She
was felicitated at the “Women Achievers Award – 2007” by the FICCI Ladies
Organization. In 2006, Wall Street Journal Asia adjudged her among the “Top Ten
Powerful Women in Asia”.
Mr. Sanjaya Gupta, 48, is a nominee Board Member representing ADB since March
2010. He does not hold any shares in any company in the Maldives that has a conflict
of interest with HDFC Plc. As a senior professional with more than 24 years of work
experience, he has coordinated with international financial institutions (IFC, ADB, and
KFW), and with various central and state Government departments to augment the
Indian real estate/ retail mortgage space. Mr. Gupta started his professional career at
HDFC Ltd., as a Management Trainee – since then he moved into various critical
positions, such as Business Head for Middle East, Deputy General Manager at HDFC
Ltd. etc. He also was the Vice President –Business Head Mortgage Operations for
ABN AMRO NV. He was the Chief Executive Officer & Managing Director for American
International Group Inc. He has also co-promoted a housing Finance company, for
the urban poor in India – India Shelter Finance Corporation Ltd. – a first of its type
company in the country. Mr. Gupta holds an MBA from the University of Lucknow
and is a B.Com Graduate. Completed his High School from St. Joseph’s College
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24 Housing Development Finance Corporation Plc, Aug 2013
Nainital and is a Certified Project Manager by Perot Systems Project Management
Institute. In addition he is also a Certified Housing Finance Trainer by Centre of
Housing Finance – a JV, USAID and HDFC Ltd. He is also a Fellow of the Royal Institute
of Chartered Surveyors - UK.
Mr. Ismail Ali Manik, 37, is a nominee Board Member representing the Government
of Maldives since the inception of the privatization of HDFC Plc. in 2009. He does not
hold any shares in any company in Maldives that has a conflict of interest with HDFC
Plc. He has over 11years of experience in Public Finance in the Government Sector
and has acted as a Consultant to World Bank. He started his Professional career in
Ministry of Finance and Treasury and worked on fiscal policy, national budget
preparation and public expenditure management issues and is currently working as
the Permanent Secretary at Ministry of Finance and Treasury . Mr Manik holds a
Master Degree in Public Administration from Columbia University, Program in
Economic Policy Management, in addition is a Bachelor of Economics, University of
Adelaide, Australia. Further he has participated at various international seminars and
workshops conducted by World Bank, IMF, Summer Institute for the Preservation of
Study of History of Economics, Columbia University and Centre for Central Banking
Studies, Bank of England.
Ms. Fareeha Shareef, 33, is a nominee Board Member representing the
Government of Maldives since privatization of HDFC Plc in 2009. She has over seven
years of experience in the financial and business advisory services. She has declared
holding of 200 shares of the Bank of Maldives, and also sitting board member of the
Maldives Pension Administration Office. She is the CEO of FJS Consulting Pvt. Ltd, a
leading management consultancy firm based in the Maldives. She has worked with
major organizations including State Trading Organization Plc., Maldives National
Shipping Limited, Maldives Tourism Development Corporation, Housing
Development Corporation Ltd, Bank of Maldives Plc. and developmental agencies
including UNDP, FAO, IFAD, WHO, World Bank and Asian Development Bank. She
has worked in KPMG Ford Rhodes Thornton and Co, Sri Lanka as an Advisor in the
Risk Advisory Section of the firm. She has also worked at Public Enterprises
Monitoring and Evaluation Board of Ministry of Finance. She holds a Masters
Degree in Management Studies (Accounting) from the University of Waikato,
Hamilton, New Zealand in addition to a Bachelor’s Degree in Commerce & a
Bachelor of Commerce and Management (Accounting & Finance) from Lincoln
University, Christchurch, New Zealand. She is a member of Association of Chartered
Certified Accountants (UK), Institute of Internal Auditors (USA), Certified Practising
Accountants of Maldives (CPA Maldives) and a Provisional Member of New Zealand
Institute of Chartered Accountants (NZ).
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Housing Development Finance Corporation Plc, Aug 2013 25
Alternate Directors -
Mr. Conrad D’Souza, 51, is an Alternate Board Member for HDFC Investments Ltd. India since
the inception of the privatization of HDFC Plc. in 2009. He does not hold shares in any
company in the Maldives that has a conflict of interest with HDFC Plc. He has 27 years of
experience in the field of Housing Finance. He joined Housing Development Finance
Corporation Limited – India in 1984 and is currently Senior General Manager – Management
Services and Investor Relations. His responsibilities include corporate planning and budgeting,
corporate finance and investor relations. He was earlier the Treasurer of HDFC-India and his
responsibilities included resource mobilization both domestic and international and asset
liability management. Mr. D’Souza has also worked earlier in Operations and Management
Services at HDFC-India. He has been a consultant in housing finance to USAID/UNDP and IFC
(Washington) and has undertaken assignments in Asia, Africa and Eastern Europe. He is a
member of the National Stock Exchange of India Limited’s Committee on Currency Derivatives
and is also a governing council member the Association of Finance Professionals of India. Mr.
D’Souza has a Master’s Degree in Commerce, a Master’s Degree in Business Administration
and is Senior Executive Program (SEP) graduate of the London Business School.
Ms. Christine A. Engstrom, 45, is an alternate Board Member representing the Asian
Development Bank (ADB) since the inception of the privatization of HDFC Plc in 2009. She
does not hold any shares in any company in Maldives that has a conflict of interest with HDFC
Plc. As a Principal Investment Specialist at the ADB with more than 18 years of work
experience, Ms. Engstrom is currently the Unit Head of Financial Institutions at ADB where she
heads a team providing debt, equity and guarantees to financial institutions in Asia. Ms.
