Analysis of Corporate Governance at Indiabulls

by Chinmai R

Introduction: IndiaBulls Housing Finance Services

Indiabulls Housing Finance Ltd. (IBHFL) is India’s third largest housing finance company,
regulated by the National Housing Bank (NHB). IBHFL is rated ‘AA’ by leading rating agencies
including CRISIL and ICRA. The company has a balance sheet size of ₹ 0.96 trillion as on 30th
September, 2020.The company has serviced more than 1 million happy customers and
cumulatively disbursed loans of over ₹ 2.77 trillion. It is has a strong nationwide presence and
continues to reach out further with eHome Loans – India’s first completely online home loan
fulfilment platform.

IBHFL offers quick, convenient and competitively priced home loans in the affordable housing
segment. The company’s primary goal is to ensure a superior home buying experience to its
customers and to make housing finance more affordable and viable by contributing to the
ecosystem that supports it.

This report aims to evaluate the effectiveness of corporate governance at Indiabulls Housing
Finance based on information available up to the last prospectus released on December 4, 2023.
The analysis covers key aspects such as women directors, board composition, CSR activities,
ongoing investigations, whistle-blower complaints, and changes in statutory auditors.

1. Women Directors in the company: Gender Diversity

The company has one woman director, indicating a modest level of gender diversity on the
board. Shefali Shah is an Additional Director (Independent) of the Company. She has a master’s
degree in economics. She is a retired Indian Revenue Services officer and has served as an
additional secretary to the Ministry of Culture as well as the Department of Consumer Affairs.
She has also been appointed as the chairperson of the Quality Review Board established under
the Chartered Accountants Act, 1949.
While this meets the minimum regulatory requirements, fostering greater diversity can bring
additional perspectives and contribute to well-rounded decision-making.

2. Board Composition: Number of Independent directors

The Articles of Association of the Company provide that the number of directors shall not be less
than three and not more than 15. At present, the Company has eight Directors on its Board, two
of whom are Executive Directors, one is a Non-Executive LIC Nominee Director, and five are
Non-Executive and Independent Directors. The presence of independent directors is considered
essential for providing unbiased oversight and ensuring that the interests of stakeholders are
safeguarded. The board's size appears reasonable, as excessive independence may lead to
complacency, while an adequate number of independent directors can effectively oversee the
CEO.

3. Ongoing Investigations: SFIO/NFRA

The Citizens Whistle Blower Forum (CWBF) filed a Public Interest Litigation (PIL) in the Delhi
High Court against the company, Sameer Gehlaut (the erstwhile promoter), Union of India,
Ministry of Finance, Ministry of Corporate Affairs, National Housing Bank, Reserve Bank of
India (RBI), Registrar of Companies Kolkata, Serious Fraud Investigation Office (SFIO), and
Securities and Exchange Board of India (SEBI). The PIL sought an investigation into alleged
violations by the promoter and irregularities related to facilities provided by the company to five
borrower groups.
The company responded with two applications in the Delhi High Court: one seeking the
dismissal of the writ petition and imposition of exemplary costs, and the other under Section 340
of the CrPC seeking prosecution against Prashant Bhushan, the deponent of the PIL, for
allegedly making false statements on oath. Prashant Bhushan, on behalf of CWBF, filed a
Common Reply denying the company's allegations and making further accusations against the
company.
The Ministry of Corporate Affairs (MCA) submitted an interim affidavit stating that, based on an
inspection of the company's accounts, three out of five loans subject to the PIL were repaid, and
the remaining two were reported as "Standard Accounts." RBI, in a counter affidavit, did not
make any statements about violations by the company and argued that the PIL was not
maintainable against RBI. SEBI, through a counter affidavit, stated that there were no prima
facie allegations of non-compliance with its regulations and requested to be removed from the
proceedings.
The Delhi High Court granted time to NHB, Registrar of Companies Kolkata, and SFIO to file
their counter affidavits. NHB, in its counter affidavit, identified procedural lapses and imposed
minor penalties. Additionally, CWBF filed an application seeking to restrain further sale of
shares by Sameer Gehlaut, the erstwhile promoter. As of the last update, the matter is reserved
for orders, indicating that the court has yet to make a final decision on the case.

4. Total Corporate Social Responsibility (CSR) spending:

Indiabulls Housing Finance has spent 34.56 Crores on Corporate Social Responsibility (CSR)
initiatives as of the year ended March 31, 2023. While in the previous years, they have spent
57.88 and 76.99 Crores respectively, the company is fulfilling its CSR obligations at a
decreasing rate. Further details on the specific initiatives and their impact provides a more
comprehensive understanding of the company's commitment to social responsibility.

5. Whistleblowing Complaints and Auditing Fraud:

There have been no reported whistleblowing complaints or auditing frauds. This indicates a
positive corporate culture and a lack of significant internal issues, contributing to the company's
overall governance effectiveness.

6. Audit firms of Indiabulls Housing Finance:

1. Joint Statutory Auditors:
a. S.N. Dhawan & CO LLP, Chartered Accountants , Date of appointment as
Statutory Auditor: November 15, 2021.b
b. Arora & Choudhary Associates, Chartered Accountants, Date of appointment as
Statutory Auditor: November 15, 2021.
2. Tax Auditor Name: Ajay Sardana Associates, Chartered Accountants

7. Complaint related to oppression and mismanagement in the company:

There has been no reported oppression, or mismanagement. This indicates a positive corporate
culture and a lack of significant internal issues, contributing to the company's overall governance
effectiveness.

Report on Corporate Governance

Indiabulls Housing Finance exhibits a commendable level of corporate governance, as evident

from several positive attributes. The inclusion of independent directors on the board is a key
highlight, contributing to unbiased decision-making and aligning the company's interests with
those of its shareholders. Furthermore, the absence of ongoing investigations is a reassuring sign,
indicating that there are no significant legal or regulatory concerns affecting the company's
operations or reputation. The dearth of reported complaints or frauds reflects effective internal
control mechanisms, affirming the company's commitment to maintaining ethical business
practices.
In addition to these positive aspects, the company demonstrates responsibility through its
adherence to Corporate Social Responsibility (CSR) obligations. This commitment underscores a
broader societal impact beyond its core business activities, reflecting a holistic approach to
corporate citizenship. However, despite these strengths, there are identifiable opportunities for
improvement.
One such area is gender diversity on the board. While the company's governance structure is
robust, enhancing the representation of women in leadership positions can bring diverse
perspectives and experiences, contributing to a more inclusive decision-making process.
Additionally, providing more detailed insights into CSR initiatives can bolster transparency. This
entails offering stakeholders a deeper understanding of the nature, impact, and alignment of these
initiatives with the company's overall sustainability goals.
Moreover, regular updates on governance practices would further fortify transparency and
stakeholder confidence. Periodic reports or disclosures on governance-related matters can keep
stakeholders informed about the company's ongoing efforts to uphold high governance standards.
Overall, while Indiabulls Housing Finance showcases positive corporate governance attributes,
addressing opportunities for improvement in gender diversity, detailed CSR reporting, and
regular governance updates can contribute to elevating the company's governance framework to
even greater heights.