Engstrom started her career at the International Finance Corporation (IFC), Washington, D.C.,
working in the Asia Department before moving to the Overseas Private Investment
Corporation (OPIC), in Washington, D.C. as Senior Investment Officer. Ms. Engstrom was
employed at Fannie Mae from 2001 to 2006 as Deal Structuring Manager in Single Family
Mortgages before assuming the post of Senior Transaction Manager in Fannie Mae’s Capital
Markets group. She is currently based in Manila. Ms. Engstrom holds an MBA from
Georgetown University as well as M.A, International Affairs from University of Virginia in
addition to B.A. in Political Science from the University of Washington.
Mr. Hamid Sodique 37, is an alternate Board Member representing the Government of
Maldives since May 2012. He does not hold any shares in any company in Maldives that has a
conflict of interest with HDFC Plc. He has over 15years of experience in Consultation work and
Project and Management area and was a member of the Maldives Pension Administration
Office and served in the Investment Committee of the Board until August 2011. He started his
Professional career in the Maldives Monetary Authority in 2006 and since then has worked at
prominent positions in well know Organization such as UNESCO, SAARC, AAA and is currently
working at a private consulting firm. He has executed many national and international projects
on business management, strategic planning, Entrepreneurship Skills Training and Mentoring.
Mr. Sodique holds a Master Degree in Business Administration from the University of
Adelaide, Australia in addition to a Bachelor’s Degree in Business Administration from
University of Brunei Darussalam.
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26 Housing Development Finance Corporation Plc, Aug 2013
Managing Director
Dr. A. D. P. Baddevithana, 54, holds a qualifying share at HDFC Maldives, and does not
hold shares in any company that has a conflict of interest with HDFC Maldives. He
counts more than 30 years of experience, with 20 years in senior management
positions in Housing Finance, Banking, and Business Administration in the UK, Sri
Lanka, and Maldives. Prior to taking up the position of Managing Director of HDFC
Maldives in September 2008 he served the HDFC Bank of Sri Lanka as its Head of
Credit, Operations and Marketing over a period of six years. He began his career in
1977 as a management trainee of the Peter Robinson Group in the UK, and his
employment record includes Kensington and Westminster District Finance Office, the
Housing Corporation of England and Wales, Clerical Medical Investment Ltd. of the
Halifax Group UK, and in Sri Lanka in 1997 as the founder General Manager of the first
private sector building society known as Nations Building Society, a position he held
until he joined the HDFC Bank of Sri Lanka in 2002. He is a Life Member of the
Association of Professional Bankers of Sri Lanka, a Certified Professional Marketer of
the Asia Pacific Marketing Federation, Fellow of the Sri Lanka Institute of Marketing,
and holds academic qualifications of Ph.D., MBA, MA and BA. He has attended many
international seminars and conferences in the UK, USA, Germany, Singapore, India,
Malaysia and Indonesia covering banking, corporate governance and housing finance.
He has been a key resource person and adviser for a number of state, international
and private sector led ventures including, HACAS UK, the Commonwealth Institute,
ADB, World Bank and the Central Bank of Sri Lanka, and has served as an accredited
resource person for programs of the Institute of Chartered Bankers of the UK.
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Housing Development Finance Corporation Plc, Aug 2013 27
Profile of HDFC Plc’s Shariáh Advisory Committee
The HDFC Amna department is managed and systematized to ensure proper Shari’ah governance
mechanisms both within the department and among its stakeholders. A Shari'ah Committee
consisting of three members will be established to advise the Board of Directors of HDFC on Shari'ah
related matters. The members of the Shariah Committee are:
Dr Ibrahim Zakariyya Moosa (Chairman), 56, holds a PhD in Fiqh and Usulul Fiqh and a M.A
in Islamic Revealed Knowledge from International Islamic University Malaysia. He obtained
his Bachelor’s Degree in Islamic Shariáh from Islamic University of Medina, Saudi Arabia.
Currently he is the Rector of College of Islamic Studies. He also served as a Parliament
Member for nine years (from 1989 to 1999); was a Member of the Special Majlis for thirteen
years (from1990 to 2004); was a Member, Supreme council of Islamic Affairs. (from 1995 to
2004); and also was a Member of Quran translation committee (from 1995 to 2004). He has
attended seminars and published articles on different matters related to Shariáh.
Assoc. Professor Dr Rusni Hassan, 46, is an Associate Professor at the Ahmad Ibrahim
Kulliyyah of Laws (AIKOL), International Islamic University Malaysia (IIUM). She graduated
with LLB (Honours) and LLB (Shariah) (First Class), Master of Comparative Laws (MCL) and
Ph.D. in Law. Her area of specialization includes Islamic Banking, Finance and Islamic
Documentations, Islamic Capital Market, Takaful and Islamic Law of Transactions. She is a
Board Member and PhD Selection Committee at IIUM Institute of Islamic Banking and
Finance. Presently she is a member of Shariah Advisory Council of Central Bank of Malaysia
(Bank Negara Malaysia). She was a member of Shariah Committee for HSBC Amanah
Malaysia, HSBC Amanah (Takaful) Malaysia and a registered Shariah Unit Trust Advisor with
the Securities Commission. She has presented numerous research papers on Islamic finance
in national and international conferences and she has also written books of Islamic finance
related subjects. She is the co- author of the winning essay of the worldwide Islamic finance
essay competition organized in Kuala Lumpur Islamic Finance forum (KLIFF) of 2010 for
research: “Take It or Leave It! The Iniquitous Islamic Banking Documents” and has won a
gold medal and a silver medal in IIUM Research Invention and Innovation Exhibition 2012 for
her research on Islamic banking and finance.
Aishath Muneeza, 27, is currently the Head of Islamic Finance of Capital Market
Development Authority (CMDA), which is the regulatory body for the capital markets of
Maldives and the chairperson of the Capital Market Shariáh Advisory Committee of CMDA.
She sits in the National Fiqh Academy (National Fatawa Council) of Maldives. She also serves
as the Islamic finance Consultant for Housing Development Finance Corporation PLC (HDFC)
of Maldives. The Islamic wing of HDFC, HDFC Amna was set up under her direct guidance.
She is also a registered Shariah Advisor at Securities Commission of Malaysia to advise on
non-ringgit shariah compliant products. She delivers public lectures and conducts training on
Islamic Finance related areas for government officials and private institutions. She has
presented numerous research papers in national and international conferences and has
spoken about Islamic finance related matters in different parts of the world including France,
India, Tunisia, Mauritius, Australia, Brunei, Indonesia and Malaysia. She has published
academic books and papers on Islamic banking and Finance. As an Attorney, she also drafts
documentation for Islamic products for Islamic financial Institutions. She holds a LL.B (HONS)
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28 Housing Development Finance Corporation Plc, Aug 2013
degree and a LL.M (Banking) from International Islamic University Malaysia. Currently she is
doing her PhD.
Profile of other members of the senior management team.
Company Secretary, Senior Manager Administration and HRD - Mr Adam Athif, 41,
joined HDFC Plc. in December 2004. He does not hold any shares in the company or in
any company in the Maldives that has a conflict of interest with HDFC Plc. Mr Athif
started his career in the Government of Maldives in 1990 as a Secretary since then he
has worked his way up the ladder and has worked in areas related to Administration
and Human Resources in the Private Sector as well as the Government. He holds a
Diploma in Business Administration and is well versed with local Housing Market
having attended various workshops in relation to Housing Finance.
Chief Financial Officer - Mr. Ali Shareef 31, joined HDFC Plc in October 2012. He does
not hold any shares in any company in Maldives that has a conflict of interest with
HDFC Plc. He has over 11years of experience in Finance in the Government Sector and
has acted as a Consultant to local firms. He started his Professional career in the Public
Enterprises Monitoring and Evaluation Board at the Ministry of Finance and Treasury
and worked on due diligence of SOE’s, Financial reviews of PE’s, advice PE’s on
budgets, business plans & Policies. Mr. Shareef holds a BA (Hons) Accounting from
University of Hertfordshire, UK/ through Inti College Malaysia and is an Affiliate
Member of the Association of Chartered Certified Accountants of the UK since 2008.
He served as Technical Advisor to the Minister in the Public Enterprises Monitoring
and Evaluation Board, Ministry of Finance and Treasury prior to joining HDFC Plc.
Deputy General Manager and Head of Accounts – Mr. Ibrahim Didi, 35, joined the HDFC
Plc. in June 2008. Other than 83 shares in the Bank of Maldives, he does hold any shares in
any company in the Maldives that has a conflict of interest with HDFC Plc. He began his
career in the Ministry of Planning in August 1998, and his service record includes reputed
organisation such as Island Aviation Service Ltd. and Wataniya Telecom Maldives Pvt Ltd.,
where he was the Finance Operations Manager for three years prior to joining HDFC Plc. He
is a passed finalist of the Managerial Level of CIMA. He attended many local and
international seminars and workshops on Business Administration, Banking and Islamic
Finance.
Chief Technology Officer- Mr. Mohamed Shaafiee 35, joined HDFC Plc., in July 2012. He
does not hold any shares in the company or any other company in the Maldives that has a
conflict of interest with HDFC Plc. He started his career as Interim Chief Information Officer
at Makmal Komersial Holdings Sdn. Bhd., Malaysia, in March 2000, during which time he
lectured at APIIT College and provided consultancy to the partner start-up Cyanix
Computers. He has worked with a number of reputable local firms in top-level management
capacity, including Wataniya Telecom Maldives and Focus Computers Pvt Ltd. Clients who
have benefited from his consultancy services over the past decade include Maldives Police
Service, Crown Company Pvt Ltd, Attorney General’s Office and Damas Company Pvt Ltd.
Prior to joining HDFC he was working for the President’s Office, Maldives, as their Head of IT,
with a stint at the 17th SAARC Summit as the Project Director for IT assigned by the
Government of Maldives. He holds a Master’s degree in Software Engineering from
Staffordshire in addition to a Bachelor’s of Science degree in Computing. One of the
outstanding achievements in his area of interest is the development of a non-von-Neumann
Programming Language, Symlah, which is one the first Turing-complete programming
language developed by a Maldivian.
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Housing Development Finance Corporation Plc, Aug 2013 29
Senior Manager - IT- Mr. Mohamed Fathy, 37, joined the HDFC Plc. in March 2004 as part of
the initial team and holds one share in the company. He does not hold any shares in any
company in Maldives that has a conflict of interest with HDFC Plc., except at Bank of
Maldives Plc at which he holds 50 Shares. Mr. Fathy began his career 2001 in the field of
audit and gained experience at local firms and with the experience gained got engaged in
providing consultancy services as a freelance consultant. While at HDFC he has headed the
Internal Audit Division as well as the IT Division, in addition to numerous contributions
provided in the development internal controls and systems, he holds Bachelor of Commerce
from Banglore University of India and M.Sc. in IT Management from Asia Pacific University
(A.P.U), Malaysia.
Senior Manager for Credit- Ms. Aishath Rasheeda, 42, joined the HDFC Plc. in March 2008
and holds one share in the company. She does not hold any shares in any company in
Maldives that has a conflict of interest with HDFC Plc. Ms. Rasheeda began her career with
the Maldives Monetary Authority in July 1990, and counts continuous 14 years of experience
at the Central Bank, which made her a founder staff member as Manager Credit of HDFC Plc.
in 2004. She holds AAT Diploma and has attended many national and international training
programs, workshops, and seminars related to both conventional and Islamic Housing
Finance.
Senior Manager- Business Development & CRM - Mohamed Shafeeq, 34. Joined HDFC Plc.
In July 2009 and does not hold any shares in the company or in any company in the Maldives
that has a conflict of interest with HDFC Plc. He began his career in 1997 with Society for
Health Education (SHE), a reputed nation-wide non-profit non-government organization in
the Maldives, and was promoted as its Finance Director in 2008. He holds a Master in
Business Administration from the University of Ballarat, Australia in addition to a BA (Hons)
Accounting and Finance awarded by University of East London, UK. He is a member of
Association of Chartered Certified Accountants (UK), and also a senior member of Certified
Practising Accountants of Maldives (CPA Maldives) He attended many local and international
seminars and workshops on Business Administration, Marketing, Banking and Finance.
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30 Housing Development Finance Corporation Plc, Aug 2013
15. Managing Director’s Report We are pleased to present this report to the sukuk prospectus of HDFC Plc. with extracts
from the Audited Accounts for the year ended December 31, 2012 while the full audited
financial statements complete with the auditor’s report is annexed:
The nine-year financial landscape shows that HDFC has grown with each passing year to reach
stability and sustainability.
Year
2004 (9
months) 2005 2006 2007 2008 2009 2010 2011 2012
Gross income 1.8 12.8 20.0 20.3 21.0 34.3 39.6 61.1 90.9
Net income (0.2) 4.9 9.3 14.3 15.6 25.5 30.4 43.6 62.4
Operating
profit/(loss) (1.3) 4.6 8.9 14.1 10.4 19.1 23.5 38.0 57.9
Since its establishment by the Maldives Monetary Authority in 2004, HDFC has played an unmatched
role in the life of the nation by helping Maldivians live their dream of having a decent home in a safe
and healthy environment. It is the only specialized housing financial institution in the Maldives for
mortgage home loans, the majority shareholding of which, upon privatization, was taken up by
international investors comprising International Finance Corporation (IFC) of the World Bank Group,
Asian Development Bank (ADB) and HDFC Investments Ltd. of India. The nine-year financial
landscape shows that HDFC has grown with each passing year to reach stability and sustainability.
HDFC’s transformation into a Public Private Partnership in 2008 was carefully designed to create a
stable housing finance solution that is both affordable and sustainable. Moving to a new phase by
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Housing Development Finance Corporation Plc, Aug 2013 31
embracing responsible finance with its principles of client protection, HDFC has not only served the
housing needs in the Male’ region, but has made great strides towards giving access to finance to
tens of thousands who live in the far-flung atolls with its Island Outreach Programme. The
performance of the year under review surpassed the key performance indicator benchmarks set at
the beginning of the period despite the country situation in 2012, and the obstacles HDFC had to
face during a period viewed by the international investors
as the most volatile and turbulent one in the history of the Maldives. HDFC was able to record an
impressive growth in the operational profit of MVR 57.9 million for the year ended 2012, which was
a 52% increase over 2011 with an year-over-year loan portfolio growth of 33%. HDFC has strived to
reach greater heights of excellence with each passing year, and 2012 was no exception. Therefore, it
would be remiss not to mention the commitment and passion of one of the finest teams of
professionals I have been privileged to work with, right across the board, from HDFC’s Chairman and
Board of Directors who have set effective policies and charted a course to take the organization from
strength to strength, and its management and staff who have made it possible for us to record yet
another landmark year of growth and sustainability in 2012. We thank our valuable customers
whose commitment to performance of their financial obligations has established a sound credit
culture as the bedrock of HDFC’s success thus far. They have given much needed investor confidence
to expand operations in order to offer access to finance and financial inclusion to many Maldivians
living in the remote atolls to the north and the south of the Male’ region. We take this opportunity
to express our sincere gratitude to our regulators, the Maldives Monetary Authority led by its
Governor Dr. Fazil Najeeb, and the respective teams that have assisted HDFC by their supervision to
achieve continuous improvement in policies and processes towards the development of a robust
organization, built to last. We also appreciate the government and private agencies who have been
our partners and well-wishers, especially the housing ministry and the finance ministry, and their
respective ministers, and the CEO and management of Capital Market Development Authority for
the active interest they have taken in furthering HDFC’s cause of providing homegrown solutions in
housing finance to the masses in an affordable and a sustainable manner.
Lending Operations and the Social Impact
HDFC’s inclusive business model has developed a range of products and services that involve the
cottage industries in the value chain as suppliers of building material such as compressed cement
blocks and carpentry work carried out at an island level to reduce the cost of construction. The total
number of beneficiaries at the bottom of the pyramid exceeds 10,000 during the 9-year existence of
HDFC. A comprehensive range of products and services have been innovated to serve the customers
better. Effective counselling service and CRM have helped in achieving best-fit product development
through customer feedback.
Total loans approved and disbursed under various product categories serve to profile HDFC’s direct
contribution to the housing finance market. Since its inception, total housing finance injected to the
market stood at MVR 1.2 billion as at the year ended on December 31, 2012. Approximately 6,000
customers under the pooled application process participated in HDFC’s growth. As at the year end,
the total outstanding capital stood at MVR 800 million profiled as below:
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32 Housing Development Finance Corporation Plc, Aug 2013
Country Report on Housing and Housing Finance
Having re-structured its capital in February 2009, and with new lines of long-term credit, HDFC has
re-entered the market for mortgage loans for housing needs of individuals and families. HDFC is able
to offer long repayment terms in a market where the demand has grown at a pace outstripping the
supply of matching funds. The privatization has transformed the institution to face the future as a
commercially viable, private sector-led company that can grow and develop effective solutions to
the urgent housing problems of the Maldives. The Maldives consist of approximately 1,200 islands
covering an area of 90,000 sq. km. of the Indian Ocean, set in an Exclusive Economic Zone (EEZ)
covering 859,000sq km. The island nation has 196 administrative islands designated for habitation,
in addition to which over 100 islands are allocated as resort properties and 35 islands designated for
industry and agriculture. Maldives is home to approximately 350,000 citizens living in a dispersed
manner with only thirteen islands outside of Male’ region recording a population of more than 5000
inhabitants. This presents a formidable challenge to a housing finance institution which intends to
operate at a national level due to the diverse needs of the population that is thinly spread in some
regions, with the exception of the post-tsunami phenomenon of concentration through in-migration,
where the stress of housing is felt the most in the Male’ Atoll. The nation’s capital Malé, with around
2.5 sq. km. of total land area, has over one third of the entire population, while approximately
seventy percent of the rest of the inhabited islands have less than 1000 inhabitants. Maldives has a
relatively young population with almost forty percent under 15 years of age and around three
percent over 65 years of age. This demographic profile translates to a growth in demand for housing
in the foreseeable future as the young population matures to full-fledged participation in the
economy. With regard to human development trends, the country ranks high among the Asia-Pacific
countries.
In order to provide a sustainable solution to the limitation of suitable land to develop much needed
housing stock in the Male’ Atoll, land reclamation in a viable manner began at the turn on the
century with the Hulhumale project spearheaded by stateown Hulhumale Development Corporation
(renamed as Housing Development Corporation or HDC in 2009). Another recent project under the
umbrella of Global Projects Development Company (GPD) to reclaim the Gulhi Falhu reef-basin has
also met with a degree of success. There is special emphasis on developing these two projects to
provide modern and sustainable communities. Here the challenge would be to provide housing
development finance to match the rapid pace of development as Hulhumale is scheduled for a
second phase of reclamation in 2013. The government’s concept of developing focus islands that will
create a demand for housing is also a positive trend. It will assist sustainable development of home
ownership based on mortgage financing of properties that would appreciate in value to maintain a
positive equity scenario. The underlying real estate value and market value of homes being
developed from HDFC mortgage loans is a highly significant factor as a market characteristic,
especially in the light of the 2008 financial crisis faced by the developed economies of the world,
where subprime home lending and a property bubble that burst had contributed to a financial
meltdown. The statistics of households according to UNFPA (United Nations’ Population Fund-2008
survey updated for 2012) are as follows:
Households :
Male’ 15,000
Atolls 33,000
Total 48,000
Therefore, the density in Malé is around eight members per household with 60,000 people per sq.
km., which is one of the highest in the world. In the outer atolls, this figure is reduced to around six.
However, it is the constraints on buildable land that has made Male’ one of the most densely
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Housing Development Finance Corporation Plc, Aug 2013 33
populated capital cities. A desirable family size per unit of four would lead to an additional housing
requirement for the Male Atoll estimated at present to be 10,000 units, which can be absorbed by
the combined infrastructure of Hulhumale and Gulhi Falhu developments. Therefore, HDFC’s
solution for financing sustainable housing development in the Maldives is linked to the strategies of
the Housing Development Corporation (HDC) of Hulhumale, and GPD of Gulhi Falhu. Their Joint
Venture Partnerships with a number of international property developers should yield
approximately 2000 units of housing per annum and, with an additional role as a social landlord in
Hulhumale’, the HDC has shown their commitment to addressing the housing problem facing the
Male’ Atoll
Maldives’ Economic Landscape
The national housing policy for outer atolls is one that is linked with the GOM’seconomic
development policy. Typical of an island nation, development in Maldives is also constrained by the
absence of land based mineral resources. There is limited scope for expansion of the agriculture
sector. Certain areas possess vulnerability to natural disasters and environmental hazards. The major
industries driving the Maldivian economy are fisheries and tourism with the supporting industries of
transport, construction, boat-building, fish processing and finance. Tourism, fishing and transport
are the major sources of foreign exchange earnings and government revenue, and which together
directly account for about 60 percent of gross domestic product. In terms of employment, these
three sectors along with construction industry account for more than 50% of total employment. A
large expatriate workforce plays a key role in the development of the Maldivian economy. Their
needs of accommodation have created a vibrant market for rental income from foreign employment
categories that include teachers, accountants, medical personnel and other business and technical
professions including civil construction and infrastructure development. The Government’s support
for the development process is seen from the large number of employees in the public sector, which
accounts for approximately one third of the working population. The public sector consists of the
government and state owned enterprises (SOEs) covering a wide range of activities including fuel
supply, banking, air and sea transport, international shipping, communications and the provision of
electricity and utilities, fisheries operations, tourism and importing and distributing a large share of
essential foodstuff. The Maldives’ narrow financial sector is dominated by the banking sector, which
consists of one locally owned commercial bank, BML, the recently established Maldives Islamic Bank,
MIB, branches of three Asian commercial banks, SBI, Habib, MCB, and a branch of a global bank,
HSBC. Non-bank financial institutions, known as OFIs (Other Financial Institutions) include players in
the general insurance market, Maldives’ Finance Leasing Company, (MFLC), and the only housing
finance institution, HDFC. MMA is the primary source of domestic financing for the Government’s
fiscal operations. The commercial banks mobilize savings and provide credit and foreign exchange to
the private sector. Currently work is underway to promote the Maldives Stock Exchange for raising
much needed capital for economic development. Capital Market Development Authority (CMDA)
facilitates trading arrangements. There is limited secondary market trading activity with shares of
the Bank of Maldives (BML), and two other state owned public companies, namely the Maldives
Transport and Contracting Company (MTCC) and the State Trading Organization (STO), playing the
lead role out of the six listed entities. The recently passed Securities Act paves the way for the
establishment of a formal capital market, with HDFC taking the lead by issuing the first ever rated
bond to be listed in the Maldives Securities Exchange in February 2013.
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34 Housing Development Finance Corporation Plc, Aug 2013
The open economy of the Maldives has a narrow export base with high dependence on imports for
most of its economic activities. Imports have averaged around 61% of the GDP in recent years, while
domestic exports, consisting primarily of fish and fish products have ranged between 11-15% of the
GDP. Net surplus on services and transfers has averaged around 34% of the GDP. Service receipts
come from tourism and related activities. There is a significant outflow of transfers from the
economy owing to the large expatriate workforce. Medium and long-term debt flows and inflows of
capital for direct investments dominate the capital account of the balance of payments. There is no
exchange control legislation in the Maldives. Foreign direct investment in the country needs prior
approval of the government and a negotiated annual royalty is payable. There are no restrictions on
transferring of profits.
The construction sector continued to remain robust in 2012, with 8% growth during the year.
According to a World Bank report published in 2012, Maldives’ economy has recovered from the
debacle of 2009 where the GDP had contracted by 4.74% (negative) to achieve 7.46% growth by the
end of 2011 as depicted below:
GDP growth in 2012 was limited to 3.4% despite coming close to the anticipated performance from
tourism and construction sector during the year. This may be attributed to a reality check on the
recovery efforts after the 2009 negative GDP, which cast a long shadow into the future impacting
the structure of the national debt and budget deficit. The European debacle reflected in the global
economic and financial conditions in 2012 would impact on the Maldives tourism, but the continued
success of reaching across the globe for all-year-round tourism and innovation to capture new
market segments are positive signs for future growth. Maldives is proactively seeking other avenues
of GDP growth from a diversified field of economic activity, and it signals a future that would reduce
Maldives’ over-dependence on tourism.
Acknowledgements
The privatized HDFC Maldives has completed 4 years of growth to lay a firm foundation of
sustainable development to address the housing needs of the Maldives. To help achieve the
aspirations of the people, there is an urgent requirement to upgrade substandard housing and build
up a new housing stock in this emerging economy. In building capacity of HDFC to meet these
challenges, the greatest asset at our disposal is the commitment and professionalism of all our
employees towards realizing the mission and vision of HDFC Maldives. I am immensely grateful to
our dedicated staff for their valuable contribution. Our valued customers are essentially the citizens
of Maldives, and the raison d’être and the core of HDFC’s continued motivation to improve their
lives through access to affordable housing finance so that they can live in decent homes, in safe and
healthy environments. We thank them for forging a lifelong relationship with an institution they can
call their own.
We appreciate the enabling and regulatory environment created by the Maldives Monetary
Authority, Ministry of Finance and Treasury, Ministry of Housing and Infrastructure, Male’ City
Council, Ministry of Economic Development, Judiciary and all other government agencies, as well as
the officials of international shareholders and investors who monitor and mentor our progress. In
my personal capacity, as the Managing Director, I would like to place on record my profound
appreciation to all the stakeholders, especially our staff, shareholders, customers, chairman and the
board of directors for their support and cooperation extended to me. The outgoing Chairman of
2012, Mr. Sanjaya Gupta has been a tower of strength in concluding a successful year. He was ably
supported by his fellow directors Ms. Renu Sud Karnad, Mr. Subrata Data Gupta, Mr. Ismail Ali
Manik, Ms. Fareeha Shareef, and alternate directors Mr. Conrad De Souza, Ms. Christine Engstrom,
and Mr. Hamid Sodique. We also welcome the appointment of Mr. Ismail Ali Manik as chairman for
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Housing Development Finance Corporation Plc, Aug 2013 35
2013. We extend our very sincere gratitude to the outgoing director and IFC nominee Mr. Subrata
Dutta Gupta for completing a three and a half year directorship of HDFC that came to an end on
December 31, 2012. He has left an indelible mark as a pioneer of the privatized HDFC’s progress, and
will always be remembered for his yeomen service towards the success of the early years following
privatization. We wish him well in all future endeavors. We also thank our legal counsel Mazlan and
Murad Law Associates as well as PWC Maldives for their professional input, and our Consultant on
Islamic Finance, Ms. Aishath Muneeza, for her passion and dedication to establishing an Islamic
Finance Window at HDFC.
No National Housing Finance Institution could hope to grow and sustain a sound loan portfolio that
adds value to the lives of the people it serves without the participation of sound investment
partners. In this regard, we thank the IFC, ADB, FMO of Netherlands, the country’s very own Bank of
Maldives, Allied Insurance Company of Maldives, Maldives Post Ltd., and Amana Takaful (Maldives)
PLC for their support in making 2012 a successful year for HDFC. Going forward, a great deal is
expected of HDFC’s partnership with national and international players to usher an era of model
living for Maldivians in decent homes in an environment as clean, green, and breathtaking as the
ocean paradise that defines the Maldives.
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36 Housing Development Finance Corporation Plc, Aug 2013
16. HDFC’s Corporate Governance The essence of corporate governance at HDFC Plc. is the relationship between the board
of directors, management and the shareholders to act in the best interest of the all the
stakeholders. Corporate Governance ensures that companies are directed and managed
at Board and management level in a fair and transparent manner. HDFC’s corporate
governance is planned and implemented at the Board level and led by the Board. It
provides guidance on how the objectives of the company are set and achieved, how risk
is monitored and assessed, and how performance is optimized. It is concerned with the
organization’s policy direction and implementation in a fair and transparent manner by
the board of directors, the management and the staff of HDFC. The code of corporate
governance provides guidance on how to set the objectives of the company for optimum
performance while managing and monitoring the risks in order to achieve:
i) Creation of value (through entrepreneurism, innovation, and development)
ii) Implementation of effective control systems commensurate to the risks involved
iii) Accountability and transparency
Corporate governance refers to internal disciplines or systems, which govern the
relationships among the 'key players' or entities that are instrumental in the performance
of the organization. The details of which is provided in Annex 9.
17. Inspection of documents
The Memorandum and Articles of Association of HDFC Plc., Shareholders Agreement and
all other documents including audited accounts from inception of the Company referred
to in this Prospectus may be inspected at any time during normal business hours at the
Registered Office of HDFC Plc. until the end of the subscription period.
The Registered office of HDFC Plc;
Housing Development Finance Corporation Plc
4th
Floor, H. Mialani, Sosun Magu
Male’, Republic of Maldives
Tel: 3338810, Fax: 3315138
Email: [email protected]
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Housing Development Finance Corporation Plc, Aug 2013 37
18. Risk Factors
Risks Related to the Issuer
HDFC activities primarily relate to the provision of mortgage home-finance for
the construction and purchase of residential properties. The company’s activities
are exposed to a variety of financial risks and those activities involve analysis,
evaluation, acceptance and management risk or combination risk.
HDFC’s total Balance Sheet value as at the year ended December 31, 2012 stood
at MVR 797.7 million of which, borrowings (see Note 28 to the Audited Financial
Statements in Annexure 4) MVR 349.5,million was represented by:
Million
Bank Overdraft 36.02
International Finance Corporation (IFC) 85.15
Asian Development Bank (ADB) 73.60
Corporate Sukuks 40.30
Netherlands Development Finance Company (FMO) 94.45
Wakala Facility 20.00
HDFC is exposed to the following risks;
1. Exchange Rate Risk
2. Equity Risk
3. Market Risk
Exchange Rate Risk
Foreign exchange risk is mitigated through a hedging mechanism by entering
into a ‘Currency Swap Agreement’ between HDFC and State Trading
Organization Plc.
Equity Risk
Since the stock of HDFC Plc. is not listed on the Maldives Stock Exchange and held
between International Shareholders and the Government of Maldives, the company
does not have an equity risk.
Market Risk
Market risk is the risk that the fair value or the future cash flows of the financial
instruments will fluctuate because of the changes in market prices. HDFC has a
significant concentration of fair value risk on the properties taken as mortgage security
for home -finance.
Due to the very nature of the assets funded under the portfolio, it makes the company
exposed to the risks associated with economic standing of the Maldives particularly as it
relates to the cost of construction, rental market for residential properties, real estate
values and sales.
Market risk is mitigated by:
• Strict credit criteria that preserves the margin of the amount funded versus
the cost/value on any property.
• Prudential criteria that would ensure that the ability to repay debt is
reasonably assured by customer’s financial circumstances and credit history.
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38 Housing Development Finance Corporation Plc, Aug 2013
• Regular review and assessment of market factors that affect the quality of the
mortgage portfolio.
Risks Related to the Issue
Before making an investment decision, prospective purchasers of Sukuk should
consider carefully, in the light of their own financial circumstances and investment
objectives, all of the information in this Prospectus.
The Issuer believes that the factors described below represent the principal risks
inherent in investing in the Sukuk, but the inability of the Issuer to pay any amounts
on or in connection with the Sukuk may occur for other reasons and the Issuer does
not represent that the statements below regarding the risks of holding any Sukuk
are exhaustive.
There may also be other considerations, including some which may not be presently
known to the Issuer or which the Issuer currently deems immaterial, that may
impact any investment in the Sukuk.
1. Payment risk is the risk that the issuer will default on payment of yield and
principal. HDFC’s liquidity management process ensures that it has sufficient
liquidity to pay its creditors and lenders when they fall due.
2. Difficult macro-economic and financial market conditions could materially
adversely affect Issuer’s business, results of operations, financial condition
and prospects.
3. The Sukuk will not be guaranteed by the Government of the Republic of the
Maldives.
4. A more competitive environment in the Republic of the Maldives may
adversely affect the Issuer’s business and results of operations
5. The Issuer’s business may be adversely affected if there is any disturbance
to its operational systems or a loss of business continuity.
6. Future events may be different from those reflected in the management
assumptions and estimates used in the preparation of the Issuer’s financial
statements, which may cause unexpected losses in the future
7. Absence of secondary market/limited liquidity - there is no assurance that a
secondary market for the Sukuk will develop or, if it does develop, that it will
provide the Sukuk holders with liquidity of investment or that such
secondary market will continue for the life of the Sukuk. Accordingly, a
Sukuk holder may not be able to find a buyer to buy its Sukuk readily or at
prices that will enable the Sukuk holder to realize a desired yield. The
market value of the Sukuk may fluctuate and a lack of liquidity, in particular,
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Housing Development Finance Corporation Plc, Aug 2013 39
can have a material adverse effect on the market value of the Sukuk.
Accordingly, the purchase of the Sukuk is suitable only for investors who can
bear the risks associated with a lack of liquidity in the Sukuk and the
financial and other risks associated with an investment in the Sukuk. An
investor in the Certificates must be prepared to hold the Sukuk for an
indefinite period of time or until their maturity.
8. The Sukuk are limited recourse obligations - The Sukuk are not debt
obligations of the Issuer. Instead, the Sukuk represent an ownership interest
solely in the Mudaraba. Recourse to the Issuer in respect of the Sukuk is
limited to the Mudaraba and proceeds of the Mudaraba are the sole source
of payments on the Sukuk.
9. The Shariah Advisor and the CMDA Shariah Advisory Committee have issued
an opinion in respect of the Sukuk. However, an opinion is only an
expression of the view of the Shariah Advisor and the CMDA Shariah
Advisory Committee board based on their experience in the subject and is
not a binding opinion. There can be no assurance as to the Shariah
permissibility of the structure of the issue and the trading of the Sukuk and
none of the advisors to the Issuer makes any representation as to the same.
Sukuk holders are reminded that, as with any Shariah views, differences in
opinion are possible. Sukuk holders are advised to obtain their own
independent Shariah advice as to whether this Prospectus and the Sukuk
meets their individual standards of compliance and make their own
determination as to the future tradability of the Sukuk on any secondary
market.
Risk management policies
The other risk management policies and processes adopted by HDFC are given
below:
Credit Risk
The company takes on exposure to credit risk, which is the risk that counterparty
will cause a financial loss for HDFC by failing to discharge an obligation. Credit risk is
the most important risk for HDFC’s business; management therefore carefully
manages its exposure to credit risk. Credit exposures arise principally in lending
activities that lead to home-finance and advances. There is also credit risk in off-
balance sheet financial instruments, such as home-finance commitments.
Credit policies were formulated covering HDFC's credit activities and establishment
of individual limits of authority for initiating, reviewing and approving credit.
Prudential due diligence on customers’ creditworthiness is assessed using the
Maldives Credit Information Bureau, physical verification, background screening.
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40 Housing Development Finance Corporation Plc, Aug 2013
Liquidity Risks
Liquidity risk is the risk that HDFC is unable to meet its payment obligations
associated with its financial liabilities when they fall due and to replace funds
when they are withdrawn. The consequence may be the failure to meet
obligations to repay depositors and fulfill commitments to lend.
HDFC’s liquidity management process, as carried out within HDFC and
monitored by the senior management in HDFC, includes:
• Day-to-day funding, managed by monitoring future cash flows to ensure
that requirements can be met. This includes replenishment of funds as
they mature or are borrowed by customers;
• Maintaining a portfolio of deposits with that can easily be liquidated as
protection against any unforeseen interruption to cash flow
• Monitoring balance sheet liquidity ratios against internal requirements;
and
• Managing the concentration and profile of debt maturities.
• Monitoring and reporting take the form of cash flow measurement and
projections for the next week and month respectively, as these are key
periods for liquidity management. The starting point for those
projections is an analysis of the contractual maturity of the financial
liabilities and the expected collection date of the financial assets.
• HDFC also monitors unmatched medium-term assets, the level and type
of undrawn lending commitments and undrawn borrowings.
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Housing Development Finance Corporation Plc, Aug 2013 41
Capital Management of HDFC
HDFC’s objectives when managing capital, which is a broader concept than the
‘equity’ on the face of balance sheets, are:
� To comply with the capital requirements set by the lenders
� To safeguard HDFC’s ability to continue as a going concern so that it can
continue to provide returns for shareholders and benefits for other
stakeholders
� To maintain a strong capital base to support the development of its
business
� Capital adequacy and the use of regulatory capital are monitored daily by
HDFC’s management, employing techniques based on the guidelines
developed by the Basel II Committee, for supervisory purposes.
The risk-weighted assets are measured by means of a hierarchy of five risk
weights classified according to the nature of – and reflecting an estimate of credit,
market and other risks associated with each asset and counterparty, taking into
account any eligible collateral or guarantees. A similar treatment is adopted for
off-balance sheet exposure, with some adjustments to reflect the more
contingent nature of the potential losses.
19. Material outstanding indebtedness in relation to the issue As at December 31, 2012 HDFC PLC does not have any debts in the Company’s balance
sheet that cannot be serviced from its ordinary course of business.
20. Litigation and disputes At the date of publication of this Prospectus, to the best of the Company’s knowledge and
understanding, there is no significant on-going litigation by or against HDFC or any of its Directors.
There has not been any litigation against HDFC or any of its Directors in the past 05 (five) years, nor
are there any penalties imposed by any regulatory authority or judicial decision.
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42 Housing Development Finance Corporation Plc, Aug 2013
21. Details of shareholding in the company
22. Staff Details At the date of publication of prospectus the company has 29 staff members. Broad
categories are appended below;
Categories No
Managerial 16
Operational 11
Support 02
Total 29
DETAILS OF SHARE HOLDING IN THE COMPANY (INCLUDING DIRECTORS OF THE BOARD)
Authorized Share Capital of the Company - MRF 318,750,000 (Issued MRF 159,375,000)
MRF 100 par value
Name Capacity/Designation Value of Share(s)
held
No. of
Share(s)
held
Government of Maldives Shareholder 78,092,800 780,928
International Finance Corporation Shareholder 28,687,500 286,875
Asian Development Bank Shareholder 28,687,500 286,875
HDFC Investment Ltd. Shareholder 23,906,200 239,062
Mr. Ibrahim Naeem Shareholder 100 01
Ms. Raheema Saleem Shareholder 100 01
Mr. Hamid Yoosuf Shareholder 100 01
Mr. Mohamed Shahudy Shareholder 100 01
Ms. Aishath Rasheeda Shareholder 100 01
Mr. Mohamed Fathy Shareholder 100 01
Mr. Mohamed Hamdhan Fahumy Shareholder 100 01
Mr. Ahmed Anwar Shareholder 100 01
Mr. Nahid Idrees Shareholder 100 01
Dr. A.D. Priyanka Baddevithana Managing Director 100 01
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Housing Development Finance Corporation Plc, Aug 2013 43
23. Disclosure of material contracts & conflict of interest of directors
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24. Annexes
24.1. Annex - 1. Legal due diligence
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24.2. Annex - 2. Accountant’s report
(To be submitted)
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24.3. Annex - 3. Extract of Articles of Association
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24.4. Annex - 4. Performance Guarantee Letter by HDFC
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24.5. Annex - 5. Audited financial statements for the year ended
31.12.2012
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24.6. Annex - 6. Capital market development authority’s approval
(To be obtained)
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24.7. Annex - 7. Registrar of the Companies’ approval
(To be obtained & submitted later)
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24.8. Annex - 8. Extract of Corporate Governance Code
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24.9. Annex - 09. Declaration of Shariah Advisor
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24.10. Annex -10. Endorsement of HDFC Shariah Committee
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24.11. Annex -11. Glossary